16.1 cm 4 cm 16.

1 cm

Ergun Publication Series: Global Legal Guides

GLOBAL MERGERS & ACQUISITIONS GUIDE

GLOBAL

2025

24 cm
MERGERS & ACQUISITIONS
GUIDE

2025

ERGUNBOOKS

DEMİRCİOĞLU - 16.5 X 23.5 CM BİTMİŞ FORMA ÖLÇÜSÜ - 11/11/2024

 Global Mergers & Acquisitions Guide 2025

Ergun Publication Series: Global Legal Guides

GLOBAL
MERGERS & ACQUISITIONS
GUIDE
2025

Edited by

Lara Sezerler
Irmak Yensel Nergiz
Melis Kaim
Begüm Şen
Naz Çerçioğlu
Nazan Eda Mumcu

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Global Mergers & Acquisitions Guide 2025

Ergun Books (UK) Limited

Editors
Lara Sezerler
Irmak Yensel Nergiz
Melis Kaim
Begüm Şen
Naz Çerçioğlu
Nazan Eda Mumcu
Published by Ergun Books (UK) Limited
284 Chase Road, A Block 2nd Floor, London
United Kingdom, N14 6HF
ISBN: 978-1-7394015-9-7
Ergun Publication Series: Global Legal Guides
© Ergun Books (UK) limited
All rights reserved. No part of this publication may be reproduced or transmitted in any
form or by any means, mechanical, photocopying, recording or otherwise, without the
prior written permission of the publisher. Due to the general nature of its contents, this
publication should not be regarded as legal advice. The Publisher, Editors and Authors
makes no representation or warranty as to, and assume no responsibility for, the accuracy
or completeness of the information contained herein.

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 Global Mergers & Acquisitions Guide 2025

Contents

FOREWORD................................................................................................................................................. 7
1. ALBANIA ...................................................................................................................................................... 9
HOXHA, MEMİ & HOXHA
2. ARGENTINA ..............................................................................................................................................19
MARVAL, O’FARRELL & MAIRAL
3. AUSTRALIA ................................................................................................................................................43
CORRS CHAMBERS WESTGARTH
4. AUSTRIA .....................................................................................................................................................57
BRANDL TALOS
5. AZERBAIJAN .............................................................................................................................................69
MGB LAW OFFICES
6. BAHRAIN.....................................................................................................................................................81
TROWERS & HAMLINS
7. BANGLADESH...........................................................................................................................................87
DOULAH & DOULAH
8. BOLIVIA ................................................................................................................................................... 107
AGUILAR CASTILLO LOVE
9. BOSNIA AND HERZEGOVINA............................................................................................................ 113
MARIĆ & CO
10. BRASIL...................................................................................................................................................... 119
CESCON BARRIEU
11. BULGARIA ............................................................................................................................................... 135
KAMBOUROV & PARTNERS
12. COSTA RICA ........................................................................................................................................... 145
AGUILAR CASTILLO LOVE
13. CROATIA................................................................................................................................................... 153
WOLF THEISS
14. DENMARK................................................................................................................................................ 161
GORRISSEN FEDERSPIEL
15. ECUADOR................................................................................................................................................ 175
AGUILAR CASTILLO LOVE

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Global Mergers & Acquisitions Guide 2025

16. FRANCE.................................................................................................................................................... 185

WILLKIE FARR & GALLAGHER LLP
17. GERMANY................................................................................................................................................ 201
HEUKING
18. GIBRALTAR.............................................................................................................................................. 213
HASSANS
19. GREECE..................................................................................................................................................... 225
ZEPOS & YANNOPOULOS
20. HUNGARY................................................................................................................................................ 243
WOLF THEISS
21. INDIA......................................................................................................................................................... 261
JSA ADVOCATES & SOLICITORS
22. ITALY.......................................................................................................................................................... 275
STUDIO LEGALE PADOVAN
23. IVORY COAST......................................................................................................................................... 283
GENI & KEBE
24. JAPAN....................................................................................................................................................... 299
TMI ASSOCIATES
25. JORDAN................................................................................................................................................... 313
HAMMOURI & PARTNERS
26. KAZAKHSTAN......................................................................................................................................... 333
GRATA
27. KYRGYZSTAN.......................................................................................................................................... 339
GRATA
28. LATVIA...................................................................................................................................................... 349
TGS BALTIC
29. LIBYA......................................................................................................................................................... 357
TUMI LAW FIRM
30. LUXEMBOURG....................................................................................................................................... 363
BRUCHER THIELTGEN & PARTNERS
31. MALTA....................................................................................................................................................... 371
FENECH & FENECH ADVOCATES
32. MEXICO.................................................................................................................................................... 385
CUESTA CAMPOS
33. MOLDOVA............................................................................................................................................... 397
EFRIM ROȘCA ASOCIAȚII LAW FIRM

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 Global Mergers & Acquisitions Guide 2025

34. MONTENEGRO....................................................................................................................................... 415

LAW OFFICE VUJACIC
35. NETHERLANDS...................................................................................................................................... 421
ORANGE CLOVER
36. NIGERIA.................................................................................................................................................... 427
BLOOMFIELD LAW
37. NORTH MACEDONIA........................................................................................................................... 437
ODI LAW
38. POLAND................................................................................................................................................... 459
ADDLESHAW GODDARD
39. QATAR....................................................................................................................................................... 467
SULTAN AL-ABDULLA & PARTNERS
40. ROMANIA................................................................................................................................................ 473
ȚUCA ZBÂRCEA & ASOCIAȚII
41. SENEGAL.................................................................................................................................................. 487
GENI & KEBE
42. SERBIA...................................................................................................................................................... 497
VP LAW FIRM
43. SLOVAKIA................................................................................................................................................ 503
EFRIM ROŞCA ASOCIAȚII LAW FIRM
44. SLOVENIA................................................................................................................................................ 517
KARANOVIC PARTNERS
45. SOUTH KOREA....................................................................................................................................... 527
BAE, KIM & LEE
46. SWITZERLAND....................................................................................................................................... 535
MLL LEGAL
47. TAJIKISTAN.............................................................................................................................................. 551
GRATA
48. TÜRKİYE.................................................................................................................................................... 557
ERGÜN AVUKATLIK BÜROSU
49. UKRAINE.................................................................................................................................................. 569
INTEGRITES
50. UNITED ARAB EMIRATES.................................................................................................................... 581
GREENBERG TRAURIG, LLP
51. UNITED KINGDOM............................................................................................................................... 597
ADDLESHAW GODDARD
52. UZBEKISTAN........................................................................................................................................... 605
CENTIL LAW

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 Global Mergers & Acquisitions Guide 2025

Foreword

W
e are delighted to present the 2025 edition of the Global M&A Guide, a refreshed
and expanded resource that reflects the dynamic and evolving landscape of
mergers and acquisitions worldwide. Building on the strong foundation of
previous editions, this volume again brings together a distinguished group of legal
professionals from across the globe to provide a comprehensive, comparative overview of
M&A frameworks in their respective jurisdictions.

Mergers and acquisitions are inherently complex transactions that demand a deep
understanding of the legal, regulatory, and commercial environments in which they take
place. In today’s interconnected global economy, professionals involved in cross-border
M&A must have access to timely and jurisdiction-specific insights to navigate the intricacies
of international transactions effectively. This guide aims to serve as a strategic compass for
dealmaking.

Each chapter is authored by leading legal experts who generously share their in-depth
knowledge, practical experience, and forward-looking perspectives. Their contributions
span a wide array of key topics—including fundamental principles, foreign investment,
corporate governance, shareholder rights, regulatory approvals, enforceability, and market
trends—offering readers both a solid understanding of core legal principles and guidance
on the latest developments shaping cross-border M&A.

Our contributors, who are all distinguished legal professionals from leading firms across
the globe, have generously shared their jurisdiction-specific knowledge and expertise.
Their insights reflect both recent legal developments and practical experience, offering
valuable guidance on key aspects of M&A transactions. By comparing similarities and
exploring jurisdictional differences, this publication encourages a deeper understanding
of the nuanced legal, commercial, and cultural considerations that impact international
transactions.

We extend our sincere gratitude to all contributing authors for their time, dedication,
and expertise. Their valuable contributions have helped transform this publication into a
practical, insightful, and truly global resource.

We hope that this 2025 edition of the Global M&A Guide proves to be an indispensable
tool in your international M&A activities, supporting well-informed decisions and strategic
execution in an increasingly dynamic and interconnected market

Lara Sezerler
İstanbul, 2025

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 Global Mergers & Acquisitions Guide 2025

ALBANIA
HOXHA, MEMİ & HOXHA

Shpati Hoxha
Partner
[email protected]

A. General 2. What are the most common types

of corporate entities (e.g., joint
1. What is the main legal framework stock companies, limited liability
applicable to companies in your
companies, etc.) used in your
jurisdiction?
jurisdiction? What are the main
The main legal framework applicable to differences between them (including
companies in Albania is composed of: but not limited to with regard to the
shareholders’ liability)?
• “The Law No. 9901 on Entrepreneurs
and Commercial Companies dated April The most common type of company used
14, 2008” as amended; in Albania is the limited liability company
• “The Law No. 9723 on Business (shoqëri me përgjegjësi të kufizuar)
Registration, dated May 3, 2007” as (SHPK). The limited liability company is the
amended; most common vehicle involved private
acquisitions, as it offers limitation of
Additionally, for listed companies, the liability for the shareholders and a flexible
following legal acts are also relevant: convenient internal governance structure.
• “The Law No. 62/2020 on Capital The limited liability company is not allowed
Markets, dated May 14, 2020 ”; and to issue securities or trade other debt
instruments to the public.
• “The Law No. 10236 on Takeover of
Public Companies, dated February The second most common type of
18, 2010 “However, given the company is the joint stock company
underdevelopment of securities (shoqëri aksionare) (SHA), which also offers
markets in Albania, the first two legal limitation of liability for the shareholders,
acts currently constitute the most but requires a more complex internal
relevant framework in practice. governance structure. The joint stock

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Global Mergers & Acquisitions Guide 2025

company may issue securities and/or trade such as restrictions on foreign currency
other debt instruments to the public. shareholder loans.
However, given the underdevelopment of
5. Are there any specific considerations
securities markets in Albania this feature is
for employment of foreign
not widely used. In practice, a joint stock
employees in companies
company is chosen over a limited liability
incorporated in your jurisdiction?
company only when a business activity
requires this company type (e.g., banking, The employment of foreign employees
insurance and similarly regulated sectors) in companies incorporated in Albania
or when this company type is required is generally subject to the issuance of a
based on internal group policies. labour permit by the competent Albanian
Other types of companies available under authorities. Simplified procedures apply,
Albanian law are the general partnership among others, to senior management,
(shoqëri kolektive) and limited partnership highly skilled workers and transferees
(shoqëri komandite) (SHK). These company within the company group. Foreign
types are less often chosen, as they do not employees who are citizens of certain
offer limitation of liability for the owners (in countries (e.g., EU member states, USA
a limited partnership, limitation of liability etc.) enjoy special benefits regarding the
is offered only for once category of owner). issuance of labour permits.

B. Foreign Investment C. Corporate Governance

3. Are there any restrictions on foreign 6. What are the standard management
investors incorporating or acquiring structures (e.g., general assembly,
the shares of a company in your board of directors, etc.) in a corporate
jurisdiction? entity governed in your jurisdiction
and the key liability issues relating
There are no general restrictions provided to these (e.g., liability of the board
by law with respect to the foreign members and managers)?
ownership of companies in Albania.
Limited liability company (mandatory
Under Albanian law, foreign investors are minimal governance requirements):
generally free to invest in Albania without
any investment approval, subject only to • General assembly/sole shareholder;
the same regulatory requirements and • One individual managing director;
sector permits (e.g., banking, insurance and
similarly regulated sectors) applicable to • No statutory auditor is required, unless
Albanian investors. Foreign investors are certain business thresholds are met.
legally allowed to hold 100% ownership Joint stock company (mandatory minimal
of local companies and are not required to
governance requirements):
partner with the state-owned enterprises or
local enterprises/persons. • General assembly/sole shareholder;
4. Are there any foreign exchange • Supervisory body (Board of Directors
restrictions or conditions applicable or Supervisory Board minimum 3
to companies such as restrictions to (three) members, with a majority of
foreign currency shareholder loans? independent members)
There are no foreign exchange restrictions • Executive body (Board of Directors
or conditions applicable to companies, minimum of 3 (three) members, or in

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 Global Mergers & Acquisitions Guide 2025

case of a Supervisory board, at least one • distributing the company’s assets;

individual managing director);
• allowing the company to continue
• Mandatory statutory auditor is required. doing business when it should be
foreseen that it will not be able to pay
Members of the management/
its debts;
supervisory body will generally be liable
to the company (qualified creditors and • in case of an increase in capital, issuing
shareholders have a derivative claim) if they shares contrary to the set purpose or
fail to: before they have been paid for;
• perform their duties established by • making payments to board members or
law or articles of association in good managing directors;
faith and in the best interests of the • granting loans.
company as a whole, which includes
the environmental sustainability of its 7. What are the audit requirements in
operations; corporate entities?

• exercise powers granted to them by law Based on the Law No. 10091, dated March 5,
or articles of association only for the 2009 “On the Legal Audit and Organization
purposes established therein; of the Professions of Legal Auditor and
Certified Accountant”, as amended, the
• give adequate consideration to matters mandatory statutory audit requirements
to be decided; applies in the following cases:
• avoid actual and potential conflicts • to all companies, regardless of
between personal interests and those their registration form, that apply
of the company; International Financial Reporting
• ensure that approval is given where Standards (IFRS);
contracts are concluded in conflict of • to all joint stock companies that apply
interest; the National Accounting Standards
• exercise reasonable care and skill in the (“NAS”);
performance of their functions. • to limited liability companies that apply
Specific shortcomings that may cause a NAS, if at the end of the accounting
breach of fiduciary duties (note: some items period of 2 (two) consecutive years,
do not apply for LLCs) include cases where they exceed two of the following three
the following actions occur contrary to the indicators:
law or the articles of association: o total assets in the statement of financial
position as at the end of the accounting
• returning contributions to shareholders;
period equal or exceed ALL 50,000,000
• paying interests or dividends to (approx. EUR 464,000;
shareholders;
o annual turnover from business activities
• subscribing, acquiring, accepting as for the accounting period equals or
pledge or withdrawing the company’s exceeds ALL100,000,000 (approx. EUR
own shares; 930,000;
• issuing shares prior to full payment of o average number of 30 employees
their par value or a higher issue price; during the accounting period.

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Global Mergers & Acquisitions Guide 2025

D. Shareholder Rights Yes, shareholders owning at least 5% (five

percent) (or a lower threshold provided
8. What are the privileges that can in the articles of association) have certain
be granted to shareholders? In specified statutory rights, as follows (note:
particular, is it possible to grant some items do not apply to limited liability
voting privileges to shareholders for companies):
appointment of board members?
• Request special investigations
Limited liability company: All regarding the activity of the company
shareholders of a limited liability company bodies;
shall be the same rights and duties. This
company type does not allow the grant • Start derivative claims for breach of
voting privileges. Voting rights are based fiduciary duties by the company bodies;
on the shares held in the company. • Convene the general meeting;
Shareholders may agree among themselves
on particular voting arrangements, but • Insert items on the agenda of the
this would be a contractual obligation general meeting;
between shareholders and not part of the
• Request special supervisory actions;
company governance - i.e., a breach of the
shareholders agreement would lead claims • Appoint board members (if provided for
for damage compensation but would not in the articles of association).
the invalidate of the voting process.
The articles of association may provide
Joint stock company: joint stock additional minority rights.
companies may issue shares of different
10. Is it possible to impose restrictions
classes.
on share transfers under the
Shares carrying the same rights shall corporate documents (e.g., articles
constitute one class (ordinary shares, of association or its equivalent in
preferential shares, voting shares and your jurisdiction) of a company
non-voting shares). Ordinary shares incorporated in your jurisdiction?
entitle their holders to exercise their rights
Yes, it is possible to impose restrictions
in the general meeting and to receive
on share transfers under the corporate
a proportional share of profits and of
documents of a Limited liability company
liquidated assets.
and of a joint stock company. These
Preferential shares entitle their holders to restrictions may include, inter alia, pre-
have a certain amount or percentage of the emption rights, rights of first refusal, and
par value of their shares paid from profits approval by the general meeting etc.
prior to ordinary shareholders if a dividend
11. Are there any specific concerns or
is declared, priority in the distribution of
other considerations regarding the
liquidated assets, and other rights set by
composition, technical bankruptcy
the statute.
and other insolvency cases in your
There is a presumption that the preferential jurisdiction?
rights established by the articles of
Limited liability companies (Article 82 of
association shall be exhaustive.
the Company Law): the general meeting
9. Are there any specific statutory rights has to be convened, if the annual or
available to minority shareholders interim accounts show or if it is a danger
available in your jurisdiction? that the company’s assets will not cover its

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 Global Mergers & Acquisitions Guide 2025

liabilities within the next 3 (three) months. 110/2016 on Bankruptcy, provides that, the
An independent auditor’s report shall be debtor has the duty to submit a request for
presented to the general meeting. In these the initiation of bankruptcy proceedings,
circumstances, the general meeting may within 60 days from the date on which
pass an advisory resolution approving the debtor knew or should have known
or condemning the conduct of the that debtor has become unable to pay its
management. creditors. In the case of legal entities, this
obligation belongs to each member of the
Joint stock companies (Article 136 of
governing body; if these representatives
the Company Law): the general meeting do not submit the request for the initiation
must be convened, if the annual or interim of the bankruptcy procedure, they will
accounts show or if it is clear that losses be personally liable to compensate the
amount to 50% of the basic capital, or creditors for the damages suffered for this
if there is a danger that the company’s reason. The bankruptcy court may also
assets will not cover its liabilities within impose a sanction on the debtor or any
the next 3 (three) months. An independent member of the management body who
auditor’s report shall be presented to the does not fulfil the obligation, according to
general meeting. In these circumstances, this article, excluding them from the right
the general meeting may pass an advisory to exercise any activity for a period of 1
resolution approving or condemning the (one) to 5 (five) years, depending on the
conduct of the management. importance of the violation.
Moreover, based on Article 16 of the If such a request is not submitted jointly
Company Law, the individual who by all members of the governing body or
is a company member, shareholder, all members of the simple company, the
or representative of a member or request will be allowed by the bankruptcy
shareholder, a Managing Director or a court if the reasons provided for the
member of the Board of Directors, that initiation of the bankruptcy procedure are
through actions or omissions secures unjust sufficient and convincing. The bankruptcy
profits for him/herself, or wilfully causes to court hears the other members of the
third parties a loss of property, is personally governing body and members of the
responsible towards third parties, including general partnership who have not joined
public bodies, to pay with his/her property the petition before making a decision.
for company obligations, when he/she,
amounts others: E. Acquisition
• At a time when he/she knew or must 12. Which methods are commonly used
have known that the company did to acquire a company, e.g., share
transfer, asset transfer, etc.?
not have sufficient capital to meet
commitments to third parties, did The share transfer is by far the preferred
not take the necessary actions within method to acquire a business, as it:
his/her powers pursuant to the
• generally, requires limited regulatory
law to prevent, depending on the
approval (i.e., only merger control
circumstances, the company to proceed
clearance, if the relevant turnover
its business and/or to assume new
thresholds are met – specific sectors,
commitments towards third parties,
such as banking, insurance etc.
including public authorities.
may require additional preliminary
Additionally, Article 15 of the Law No. clearance);

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Global Mergers & Acquisitions Guide 2025

• is tax efficient (the transactions Value • is tax efficient (the transactions VAT
Added Tax (“VAT”) exempt and sellers exempt and sellers would generally
would generally only be liable to capital only be liable to capital gains tax);
gains tax on the difference between the The disadvantages of a share transfer
equity and the purchase price); arise from acquiring the target company
Asset transfers, while may bring benefits along with its liabilities. However, business
in terms of carving-out pre-existing liabilities of the target company can be
liabilities from the scope of the target, factored in the purchase price for the
could require significant efforts in shares, and additional protection for the
addition to the regulatory requirements purchaser may be achieved through seller
of a share transfer, such as: liability for breach of specific representation
and warranties.
• Requirement of specific governmental
14. What are the approvals and
approvals (e.g., to transfer business
consents typically required (e.g.,
licenses/permits);
corporate, regulatory, sector
• Requirement of specific third-party based and third-party approvals)
approvals (e.g., having rights on specific for private acquisitions in your
assets); jurisdiction?

• Requirement of registration in specific In case of a share transfer transaction, the

public registers (e.g., in case of real approvals and consents would be typically
estate); required only for competition law purposes,
if the relevant turnover thresholds are met
• Additional employment law (specific sectors, such as banking, insurance
implications for the transfer of the staff. etc. may require additional preliminary
Moreover, to avoid the application of VAT clearance).
on the transaction value, the scope of Corporate approvals might be necessary
the deal must include the transfer of the only if specifically required under the
enterprise as whole; the exception from VAT articles of association of the target
should be confirmed by a specific ruling of company.
the tax authorities.
In case of an asset transfer transaction,
Additionally, the capital gain tax must be typical approvals and consents would
separately assessed based on an evaluation include:
of the value of the target assets. • Regulatory approval for the transfer
13. What are the advantages and business licenses/permits;
disadvantages of a share purchase • Regulatory for the transfer of the
as opposed to other methods? assets in specific sectors (e.g., banking,
The share transfer is advantageous as it: insurance, energy etc.);

• generally, requires limited regulatory • Registration of the asset transfer in

approval (i.e., only merger control specific public registers (e.g., in case of
clearance, if the relevant turnover real estate);
thresholds are met – specific sectors, • Third party approvals (e.g., lenders
such as banking, insurance etc. having security on the assets, sellers
may require additional preliminary having title retention or other rights
clearance); attached to the asset).

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 Global Mergers & Acquisitions Guide 2025

Moreover, for competition law purposes, • Competition authority, if required

an approval will be only required if the turnover thresholds are met; and
relevant turnover thresholds are met. • Regulatory authorities of the sector (if
15. What are the regulatory the target operates in the regulated
competition law requirements sectors, such as banking, insurance,
applicable to private acquisitions in energy etc.).
your jurisdiction? Moreover, a deal causing the change of
control in a company (not applicable for
Under the Albanian competition law, a prior
asset transfers), will require the declaration
merger control approval by the Albanian
in a specific public register of the new
Competition Authority is required for both
ultimate beneficial owner(s).
share and asset transfer transactions, if
the participating undertakings (purchaser 18. Can sellers be restricted from
and target) meet the following turnover shopping around during a
thresholds: negotiation process? Is it possible
to include break fee or other
• in the preceding business year, the penalty clauses in acquisition
parties’ combined worldwide turnover documents to procure deal
exceeds ALL 7,000,000,000 (seven exclusivity?
billion) (approx. EUR 58,830,000, and
the individual turnover in Albania The sellers may be restricted from shopping
of at least one of the participating around during a negotiation process if
undertakings exceeds ALL 200,000,000 specifically, so agreed between the parties.
(approx. EUR 1,680,000); or It is possible to include break fee or other
penalty clauses in acquisition documents to
• in the preceding business year, the procure deal exclusivity.
parties’ combined Albanian turnover
19. What are the conditions precedent
exceeds ALL 400,000,000 (approx. EUR
in a typical acquisition document?
3,360,000, and the individual turnover
Is it common to have conditions to
in Albania of at least one of the
closing such as no material adverse
participating undertakings exceeds ALL
change?
200,000,000 exceeding ALL 200,000,000
(approx. EUR 1,680,000). Typical conditions precedent in acquisition
document include, without limitation:
16. Are there any specific rules
applicable for acquisition of public • Obtaining regulatory approvals if so
companies in your jurisdiction? required;
• Obtaining the necessary corporate
Given the underdevelopment of securities
approvals;
markets in Albania, currently there are no
specific rules applicable for the acquisition of • Performing the necessary actions /
public companies. corrections, with respect to items that
may have been identified during the
17. Is there a requirement to disclose due diligence process.
a deal, for instance to regulatory
authorities? Is it possible to keep a It is common to have closing conditions
such as no material adverse change and/
deal confidential?
or omitting actions that go beyond the
Yes, a deal must be disclosed to regulatory ordinary course of business, without the
authorities in certain instances, such as: purchaser’s consent.

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Global Mergers & Acquisitions Guide 2025

20. What are the typical warranties 21. Is there a requirement to set a
and limitations in acquisition minimum pricing for shares of a
documents? Is it common to obtain target company in an acquisition?
warranty insurance? There is no requirement to set a minimum
Typical representations and warranties in pricing for the shares of a target company
acquisition documents include, without in an acquisition.
limitation: 22. What types of acquisition financing
are available for potential buyers in
• Authority to sign valid and binding
your jurisdiction? Can a company
agreement;
provide financial assistance to a
• Title and ownership of the shares; potential buyer of shares in the
target company?
• Valid incorporation and good standing
of the target; Acquisition financing available for potential
buyers in Albania is typically limited to the
• No encumbrances or no undisclosed banking sector.
encumbrances;
A company may provide financial
• Compliance by the target with assistance to a potential buyer of shares in a
regulatory requirements; target company.
• Accurate accounting, tax returns and 23. What are the formalities and
financial statements; procedures for share transfers and
how is a share transfer perfected?
• No disputes or no undisclosed disputes;
Share transfers are not subject to particular
• Other matters that may have been formalities and procedures. Only the written
identified during the due diligence form is a mandatory requirement for the
process. validity of a share transfer agreement.
Typical limitation in acquisition documents Share transfers are completed in accordance
include: with the terms agreed by the parties, subject
to mandatory regulatory approvals.
Up to 100% of the purchase price for breach
of warranties on binding agreement, valid 24. Are there any incentives (such
incorporation and title on shares, for a as tax exemptions) available for
period equal to the statutory time limit; acquisitions in your jurisdiction?

Fraction of the purchase price for breach There are no incentives (such as tax
exemptions) available for acquisitions in
of other warranties for a typical period of 2
Albania.
(two) -3 (three) years post-closing, with the
exception of warranties on tax liabilities, F. Enforceability
for which a period equal to the statutory 25. Can acquisition documents be
time limit is typically demanded by the executed in a foreign language?
purchaser.
Yes, acquisition documents can be executed
It is not common to obtain warranty in a foreign language. However, a certified
insurance, as this is not an insurance translation into the Albanian will be required
product generally offered by Albanian for the filing of the acquisition documents
insurance companies. with the company register.

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 Global Mergers & Acquisitions Guide 2025

26. Can acquisition documents be G. Trends and Projections

governed by a foreign law?
29. What are the main current trends in
Yes, the acquisition documents may be M&A in your jurisdiction?
governed by a foreign law.
As mentioned, given the
27. Are arbitration clauses legally underdevelopment of securities markets
permissible or generally included in in Albania, the first two legal acts are in
acquisition documents? practice the norm for private acquisition in
Yes, arbitration clauses are legally Albania. Owing to Albania’s small economy,
permissible and generally included in deals for the acquisition of local targets
acquisition documents. have been less impacted by funding
constraints posed by tighter credit markets
28. Are there any specific formalities and rising interest rates. Because of this,
for the execution of acquisition there has been a consistent emphasis of
documents? Is it possible to M&A activity over the past few years in
remotely/digitally sign documents? industries including energy and minerals,
No specific formalities apply for the IT, real estate and tourism, as well as
purpose of the validity of acquisition telecommunications.
documents, as long as they are in written
30. Are any significant development
form. Remotely/digitally signed acquisition
or change expected in the near
documents would be valid under Albanian
future in relation to M&A in your
law.
jurisdiction?
However, for the filing with the company
There are no significant developments or
register, additional formalities may
changes expected in the near future in
apply depending on the circumstances
relation to M&A in Albania.
(e.g., notary certification/apostille seal).
Please note that these are not validity
requirements but rather filing requirements
at the administrative level.

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 Global Mergers & Acquisitions Guide 2025

ARGENTINA
MARVAL, O’FARRELL & MAIRAL

Barbara Ramperti Santiago Cocimano

Partner Associate
[email protected] [email protected]

A. General as long as and insofar as they do not

contradict the federal constitutional text.
1. What is the main legal framework
applicable to companies in your The activity of companies in Argentina
jurisdiction? is regulated by the Argentine Civil and
Commercial Code (“ACCC”), which entered
Argentina has adopted the federal into force on August 1, 2015, unifying the
republican representative form of former Civil Code and the Commercial
government. Thus, the Argentine Congress, Code, and, in turn, by the General
composed of 2 (two) houses called the Companies Law No. 19,550 (“GCL”).
Senate and the House of Representatives,
In turn, some companies may be
which constitute the legislative branch,
additionally regulated by special laws
enacts the laws relating to federal
specific to the activity they carry out,
legislation and the Civil, Commercial,
for example, financial institutions,
Criminal, Mining, Labor, and Social Security
insurance companies, companies
Codes, applicable throughout the country. authorized to publicly offer their securities,
Each Province has the power to enact its utilities and companies involved in
own Constitution. telecommunications, media and airline
The National Constitution and the activities, among others.
International Treaties on Human Rights 2. What are the most common types
with constitutional hierarchy are placed of corporate entities (e.g., joint
above the whole legal system, the other stock companies, limited liability
international treaties follow immediately companies, etc.) used in your
after, the laws sanctioned by the National jurisdiction? What are the main
Congress below and finally the provincial differences between them (including
legislation and then the municipal but not limited to with regard to the
legislation, which will be considered valid shareholders’ liability)?

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Global Mergers & Acquisitions Guide 2025

In accordance with the provisions of the SAs must be formed with a minimum of
GCL, the following classification of the 2 (two) shareholders that can be either
types of companies in the country can be legal entities or individuals. The corporate
made as: capital is divided into shares, which are
always of equal face value and expressed
1) Partnerships by parts of interest (or in Argentine currency. Its minimum
of persons): partnerships; limited by capital required is ARS 30,000,000 and
simple partnership; of capital and while it must be fully subscribed upon
industry; accidental or in participation. incorporation, only 25% needs to be paid
2) Companies by quotas: limited liability in at the time of subscription of the shares,
companies. and the balance within the following 2
(two) years.
3) Companies by shares (or capital):
corporations; limited partnerships; Shareholders of SAs are only liable for
cooperatives; mixed economy the obligations incurred by the company
companies. to the extent of the shareholders’ capital
commitments or contributions because
In addition, 2 (two) new variations the company is a legal entity independent
of corporations have been added in from its shareholders. The shareholders
recent years. These are sole shareholder are liable only for the capital they have
corporations (Sociedades Anónimas agreed to contribute to the corporation.
Unipersonales, hereinafter “SAU”) and Each shareholder is liable only for their
simplified corporations (Sociedades por own pending capital contribution
Acciones Simplificadas, hereinafter “SAS”). so shareholders who have fully paid
In any case, although the GCL establishes shares are generally not liable for the
the existence of several different types of company’s obligations beyond their capital
companies, the fact is that in practice, all contributions.
commercial activity of a certain significance
Any shareholder with interests in conflict
is usually channeled mainly through only
with those of the company has a duty to
two types of companies: corporations
abstain from voting on any matter that
(Sociedades Anónimas, hereinafter “SA”)
relates to such conflict so if any shareholder
and limited liability companies (Sociedades
does not observe this provision, it will be
de Responsabilidad Limitada, hereinafter liable for resulting damages from a final
“SRL”). resolution of the matter in conflict, but
SRLs have traditionally been considered only if, without the shareholder’s vote,
a suitable vehicle for small companies, the majority vote necessary to adopt
while SAs are the investment vehicle such resolution would not have been
normally used by large companies or joint obtained. Furthermore, all shareholders
ventures. However, there is currently a who vote in favor of a resolution that is
growing interest in the use of SRLs by larger subsequently declared void may be jointly
companies, mainly because they must and severally liable without limitation, for
comply with fewer corporate formalities any consequences resulting therefrom.
and are, in general, easier to administer The GCL provides that shareholders or
than SAs. In addition, although SAs, and those effectively exercising control over
SRLs are subject to substantially similar tax a company who cause damage to the
treatment, some foreign companies may company are jointly liable for such damages
find it advantageous to invest in SRLs due and cannot set off such damages against
to “pass through” tax benefits. profits that their action may have produced

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 Global Mergers & Acquisitions Guide 2025

in connection with other transactions of (two) and a maximum of 50 quota holders.

the company. The shareholders or those Quota holders may be either individuals or
exercising control that use funds or assets corporate legal entities.
of the company in a transaction for their
There is no minimum capital required to set
own benefit must contribute any profits
to the company and must bear the losses up an SRL. The capital is divided into quotas
themselves. Also, the actions of the (cuotas), which are interests in the capital of
company that conceal the pursuit of extra- the company, and which must be expressed
corporate purposes and constitute a mere in Argentine currency. Quotas must be of
resource to violate the law, public order equal par value ARS 10 or its multiples and
or good faith or to frustrate the rights of entitle the quota holders to 1 (one) vote each.
third parties, will be directly imputed to the While the capital of an SRL must be fully
shareholders or controlling shareholders subscribed upon incorporation, only
that made it possible, who will be jointly 25% needs to be paid in at the time of
and unlimitedly liable for the damages subscription of the quotas and the balance
caused. within the following 2 (two) years.
In addition, the bankruptcy of a company SRLs cannot in principle be listed on an
can be extended to a controlling official stock exchange.
shareholder in certain cases, for example,
if a shareholder disposes of assets of the Quota holders enjoy limited liability up to
company as if they were the shareholder’s the capital subscribed in the SRL. However,
own, thereby defrauding the company’s each quota holder guarantees vis-à-vis third
creditors. A similar result would ensue if any parties, jointly and severally, and without
controlling person steered the company’s limit: (i) all pending capital contributions,
interest in the direction of the controlling whether pertaining to the holder or not,
shareholder’s interest or the economic and whether monetary or non-monetary;
group to which he or she is a party. and (ii) the overvaluation of non-monetary
contributions, whether its own or not.
In turn, the SAUs are formed with a
single shareholder that can be either In the event of a transfer of quotas, the
a legal entity or an individual. The GCL guarantee of the assignor continues to
imposes on SAUs the same incorporation apply to corporate liabilities assumed up
requirements of SAs, including further to the time of the transfer registration.
requisites as follows, among others, SAU: (i) The purchaser guarantees unlimitedly the
cannot incorporate another SAU; (ii) share capital contributions jointly and severally,
capital shall be fully subscribed and paid and without limitation, with no distinction
up upon incorporation; (iii) is subject to as to commitments before or after the date
permanent government control; (iv) must of the registration. The assignor who has
appoint a supervisory committee (comisión not paid in full his or her quotas is liable
fiscalizadora) comprised of at least 1 (one) severally and jointly with the assignee for
regular and 1 (one) alternate statutory the amount still to be paid in. The company
supervisors; and (v) corporate name shall may not demand payment from the
include the expression “Sociedad Anónima assignee without first pursuing the assignor
Unipersonal”, its abbreviation or the in arrears.
acronym SAU.
Any quota holder with interests in conflict
Finally, SRLs are limited liability companies with those of the company has a duty to
that may be formed with a minimum of 2 abstain from voting on any matter that

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Global Mergers & Acquisitions Guide 2025

relates to such conflict. If that quota holder company that are transferred to a person
does not observe this provision, the partner or economic group must be submitted to
will be liable for any resulting damages the pertinent governmental authority for
from a final resolution of the matter in clearance. However, those regulations apply
conflict if the majority vote necessary to to both foreign and domestic investors.
adopt such resolution would not have been
However, for foreign companies to
obtained without the quota holder’s vote.
incorporate and/or acquire shares in a local
Furthermore, all quota holders that vote in company, they must previously prove that
favour of a resolution that is subsequently they have been incorporated in accordance
declared void may be jointly liable, without with the laws of their respective countries
limit, for any consequences resulting and register their articles of incorporation,
therefrom. Also, the actions of the company amendments, and other enabling
that conceal the pursuit of extra-corporate documentation, as well as that relating to
purposes and constitute a mere resource to their legal representatives, with the registry
violate the law, public order or good faith of the jurisdiction where the Argentine
or to frustrate the rights of third parties, will company is incorporated.
be directly imputed to the quota holders The foreign companies to be registered
or controlling quota holders that made it in the City of Buenos Aires must prove
possible, who will be jointly and unlimitedly that they are not offshore companies
liable for the damages caused. and are not incorporated in an offshore
From a tax perspective, as a general jurisdiction and would be in a position to
principle, all types of Argentine companies submit evidence that its main activity is not
are considered Argentine resident intended to be performed in Argentina,
taxpayers and subject to the same tax evidencing that it has significant assets
treatment. Thus, from a tax perspective, abroad. According to the Public Registry
of the City of Buenos Aires (“IGJ”), will be
there are no relevant differences between
considered as offshore companies those
carrying out businesses in Argentina
foreign companies that, according to the
through any of those vehicles.
laws of their place of incorporation or
B. Foreign Investment registration, are subject to a prohibition or
restriction to pursue all or a principal part
3. Are there any restrictions on foreign
of their purpose within the jurisdiction of
investors incorporating or acquiring incorporation or registration and offshore
the shares of a company in your jurisdictions means any independent
jurisdiction? or associated state, territory, island or
In general, foreign investors wishing to any other unit or territory, whether
invest in Argentina, either by starting up independent or not, where all or part of
new businesses or by acquiring existing the companies incorporated or registered
businesses or companies, do not require are subject to a prohibition or legal
government approval except for regulated restriction to pursue all or a principal part
areas or for general applicable regimes such of their purpose within the jurisdiction of
as antitrust regulations. In this sense, the incorporation or registration.
antitrust law requires that notice of certain Also, recently the IGJ has established
transactions such as mergers, transfers some additional restrictions such as the
of businesses, acquisitions of shares or registry will deny registration of foreign
any other rights that confer control to the corporations that are incorporated
acquirer on the acquisition of assets of a or registered in countries, domains,

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 Global Mergers & Acquisitions Guide 2025

jurisdictions, territories, associated states territory of the province or municipality

and special tax regimes, considered where the relevant lands were located:
non-cooperative for the purposes of
ii Under no circumstance could foreign
fiscal transparency and/or categorized
individuals or legal entities of the same
as non-cooperative in the fight against
nationality hold or possess more than
Money Laundering and Terrorism Financing
30% of the above-stated 15%.
of Terrorism, or of low or no taxation,
according to the criteria of some national iii Ownership by the same foreign owner
and international organizations such as the could not exceed 1000 hectares of the
United Nations and the FATF, among others. ‘core area’, or the ‘equivalent surface’
determined by the enforcement agency
In general, foreign shareholders may
according to the location of the land.
own 100% of the capital of SAs or SRLs,
except for those companies regulated iv Foreign legal entities or individuals
by a special law that requires a minimum could not be owners of rural lands
Argentine participation so there are some that comprised or were located beside
specific industries that tend to have more permanent and significant bodies of
restrictions. water (such as seas, rivers, streams,
lakes, ponds, wetlands, swamps,
A foreign investment sector that is
glaciers, confined aquifers, etc.).
still restricted to foreign investment
is broadcasting. Although are certain On December 21, 2023, Decree of Necessity
Investment Protection Treaties executed and Urgency No. 70/2023 (the “Emergency
between Argentina and third countries Decree 70/2023”) was published in the
that may be construed to supersede such Official Gazette, which, among many other
restriction, Law No. 25,750, published reforms, repealed the Rural Lands Law.
in the Official Gazette on July 7, 2003 The Emergency Decree 70/2023 is in force
establishes that foreign ownership of since December 30, 2023; therefore, as from
media companies, directly or indirectly, is such date the limitations of the Rural Lands
restricted to up to 30% of its shareholding Law have been eliminated, and foreigners
or voting rights. The said percentage of are able to freely acquire rural lands in
foreign participation may be increased Argentina.
in case of reciprocity in the percentage
Pursuant to the Argentine Constitution
permitted by the foreign country for
and Law 26,122, the Emergency Decree
the foreign investment in its own
70/2023 is subject to subsequent legislative
media companies according to its legal
control. It will remain in force unless it is
framework.
rejected by both Houses of the Federal
In addition, Law No. 26,737 enacted in Legislative (i.e., the Senate and the House of
December 2011 (the “Rural Lands Law”) Representatives).
imposed several restrictions on the
However, for the time being, the border
ownership or possession of rural lands
security zone regime established in Decree-
by foreign individuals or legal entities as
Law 15,385/1944 is still in force. This means
follows:
that foreigners seeking to acquire rural—
i No more than 15% of the total amount and, in some cases, urban—properties
of ‘rural lands’ in Argentine territory within the Argentine border (150 km when
could be owned or possessed by the limit is land and 50 km when the limit
foreign individuals or legal entities. This is maritime) must obtain the Ministry of
percentage was also applicable to the Interior’s prior approval. Only the Province

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Global Mergers & Acquisitions Guide 2025

of Buenos Aires is exempted from this prior Argentine Central Bank approval,
limitation. which may be granted or denied on a
discretionary basis.
4. Are there any foreign exchange
restrictions or conditions applicable 5. Are there any specific considerations
to companies such as restrictions to for employment of foreign
foreign currency shareholder loans? employees in companies
There are currently foreign exchange incorporated in your jurisdiction?
controls in Argentina, which affects Foreign employees must have a work
the ability of both Argentine and non- permit/authorization or work visa to be
Argentine residents to access the Argentine employed in local companies. A first
foreign exchange market at the so- classification shall be made between
called ‘official’ exchange rate (currently, “transitory” and “temporary” residencies
approximately USD 1=ARS 1091.25) to or visas. For both applications, the local
acquire and/or transfer foreign currency to
company should be sponsor duly registered
and from Argentina.
at the Argentina Immigration Directorate
Historically, the inflow and outflow of funds (“Dirección Nacional de Migraciones”).
to and from Argentina has been subject to The applications for the work visa can be
several restrictions and requirements. Over made for “transitory residencies” for stays
the course of the last 20 years, Argentina of less than 3 (three) months. It could be
has experienced 2 (two) main periods of for “technical” purposes (30 days of stay,
exchange controls. The first period began renewable for the same period), or a “work
in 2001 and ended in 2015, while the authorization” for almost 90 (ninety) days
second one started in 2019 and is currently of stay and it is not renewable. Except for
ongoing. Between 2015 and 2019, foreign the work authorization of less than 90 days,
exchange regulations were substantially the transitory residencies can be applied
relaxed until their complete abrogation in through the Argentina consulate. The
2017. mid-term/long residencies are also called
Foreign exchange controls affect all “temporary residencies” with a stay for 1
industries and cover a wide variety of (one) year, renewable for the same period.
matters, including, among others, imports There are 2 (two) alternatives to apply for
and exports of goods and services, financial a temporary work visa (mid-term/long
indebtedness, payment of profits and residence). One is to apply directly in the
dividends, and repatriation of investments country (Argentina) through the Argentina
of non-Argentine residents. The Argentine Immigration Department. In this case,
Central Bank is the regulatory authority in foreigners who do not need a visa to enter
charge of administering the access to the to Argentina can enter as a tourist, invoking
Argentine foreign exchange market by a visa waiver, and then make the conversion
establishing all regulatory requirements, to a temporary work visa through the office
which are all unified under the consolidated of the Argentina Immigration Directorate.
text of foreign exchange available at the The other way is to apply through the
BCRA’s website: http://www.bcra.gob.ar/ Argentina consulate from the jurisdiction
Pdfs/Texord/t-excbio.pdf. Access to the where the foreigner lives. The foreigners
Argentine foreign exchange market for that have a nationality that requires a
certain payments abroad (especially those mandatory visa to enter to Argentina
involving related parties) may require can apply to their request through the

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 Global Mergers & Acquisitions Guide 2025

Argentina consulate or through the Unless a higher majority is provided for

Argentina Immigration Directorate with an in the by-laws, decisions are taken by the
entry permit request. majority of the directors present at any
meeting.
For Mercosur citizens there is the possibility
to be a local employee without needing Directors of SAs are subject to a standard of
a sponsor for the application of the visa/ loyalty and diligence. Also, non-compliance
with this standard results in unlimited, joint
permit/authorization. They can apply for
and several liability for damages arising
a temporary residence or consular visa
therefrom. Directors have the duty (i) to
invoking Mercosur nationality that allows reveal any conflict of interest to the board
them to live and stay for 2 (two) years in of directors and the statutory supervisors;
the country as temporary resident. The (ii) to abstain from any deliberation related
Mercosur visa allow them to live, work and thereto; and (iii) to refrain from competing
study during their stay in Argentina. with the company.
C. Corporate Governance Directors are unlimitedly, jointly, and
6. What are the standard management severally liable to the corporation, the
structures (e.g., general assembly, shareholders and third parties for negligent
board of directors, etc.) in a corporate performance of their offices, for violations
entity governed in your jurisdiction of the law or of the by-laws of the company,
and the key liability issues relating and for any other damages caused by the
to these (e.g., liability of the board director’s fraud, gross negligence or abuse
members and managers)? of authority.

The SA can be managed by a single director Directors, who file in a timely manner
or by a board of directors, as set forth in the written objections to the corporate
by-laws. A minimum of 3 (three) directors resolution that caused the damages and
is required if the company’s capital exceeds promptly give notice to the statutory
the sum of ARS 2,000,000,000. The SA is supervisors before the proceedings
represented by the President of the board are initiated against decisions of the
of directors. If the capital of the SA is board of directors, are exempt from any
divided into different classes of shares, the consequences arising from the resolution.
by-laws may provide that each class elect Directors may be released from liability for
one or more directors and establish the certain decisions by a subsequent approval
rules for such election. of the shareholders’ meeting, provided that
The directors, who need not be such decisions do not violate the law or the
shareholders, are elected by the ordinary by-laws, and that shareholders representing
shareholders’ meeting, to hold office for a 5% or more of the company’s capital do not
period not exceeding 3 (three) fiscal years object.
and may be re-elected indefinitely. The Shareholders’ meetings must take place
majority of the directors must reside in at the corporate domicile or within the
Argentina, regardless of their nationality jurisdiction of its legal domicile and are
and all of them must have a special either ordinary (Asamblea Ordinaria) or
domicile in Argentina where notices must extraordinary (Asamblea Extraordinaria).
be given, and process served in all matters After the pandemic, some registries such
relating to the SA.
as the IGJ have allowed meetings to be
The board of directors must meet at least held through videoconferences, by means
once every 3 three) months and its quorum that allow attendees to communicate
is an absolute majority of the directors. simultaneously with each other, if such

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Global Mergers & Acquisitions Guide 2025

alternative is provided for in the by-laws. of shares present. Extraordinary meetings

require on first call a quorum of 60% of
Ordinary meetings must be called at least
shares with a right to vote unless the by-
once a year, within 4 (four) months from
laws require a higher percentage, and, on
the end of the fiscal year, to consider the
following matters: (i) financial statements, a second call, a quorum of 30% of voting
annual reports, and distribution of profits; shares unless the by-laws require a lower
and (ii) appointment and removal of or a higher percentage. A majority of
directors and statutory supervisors and votes present at ordinary or extraordinary
their performance and fees. meetings is sufficient to carry a resolution
unless the by-laws require a higher number.
Extraordinary meetings are required to In the case of transformation, extension
consider the amendment of by-laws and or redemption, except in the case of
any other matters that are not among those companies that have their shares publicly
items to be considered by law by ordinary offered or listing of their shares; early
meetings. In particular, extraordinary dissolution of the company; transfer of the
meetings are empowered to consider: (i) domicile abroad, fundamental change of
capital increases; (ii) capital reduction and purpose and total or partial reintegration
capital refund; (iii) redemptions of shares; of the capital, both on the first and second
(iv) mergers, dissolutions, liquidations and call, resolutions will be adopted by the
spin-offs; (v) limitation or suspension of affirmative vote of the majority of shares
pre-emptive rights in subscription for new with voting rights, without the plurality
share issues; (vi) the issuance of debentures of votes being applicable. This provision
and their conversions into shares; and (vii) will be applied to decide on mergers
the issuance of bonds. and spin-offs, except with respect to the
Ordinary and extraordinary meetings must incorporating company, which will be
be held when called by the directors or governed by the rules on capital increase.
statutory supervisors or by shareholders If a quorum is not present at a meeting on
representing 5% of authorized capital the first call, notice for a meeting on second
unless the by-laws permit a smaller number. call (which must be held within thirty days
of the date on which the first meeting was
Notices of meetings are given by means called), must be given at least 8 (eight) days
of announcements published for 5 (five) before the date of the second meeting. The
days in the Official Gazette, at least 10 by-laws may authorize that both meetings
(ten) days in advance of the date specified (on first and on second call) be convened
for the holding of the meeting. However, by means of the same notice. In this latter
no publications are necessary when all
case, if the meeting is convened for the
shareholders are present, and decisions are
same day, it must be held with an interval
taken unanimously.
of not less than 1 (one) hour between each
Shareholders may be represented by proxy meeting.
at any meeting. Nevertheless, directors,
The minutes of all shareholders’ meetings,
statutory supervisors and employees of the
as well as board resolutions, must be
company may not represent shareholders.
transcribed in the official books held by
Quorum for ordinary meetings on first the SA for that purpose. In some cases,
call requires the presence of a majority copies of the minutes must be filed with
of shares with a right to vote. Ordinary the registry (i.e., minutes of the board
meetings are deemed to be constituted and shareholders’ meetings related to the
on second call regardless of the number approval of annual financial statements and

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 Global Mergers & Acquisitions Guide 2025

appointment of directors of the SA). or indeterminate period, as established in

the by-laws or when appointed. Alternate
Shareholders may at their annual meeting
managers may be appointed to replace
elect one or more statutory supervisors
regular managers in case of a vacancy. The
(síndicos). They may serve for a period
managers represent the company, either
not exceeding 3 (three) fiscal years, with
possible re-election. Their functions individually or jointly as set forth in the
are to supervise the administration by-laws.
of the company, attend all board and As a general rule, the majority of the
shareholders’ meetings and, in general, managers must be Argentine residents,
control the legality of the corporation’s regardless of their nationality and they
decisions. In broad terms, they protect the need not be partners themselves.
rights of shareholders and verify that the
company abides by the law and its by-laws. Managers are individually or severally
liable according to the organization of
The appointment of statutory supervisors the management and in the case of plural
is, in principle, not mandatory. If the management, but, as a general rule, they
company dispenses with the appointment are subject to a standard of loyalty and
of statutory supervisors, at least one diligence.
alternate director must be designated.
Non-compliance with this standard gives
However, a SA with capital exceeding the rise to unlimited, joint and several liability
sum of ARS 2,000,000,000 must appoint for damages arising therefrom. They have
at least one statutory supervisor and one the duty (i) to reveal any conflict of interest
alternate statutory supervisor. Furthermore, to the quota holders, the other managers
if the company is state controlled, (in case of plural management) and the
publicly offers its shares, operates statutory supervisor/s if appointed, and
public concessions or services, performs (ii) to refrain from competing with the
capitalization or savings operations company unless it is expressly allowed by
or operations which in general solicit the partners by unanimous decision.
funds from the public, the law requires
The by-laws normally contain the rules
that a supervisory committee (comisión
for adopting resolutions, but if not, the
fiscalizadora) comprised of at least 3 (three)
corporate resolutions adopted by the vote
statutory supervisors be appointed. of the quota holders, communicating to the
The same general rules of the Board of management through any procedure that
Directors of the SA apply for the SAUs. SAUs guarantees their authenticity, within 10
are subject to permanent government (ten) days of having been simultaneously
supervision, and they must appoint consulted through a reliable means, or
a supervisory committee (comisión those resulting from a written statement
fiscalizadora) comprised of at least 3 (three) in which all the quota holders express the
regular and 3 (three) alternate statutory sense of their vote, are deemed as valid.
supervisors, being the committee always Also, after the pandemic, some registries
comprised by members in odd numbers. such as the IGJ have allowed meetings
to be held through videoconferences,
In turn, the quota holders of a SRL may by means that allow attendees to
appoint one or more managers to manage communicate simultaneously with each
and represent the company. The managers other, if such alternative is provided for in
may be appointed for either a determinate the by-laws.

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Global Mergers & Acquisitions Guide 2025

Resolutions concerning either amendments affirmative vote of the majority of shares

to the by-laws, or the appointment with voting rights, without the plurality
or removal of managers or statutory of votes being applicable. This provision
supervisors, must be passed by the majority will be applied to decide on mergers
as established in the by-laws, which must and spin-offs, except with respect to the
consist of at least the affirmative vote of incorporating company, which will be
quota holders who represent over 50% governed by the rules on capital increase.
of the company’s capital. If the by-laws
are silent on what constitutes a majority, If a quorum is not available in a meeting
the affirmative vote of the quota holders on the first call, a notice for a meeting on
that represent over 75% of the company’s second call, (which must be held within
thirty days of the date for which the first
capital is required. If one quota holder
meeting was called), must be given at least
represents the majority vote, another quota
8 (eight) days before the date of the second
holder’s vote is also required.
meeting. The by-laws may authorize that
Resolutions concerning issues other both meetings (on first and on second
than amendments to the by-laws, or the call) are convened by means of the same
appointment or removal of managers or notice. In this latter case, if the meeting is
statutory supervisors, must be passed by convened for the same day, it must be held
the affirmative vote of the quota holders with an interval of not less than 1 (one)
who represent over 50% of the capital hour between each meeting. All quota
participating in such resolution or present holders’ resolutions must be transcribed
in such meeting unless the by-laws provide into a minute book and signed.
for a higher majority.
SRLs whose capital exceeds the sum of
If the company’s capital exceeds the sum ARS 2,000,000,000 must appoint at least
of ARS 2,000,000,000, the quota holders one regular and one alternate statutory
must hold an annual meeting to consider supervisor (síndico). They may serve for a
the financial accounts of the previous period not exceeding three fiscal years, with
year, which must be called within 4 (four) possible re-election and their functions
months following the fiscal year-end. are to supervise the administration of the
Such meetings are validly held on the first company, attend managers’ and quota
call, with the presence of quota holders holders’ meetings and, in general, control
representing the majority of quotas of the legality of the company’s decisions.
the company’s capital; on the second call In broad terms, they protect the rights
with the presence of any quota holders of partners and verify that the company
regardless of the number of quotas they abides by the law and its by-laws.
represent. In both cases, resolutions must
7. What are the audit requirements in
be passed by the affirmative vote of the
corporate entities?
absolute majority of votes present. In
the case of transformation, extension The SAs must file their annual financial
or redemption (except in the case of statements with the registry drafted by
companies that have their shares publicly the Board of Directors, and if applicable,
offered or are listing their shares); early with the participation of the statutory
dissolution of the company; transfer of the supervisor. Additionally, SAs with corporate
domicile abroad, fundamental change of capital exceeding the sum of ARS
purpose and total or partial reintegration 2,000,000,000 must notify the registry of
of the capital, both on the first and second its annual ordinary shareholders’ meeting
call, resolutions will be adopted by the prior to holding any such meeting. All

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financial statements must be audited by an

accounting firm.
SAs must keep the following corporate
books: Share Registry Book, Attendance
D. Shareholder Rights
Record Book of Shareholders’ Meetings, 8. What are the privileges that can
Minutes Book of the Board of Directors and be granted to shareholders? In
of Shareholders, and, if applicable, Minutes particular, is it possible to grant
Book of the Supervisory Committee. In voting privileges to shareholders for
addition, accounting books must be kept. appointment of board members?
Shareholders may at their annual meeting The shares of SAs will always be of equal
appoint one or more statutory supervisors value, expressed in Argentine currency. The
(síndicos) who must be Argentine residents bylaws may provide for different classes
and must be attorneys or accountants duly with different rights. SAs may have different
registered to practice. They may serve for a classes of shares with different rights
period not exceeding 3 (three) fiscal years, attached to each class, which, in turn, may
with possible re-election. Their functions
be common (ordinary shares) or preferred
are to supervise the administration
(preferred shares). Within each class, the
of the company, attend all board and
shares shall confer the same rights. Any
shareholders’ meetings and, in general,
provision to the contrary is null and void.
control the legality of the corporation’s
decisions. In broad terms, they protect the Common shares may carry the right to cast
rights of shareholders and verify that the from 1 (one) to 5 (five) votes, as provided
company abides by the law and its by-laws. in the bylaws. However, the issuance of
common shares giving the right to cast
The appointment of statutory supervisors
multiple votes (up to five) is incompatible
is, in principle, not mandatory. However,
if the company dispenses with the with equity preferences. Preferred voting
appointment of statutory supervisors, shares may not be issued after the
at least one alternate director must be company has been authorized to make a
appointed. public offering of its shares.

SAs subject to permanent governmental Preferred shares may have no voting rights,
supervision must appoint at least 3 except with respect to decisions on certain
effective and 3 alternate statutory important matters, such as the extension
supervisors except when the company’s of the company’s term, conversion into
capital exceeds ARS 2,000,000,000. In another type of entity, except in the case
this case, the company must appoint at of listed companies, fundamental change
least 1 effective and 1 alternate statutory of corporate purpose and transfer of the
supervisor. company’s domicile to another country,
without prejudice to their right to attend
In turn, in the SRLs the appointment meetings with the right to speak.
of statutory supervisors is optional but
those in which capital exceeds the sum of Likewise, non-voting shares acquire the
ARS 2,000,000,000 must appoint at least right to vote during the period in which
one regular and one alternate statutory the company is in default as regards the
supervisor (síndico). Statutory supervisors benefits linked to their preference, or if
have the same requirements as those the company is listed on a stock exchange,
mentioned above. during the period in which the listing is

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suspended or withdrawn. partial repayment of capital; mergers and

divestments (except with regard to the
In the event of a capital increase, the holder
surviving company); and capital increases
of existing shares of a particular class (or
decided by extraordinary shareholders
ordinary shares if the capital is not divided
meetings which involve disbursements by
into classes of shares) has a preemptive
such shareholders.
right (except in listed companies) to
subscribe for a number of shares of the In addition, other rights may be granted
same class sufficient to maintain the contractually and not necessarily reflected
holder’s existing proportionate interest in in the company’s bylaws.
shares of that class. The preemptive right 10. Is it possible to impose restrictions
also applies to the issue of convertible on share transfers under the
securities. corporate documents (e.g., articles
Shareholders who have exercised their of association or its equivalent in
preemptive rights are entitled to accretion your jurisdiction) of a company
in proportion to their respective holdings of incorporated in your jurisdiction?
non-preemptive shares. As a general rule, transfers of shares or
When there are several classes of shares, quotas are not usually restricted, but the
the bylaws may provide for each class bylaws may include restrictions as long as
to elect one or more directors, for which in practice they do not completely prevent
purpose the bylaws shall regulate the transfers of shares.
election. The quotas of SRLs are freely transferable
9. Are there any specific statutory rights unless otherwise provided for in the
available to minority shareholders articles of incorporation. The articles of
available in your jurisdiction? incorporation may limit the transferability
of shares, but not prohibit it.
With respect to minority shareholders,
there is basically no legal action to object The clauses that require the majority or
to an acquisition other than that based on unanimous consent of the partners or that
the grounds of fraudulent conveyance or confer a preferential right to the partners
breach of fiduciary duties of the directors. or to the company if the latter acquires the
quotas with available profits or reserves
Beyond this, the GCL contains certain or reduces its capital are lawful. Thus, it is
rules intended to provide protection to not appropriate to require the unanimous
minority shareholders (e.g., cumulative approval of the partners with respect to the
votes, right to withdraw, information assignment of the corporate quotas.
rights). Minority shareholders who dissent
from certain decisions may withdraw For these clauses to be valid, the contract
must establish the procedures to be
from the corporation and are entitled to
followed for the granting of the approval
reimbursement of the book value of their
or the exercise of the purchase option, but
shares.
the term for notifying the decision to the
Such decisions include, among others: partner proposing the assignment may
change of corporate form, extension not exceed 30 days from the date on which
or renewal of the company’s duration; the latter informed the management of
transfer of domicile abroad; fundamental the name of the interested party and the
change of corporate purpose; total or price. Upon expiration of such period, the

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agreement shall be deemed to have been damages.

agreed and the preference shall be deemed
not to have been exercised.
11. Are there any specific concerns or
On the other hand, the transfer of shares
other considerations regarding the
of SAs is free. The bylaws may limit the
composition, technical bankruptcy
transferability of registered or book-entry
and other insolvency cases in your
shares, without prohibiting their transfer.
jurisdiction?
The limitation must be stated in the title or
in the entries in the account. The Argentine Insolvency and Bankruptcy
Law does not specifically refer to the share
The right to transfer the share is non-
purchase agreement of a company subject
derogable and takes the form of the right
to an insolvency proceeding. As a general
to freely dispose of it when its use is not
rule, shareholders are allowed to sell their
expressly limited by the bylaws or by law.
shares in a company even if the company is
Consequently, it can be stated that the
subject to bankruptcy proceedings.
transferability of the share is an essential
principle of any corporation, not only However, if the sale is made in any way to
because the capital is divided into shares in the detriment of creditors, it would become
order to give the shareholder the incentive an invalid act (requiring proof ) through
of its transferability, but also because - a bankruptcy revocation action. If it is a
according to the legal structure of the donation, for example, it is unenforceable
corporation - the personal conditions of the as a matter of law and the court usually
shareholders seem to be irrelevant. declares it as such.
In practice, provisions are often included In addition, if a shareholder exercises
in joint ventures that give existing the right of separation at the time the
shareholders a preferential right to insolvency of the company began, it must
purchase the shares offered for transfer. return the amount it received from the
These provisions do not apply to transfers company.
of shares in listed companies.
Finally, as explained in Query 26, Argentine
In addition, even when a company’s law recognizes that the parties to a share
articles of association do not provide for purchase agreement may choose a
restrictions on transferability, there are jurisdiction other than Argentina for the
often shareholders’ agreements, under resolution of their disputes, provided that
which shareholders regulate the manner in the matter is of an international nature
which they may exercise their voting rights and concerns pecuniary rights. However,
and grant first refusal rights to the other insolvency proceedings relating to
parties to the agreement in the event of a debtors domiciled in Argentina or whose
proposed transfer of company shares. principal place of business is in Argentina
are an exception to the rule and in such
Shareholders’ agreements are binding only
cases, Argentine courts retain exclusive
on the contracting parties and are therefore
jurisdiction.
not enforceable against third parties unless
they are fully reflected in the company’s In practice, it is not common to find in
bylaws. Shareholders’ agreements whose Argentine transactions an indemnity
clauses are not included in the articles clause on accounts receivable in case of
of association of the company will, as unexpected insolvency of the debtors,
a general rule, give rise to a claim for but in general, this would depend on the

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bargaining power of the parties. includes one or more individuals with a

controlling interest, and the submission of
an offer.
E. Acquisition Acquisitions usually involve meticulous
12. Which methods are commonly used audit and due diligence procedures, with
to acquire a company, e.g., share an emphasis on the target company’s tax
transfer, asset transfer, etc.? and labor obligations (taxes, social security,
etc.) and foreign exchange matters, among
In general, ownership of a company may be
all other aspects usually considered in any
acquired by acquiring the target company’s
due diligence process outside Argentina. It
capital stock, purchasing the assets of the
is common to request that special financial
target company as a going concern, or statements be drawn up at the time of
through a merger. closing. A share purchase agreement will
Strictly speaking, the only way to acquire require careful drafting to cover all agreed
an Argentine company is to obtain control terms and will include representation and
of the voting capital of the target company. warranties from the target company’s
What constitutes a controlling interest shareholders in favor of the buyer.
in the target company is a question of Mergers may consist of (i) consolidations,
fact and will depend on its shareholding in which two or more companies transfer
structure. Control is considered to be the their assets and liabilities to a new
power, direct or indirect, through the company which, as consideration, issues
capital stock that grants the necessary shares to the shareholders of the merged
votes to govern the corporate will in the companies, which are then dissolved, or
bodies and meetings of the company, or to (ii) mergers by absorption, in which one or
exercise a dominant influence. more companies transfer their assets and
Due to the specific characteristics of the liabilities to an existing company which,
market, the pursuit of such an objective in as consideration, issues shares to the
the open market has very little chance of shareholders of the absorbed company/
success. Hostile acquisitions are rare and companies, which are then dissolved.
public mergers and acquisitions are in fact In turn, Argentine law defines a spin-off
almost non-existent. A buyer in the open as an operation by which a company:
market can, at best, acquire enough shares separates part of its assets and liabilities
to obtain a seat on the company’s board of from its existing assets and liabilities and:
directors. (i) creates (together with another company)
In contrast, private off-exchange mergers a new company to which such assets or
and acquisitions are usual. They occur liabilities are transferred; (ii) merges such
between companies of all sizes and assets and liabilities with one or more
existing companies (in the latter case the
involve both local and foreign investors.
rules applicable to mergers will apply); (iii)
Acquisitions of unlisted companies usually
separates part of its assets and liabilities
involve a transaction negotiated directly by
from its existing assets and liabilities and
the interested buyer and all or the majority
creates one or more companies to which
shareholders of the target company. In a
such assets and liabilities are transferred;
competitive process, a typical acquisition
and (iv) creates new companies to which all
will be initiated by an investment bank
of its assets and liabilities are transferred.
or by the buyer’s contact with the target
company’s management, which usually After that, the companies to which the

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assets and liabilities have been transferred of assets, and at the same time, having to
issue shares to the shareholders of the face much lower costs.
company that has spun off the assets and
Finally, provided that the assets constitute
liabilities.
a going concern, there is no relevant
As in the case of mergers, the spin-off difference for the buyer in terms of
procedure requires the relevant company liabilities since the successor liability
to approve the operation, the spin- applies in case of an acquisition of a
off balance sheets, the issuance and business through a new investment vehicle.
distribution of shares and the relevant
14. What are the approvals and
amendments to the bylaws.
consents typically required (e.g.,
Finally, asset transfer agreements are corporate, regulatory, sector
regulated by the Law on the Transfer of based and third-party approvals)
Commercial and Industrial Establishments for private acquisitions in your
No. 11,867, which establishes a procedure jurisdiction?
aimed primarily at protecting the seller’s
In general, private merger and acquisition
creditors. In addition, the procedure
transactions are not legally subject to prior
established by the Law is also aimed at
substantive approval and/or review by
protecting the bona fide transferee in
governmental authorities, except where
case the debts exceed the claims of the
they involve specific industries.
going concern. Following the procedure
provided by the above-mentioned law is If the company’s activity is a regulated
not mandatory and, in many cases, it is activity, additional requirements and
not followed as it does not provide any regulations may apply. For example,
protection regarding taxes and labor financial institutions, insurance companies,
obligations, which are usually one of the companies authorized to publicly offer their
most relevant concerns in a M&A project in securities, public utility companies and
Argentina. companies engaged in telecommunications
13. What are the advantages and are subject to specific regulation,
disadvantages of a share purchase supervision or prior approval by the
as opposed to other methods? relevant government agencies with respect
to the transfer of their shares.
In general, it is argued that a share
purchase agreement, as opposed to other The parties to a transaction with effects
methods such as the transfer of assets, is in Argentina may be required to seek the
usually much more efficient for the seller, approval of the antitrust authorities if they
especially regarding its tax treatment. fall within the scope of antitrust law.

While in a share purchase transaction, the 15. What are the regulatory
taxes to be paid are usually around 15% competition law requirements
of the agreed price, in an asset transfer applicable to private acquisitions in
transaction, the tax rates can reach up to your jurisdiction?
35% of the agreed price and other taxes are
In order to determine if a given transaction
added to this.
must be notified before the Antitrust
Likewise, the share purchase agreement, Commission for clearance, there are 3
as long as it takes place under relatively (three) main issues that must be assessed,
normal circumstances, allows transactions namely: (i) If the transaction entails an
to be closed much faster than the transfer economic concentration pursuant to the

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Argentine Antitrust Law No. 27,442 (the that transactions that entail a change in
“Antitrust Law”); (ii) If the volume of the nature of control (from joint control
business of the companies involved in the to exclusive control or vice versa) are also
transaction exceeds the threshold set out deemed to be economic concentrations.
by the Antitrust Law; and (iii) If any of the
As to the acquisition of assets, the Antitrust
exemptions set out by the Antitrust Law are
Law has assimilated it to the acquisition
applicable. of a company in those cases in which the
(i) If the transaction entails an economic transferred assets “allow the performance
concentration pursuant to the Antitrust of one or several activities, to which an
Law. independent volume of business can be
allocated, with its own clients and own value
The Antitrust Law states that certain generated in the possibility of generating
transactions require, under certain matters of economic nature”.
circumstances, the prior approval of
the Antitrust Commission. In this sense, (ii) If the volume of business of the
transactions are deemed as economic companies involved in the transaction
concentrations when they result in the exceeds the threshold set out by the
assumption of control of one or more Antitrust Law.
companies by means of any of the If requirement (i) is met, the parties should
following acts: then assess if their turnover in Argentina
(a) Mergers. surpasses the legal threshold.
(b) Transfers of businesses. The Antitrust Law stipulates that, in order
(c) Acquisitions of shares or equity to determine whether an economic
interests, any interest thereto, concentration is subject to mandatory
convertible debt securities or securities notification before the Antitrust
that grant to the acquirer the control Commission, the involved companies’
of, or a substantial influence over the aggregate volume of business generated
issuer. in Argentina (i.e., buyer’s group and target
company) must exceed a threshold of
(d) Any other agreement or act through
100,000,000 adjustable units (equivalent
which assets of a company are
to ARS 110,228,000,0001 approximately
transferred to a person or economic
USD 104,729,691 at the relevant exchange
group or which gives decision-
rate)2.
making control over the ordinary or
extraordinary decisions of management The volume of business is defined as the
of a company. combined gross sales of products and
services during the fiscal year prior to the
The Antitrust Commission has defined
closing of the transaction arising from
control as the ability to determine the
ordinary businesses, net of discount sales,
strategic commercial policy of a company
value added tax and other taxes directly
and has classified it as exclusive and joint,
related to the volume of business.
relying on the European Commission’s
interpretations. It has also determined The volume of business to be considered

1 Please note that the value of the adjustable unit is updated on a yearly basis. The adjustable unit value corresponding to 2025 has
been established in ARS 1102,28.
2 The applicable exchange rate for the conversion of the volume of business threshold will be the one applicable on the closing date of
the last approved financial statements prior to the transaction’s closing. For your reference, the exchange rate available on December
31, 2024, was USD 1 = ARS 1052,50.

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for the threshold calculation is the one local assets and the local value of
arising from economic activities in the transaction do not exceed, each
Argentina (either by sales carried out by of them, respectively, the amount
local subsidiaries or sales from exports): equivalent to 20,000,000 adjustable
worldwide turnover is not considered for units (equivalent to ARS 20,045,600,000
these purposes. approximately USD 20,202,153), at
the relevant exchange rate, unless
(iii) If any of the exemptions set out by the
within the preceding twelve months
Antitrust Law are applicable.
transactions had been carried out
However, even if the volume of business exceeding such amount, or the amount
threshold described above is surpassed, equivalent to 60,000,000 adjustable
the economic concentration may not be units (equivalent to ARS 66.136.800.000
subject to mandatory merger control if any approximately USD 60,606,460) at the
of the exemptions set out in Section 11 of relevant exchange rate in the last 36
the Antitrust Law are applicable3. months, whenever in both cases the
same market is involved.
Transactions exempted from notification
are: 16. Are there any specific rules
applicable for acquisition of public
(a) Acquisitions of companies, when the
companies in your jurisdiction?
purchaser already holds more than 50%
of the shares, provided that it does not Takeover bids of companies authorized
entail a change in the nature of control. to list their shares publicly are governed
by the Securities Law and other specific
(b) Acquisitions of bonds, debentures,
rules of the National Securities Exchange
non-voting shares or debt securities of
Commission (“Comisión Nacional de
companies.
Valores”; “CNV”). These rules set forth the
(c) Acquisitions of only one company by requirements that need to be complied
only one foreign company that does with in both voluntary and mandatory
not have any assets or shares of other tender offers. The stock exchanges have
companies in Argentina (known as not issued specific rules governing tender
the ‘first landing’ exemption). In case offers. However, in case of listed companies,
the foreign company is active in the any information regarding a tender offer
country by means of exports, the ‘first submitted to the CNV must also be filed
landing’ exception could still be invoked with the stock exchange on which the
if such exports were not substantial, company in question is listed.
regular and predictable during the last
The CNV Rules must be complied with by
36 months, but a case-by-case analysis
any individual seeking to obtain control
should be carried out.
of a company making a public offer of its
(d) Acquisition of companies that have shares for the purposes of a takeover bid.
not registered activity in Argentina in The Securities Law and the CNV Rules apply
the last year, provided that the main to both tender offers and share exchange
activities of the target company and the offers.
buyer do not overlap.
17. Is there a requirement to disclose
(e) Acquisition of a company if its total a deal, for instance to regulatory

3 Please note that if the total amount of the volume of business is lower than 100,000,000 adjustable units, the transaction does not
require filing and no further analysis in needed, since the principal threshold provided in the Antitrust Law has not been met.

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Global Mergers & Acquisitions Guide 2025

authorities? Is it possible to keep a other deal-breaking clauses. These could

deal confidential? include a breakup fee or some form of
compensation if the agreed exclusivity is
As a general rule, it is possible to keep a
breached.
deal of a private company confidential
since there is no requirement to disclose a However, violation of the agreed exclusivity
deal. clause can often be very difficult to prove,
especially if the negotiated transaction with
However, this principle may be altered
a third party never closes.
depending on the activity of the target
company and the regulatory bodies that Non-solicitation clauses are also common
supervise and control it. This is the case, to prevent potential buyers from hiring
for example, if the company’s activity is the target company’s personnel if the
a heavily regulated one, such as financial acquisition is not finally concluded.
institutions, insurance companies,
Finally, it is also possible and recurrent for
companies authorized to publicly offer their the parties to include non-liability clauses
securities, utilities and telecommunications for retiring from the negotiations at any
companies, among other industries. time of the process, provided that this right
Also, it is not possible to keep the is exercised in good faith.
transaction confidential if buyer needs to 19. What are the conditions precedent
seek the approval of the transaction by the in a typical acquisition document?
antitrust authorities. Is it common to have conditions to
From a tax point of view, any transfer of closing such as no material adverse
change?
shares, quotas or other participations in
Argentine entities must be notified to the In Argentina, it is customary to establish
tax authorities within ten (10) days from the conditions for closing. However, in most
date of transfer. cases, in order to avoid discussions,
conditions precedent are strictly limited to
18. Can sellers be restricted from obtaining prior approval by the competent
shopping around during a regulatory authorities, when such
negotiation process? Is it possible authorization is required.
to include break fee or other
penalty clauses in acquisition This will generally depend on the industry
documents to procure deal in which the target company is engaged.
exclusivity? Transfers of shares in certain regulated
industries (i.e., banks, insurance companies,
Sellers may be restricted from comparing utility concessionaires, etc.) usually
prices during a negotiation process. Due require the authorization of the regulatory
to the time and resources invested by authority as a condition for closing when
both parties in negotiating a potential the transactions involve a change of control
acquisition, it is common for one (or both) or a significant change in the shareholding
of the parties to try to obtain exclusivity structure of the company.
rights over the transaction during certain
Unlike in transactions negotiated in other
period estimated for the negotiation
countries, material adverse changes that
process.
prevent or materially impair the Seller’s
This is usually implemented through ability to consummate the transaction are
the inclusion of exclusivity, penalty or usually interpreted much more restrictively.

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Also, many situations that would likely in in transactions in Argentina due to its
other countries be considered material great complexity of regulatory matters
adverse changes are generally expressly and the constantly changing economic
excluded, e.g., changes in applicable environment.
regulatory standards, changes in national,
provincial, or local political conditions or 21. Is there a requirement to set a
general economic, business or market minimum pricing for shares of a
conditions, including currency restrictions, target company in an acquisition?
devaluation and inflation), among others. From a tax point of view, the purchase price
This is because such situations tend to must represent the “fair market value” of the
occur much more frequently in Argentina shares. Otherwise, the tax authorities may
than in other countries. challenge the fixed price.
Finally, a distinctive feature of Argentina in In turn, from a general civil law point of
this matter is that antitrust approval is, at view, the price must bear a reasonable
least until now, not a condition precedent. relation to the real value of the shares to be
20. What are the typical warranties transferred in order to avoid any question
and limitations in acquisition in this respect. This means that the price
documents? Is it common to obtain cannot be derisory, simulated, fictitious or
warranty insurance? vile.

Warranties and limitations in acquisition In short, the consideration agreed for the
documents are usually the same as those transaction must be consistent with market
included in other countries. Among the value. If not, it could be challenged by
most common ones are the fundamental the tax authorities and even by one of the
representations and warranties and parties if the price is considered vile.
those related to financial statements, the Likewise, a fictitious or simulated price
business, labour and tax matters, and is not considered a serious price, nor is
compliance with laws, among others. there a serious price when the seller, in the
Also, in terms of indemnification, the contract, renounces to receive it, or when it
statute of limitations of the different is demonstrated that the price was not paid
obligations is usually taken into account or that it was destined to fulfill purposes
and it is very common to include different other than those proper to it.
terms for indemnification depending on The price is derisory when it is notoriously
the nature of a claim question (contractual, disproportionate -in less- with respect to
labor, tax). Just to give you an example, the the real value of the thing. Due to its gross
statute of limitation for certain tax matters disproportion, it is said that this price
is of 10 years. -strictly speaking- is not a price.
Furthermore, despite the hard work “Vile” price could give rise to the revision or
that insurance companies have been nullity of the contract.
developing lately on this issue, so far it
is not common at all to obtain warranty It is presumed, unless proven otherwise,
that there is such exploitation in case of
insurance in the context of a share purchase
significant disproportion of the benefits.
agreement.
The affected party has the option to sue for
This is mainly due to the exclusions that the nullity or an equitable readjustment of
would apply, incremental costs and delays the agreement, but the first of these actions
in negotiating this type of insurance must be transformed into an action for

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readjustment if the latter is offered by the writing to the company and recorded in
defendant when answering the claim. the Share/Shareholders’ Register Book. It
22. What types of acquisition financing is upon such notification that the transfer
are available for potential buyers in becomes effective against the company.
your jurisdiction? Can a company 24. Are there any incentives (such
provide financial assistance to a as tax exemptions) available for
potential buyer of shares in the
acquisitions in your jurisdiction?
target company?
There is a tax exemption on capital gains
Financing for acquisitions taking place in
obtained by Argentine resident individuals
Argentina is usually provided mainly by
third parties or even by the seller itself. and non-Argentine residents (as long as
In this sense, the most common type of they do not reside in a “non-cooperative
financing is usually paying the purchase jurisdiction”) resulting from the transfer of
price in installments. shares, securities representing shares and
certificates of deposit of shares carried out
Additionally in Argentina, any company
through stock exchanges or stock markets
that has a financial corporate purpose may
authorized by the Argentine Securities and
provide financing to acquire shares.
Exchange Commission.
23. What are the formalities and
In addition, it is worth noting that on June
procedures for share transfers and
27, 2024, the Argentine Congress approved
how is a share transfer perfected?
a law denominated as “Bases and Starting
In SRLs the quotas are freely transferable Points for the Freedom of the Argentinians”
unless otherwise provided in the bylaws. (“Basis Law”), which entered into force on
July 8, 2024, when it was published in the
The transfer of the quotas is effective
Official Gazette.
against the company as soon as the
transferor or the acquirer delivers to the Even though the Basis Law is a wide-
management a copy of the title of the ranging law, including unprecedented
assignment or transfer, with authentication changes in legal, commercial, regulatory,
of the signatures if it is a private instrument. and social relationships in Argentina, with
the aim of simplifying rules and obstacles
On the other hand, the transfer of the
to promote free market, competition
quotas is enforceable against third parties
and private initiative, and limit state
as soon as it is recorded in the Register
intervention, one of its most relevant
in which the company is registered.
features is the creation of an Incentive
This registration may be required by the
Regime for Large Investments (“RIGI” after
company and may also be requested by the
its acronym in Spanish), which provides for
transferor or the acquirer by exhibiting the
a comprehensive and very attractive system
title of the transfer and reliable proof of its
of tax, customs, and foreign exchange
communication to the management.
incentives, as well as guarantees and
In SAs, on the other hand, the transfer of stability for foreign and local investments.
shares does not have to be registered at the
The RIGI will be applicable in the entire
Registry.
Argentine territory and deadline for joining
The share transfer must be notified in the regime is of two years as of the entry

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into force of the Basis Law (this is until July is required before applicable authorities
2026). Such term may be extended for one (such as the antitrust authorities), an official
additional year by the Executive Branch. translation shall be required to such extent.
The term of the benefits under the regime In addition, in case of litigation before
is 30 years. Argentine courts, an official translation of
the contract into Spanish shall be required.
Adhesion to RIGI must be structured
through a single project vehicle registered 26. Can acquisition documents be
in Argentina holding a project that qualifies governed by a foreign law?
as a “Large Investment” (i.e., a project
Argentine law generally allows the parties
involving a long-term investment equal
to choose the law that will govern share
to or higher than USD 200,000,000 up
to USD 900,000,000, depending on the purchase agreements, as long as there is
promoted productive sector) in certain some connection to the system of law that
promoted productive sectors. Those is selected (although certain matters are
sectors are mining, energy, oil and gas, governed exclusively by local law).
steel, technology, agroforestry, tourism, Finally, the applicable provisions of
and infrastructure. Moreover, the RIGI foreign law must be excluded when they
is compatible with other promotional lead to solutions incompatible with the
regimes existing in Argentina, such as the fundamental principles of public order that
“Promotional regime of the knowledge inspire the Argentine legal system. Public
economy”, which is a very popular tax order is the classic way to exclude the
incentive program among Argentine IT application of foreign law in proceedings
Companies and companies engaged in the when the foreign law is incompatible with
performance of activities associated with the fundamental principles and values of
the knowledge economy. the community and the State.
F. Enforceability 27. Are arbitration clauses legally
25. Can acquisition documents be permissible or generally included in
executed in a foreign language? acquisition documents?

The share purchase agreement is not Dispute resolution (or arbitration)

agreements are clauses that are usually
expressly regulated in the GCL and is
included in share purchase agreements.
governed by the applicable law agreed
by the parties, as long as it does not affect In principle, local courts will accept
rights protected by general public policy. the choice of a foreign jurisdiction or
arbitration in an international contract if
As a general principle, civil and commercial certain requirements are met, such as (a)
contracts are not required to be drafted or the dispute that motivates the litigation is
translated into Spanish in order to be valid, related to pecuniary rights; (b) the dispute
except for contracts that must be executed does not refer to any matter reserved to the
by means of a public deed. Consequently, exclusive jurisdiction of Argentine courts;
it is perfectly valid if by agreement of the and (c) the dispute does not violate any
parties is to sign the acquisition documents principle of public policy of Argentine law.
in a foreign language.
28. Are there any specific formalities
It should be noted that in case any filing for the execution of acquisition

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documents? Is it possible to In general, it is understood that, for

remotely/digitally sign documents? purposes of the CCCN, a contract executed
with a digital signature meets the private
There are no specific formalities for
instrument requirement, while a contract
share purchase agreements to be validly
executed with an electronic signature does
executed, so that freedom of form prevails.
not. Contracts that must have a specific
Consequently, the parties may use the
execution date cannot be executed with
form they deem convenient and are free to
either an electronic signature or a digital
determine the terms of the contract as long
signature.
as they are not contrary to the law, public
order, morality and good customs. During the COVID-19 pandemic, parties
have been forced to find alternatives to
Contracts may be concluded by means of
provide legal certainty when performing
a single instrument executed by all parties
virtual closings. For example, acquisition
or by means of an offer and acceptance
documents have been signed by the
documented in separate instruments.
parties during a videoconference with the
In general terms, remote execution is valid presence of a notary who issued some
if it is carried out through means by which form of certification. In some cases, there
all parties can (with certainty) express their was also a post-signing commitment to
consent to the contract and, if in writing, complete any missing paperwork in person.
the counterparties are then exchanged.
G. Trends and Projections
Under the principle of freedom of form,
29. What are the main current trends in
contracts can generally be concluded
M&A in your jurisdiction?
with a digital or electronic signature. An
electronic contract can be used to satisfy When it comes to main current M&A
a writing requirement and, provided the trends in Argentina, in 2024 Argentina
system meets certain requirements (digital experienced a significant rebound in M&A
signature), it can even be used to satisfy a activity, registering about 100 transactions
private instrument requirement. with a total value exceeding US$ 8.9 billion.
The year ended as the most active in M&A
In this regard, Argentine law distinguishes
since 2019 in terms of deal volume and the
between digital signatures and electronic
highest in transaction value since 2017.
signatures.
The second half of the year, in particular,
Digital signatures, which are governed by saw record activity, marking the busiest
the Digital Signature Law (Law 25,506), six-month period for M&A since 2012.
have the same legal effects as “wet ink” This uptick has been largely driven by the
signatures. Digital signatures enjoy government’s pro-market policies and
a rebuttable presumption of validity, ongoing economic normalization, which
authorship and integrity. have boosted investor confidence and set a
positive outlook for 2025.
Electronic Signatures, on the other hand,
are defined by Law 25,506 as a “set of While foreign buyers (both new entrants
electronic data integrated, linked or and those already present in Argentina)
logically associated with other electronic accounted for 51% of total transaction
data, used by the signatory as his means volume, domestic investors have played an
of identification, which does not meet increasingly important role. This suggests
the legal requirements to be considered a that local players, who tend to better
digital signature.” anticipate economic cycles, are becoming

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more confident in the country’s recovery. as it happens with the mining, oil & gas and
technology industries, foreign investors
Additionally, the energy sector took center
consider access to these resources or
stage during 2024, accounting for 30% of
markets to be of greater importance, than
total deals and over 70% of transaction
the local economic context or country risk.
value, especially in operations involving
mining, particularly lithium leading the Other industries that experienced a
activity, followed by Oil & Gas, where surge in transactions include pharma
transactions were concentrated in the and healthcare, as well as construction,
upstream assets. The truth is that, given primarily in building materials and
the enormous worldwide demand for engineering.
minerals and taking into account the
30. Are any significant development
need to guarantee access to strategic
or change expected in the near
resources, Argentina could become a major
future in relation to M&A in your
investment target for countries seeking to
jurisdiction?
strengthen their position in this regard.
After a period characterized by an
Another industry that played a leading
extremely volatile political and economic
role in the last year was the technology
context, 2024 has been a year of new
sector, particularly in software & IT, fintech,
beginnings and strategic initiatives aimed
biotech and blockchain. In the past few
at attracting foreign investment as well
years, Argentina has seen a huge growth
as to enhance the opening of Argentine
in the private capital sector, where private
markets. This shift driven by the change
capital investment was mostly allocated
of government and the promotion of
to technology companies. This is also due
macroeconomic policies aligned with
to the vast talent and ability of Argentine
greater internationa trade exposure, has
entrepreneurs to provide disruptive and
created a much more encouraging and
creative solutions.
investor-friendly scenario for M&A activity.
It is also important to mention the Draft Bill,
The first electoral year of a party with a
submitted to the Congress for the first time
liberal approach implied the adoption
in 2022, in order to amend the Personal
of measures intended to soften the
Data Protection Law. The aforementioned
prevailing restrictions and achieving a
amendment seek to facilitate technological
better integration with the rest of the world
development and innovation as well as
and, consequently, an optimistic business
digital economy, and to strengthen data
environment for the implementation of
protection at a national level. The Bill was
agreements and transactions during the
praised by the European Commission
coming years might be achieved. This
earlier this year when that body endorsed
became evident from the very beginning
Argentina’s status as a country suitable
of the new government’s term through
for the free flow of personal data across
the enactment of regulations such as
borders.
the Decree of Necessity and Urgency No.
Finally, another sector that recorded 70/23, which introduced a broad legislative
activity was the food and agribusiness, an amendment aimed at deregulating the
industry that is more than competitive in economy and limiting state intervention.
Argentina and continues to attract foreign Additionally, the administration submitted
investment, positioning itself as a natural to the Congress a Draft Bill entitled “Ley de
generator of transactions. This is because, Bases y Puntos de Partida para la Libertad

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Global Mergers & Acquisitions Guide 2025

de los Argentinos” commonly known

as the Omnibus Law, which proposes a
comprehensive overhaul of numerous
regulations and restrictions adopted in
the past, seeking to end state intervention
in the national economy and, therefore,
strengthen a free-market system.
Although some provisions of the original
Bill were modified during the negotiations
to obtain the Congress´ approval, one of
the most important measures that will
definitely affect M&A is the amendment
to the Antitrust Law in order to increase
by 66% (to USD 85 billion) the minimum
amount at which companies must inform
the Antitrust Commission the acquisition
of another competing company. The
Draft Bill also states that, in the event that
antitrust authorities approve an economic
concentration, the merger cannot be
objected before an administrative court.
This could indicate the government’s
intention to promote M&As within the
country.
Although approval of the Omnibus Bill is
still under discussion, it is clear that the
current government aims to facilitate
foreign investment, boost imports
and exports, and reduce the exchange
restrictions imposed by the previous
administration.
In light of this, Argentina’s M&A market is
set for continued growth in 2025, driven
by economic stabilization, lower country
risk, market-friendly policies, rising investor
confidence, and expanding opportunities
across key sectors. As economic and
political stability strengthen—along
with Argentina’s favorable regional
positioning—investment activity is
expected to accelerate, reinforcing a
positive outlook for M&A in the near future.

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 Global Mergers & Acquisitions Guide 2025

AUSTRALIA
CORRS CHAMBERS WESTGARTH

Felicity Saxon
Partner
[email protected]

A. General
1. What is the main legal framework 2. What are the most common types
applicable to companies in your of corporate entities (e.g., joint
jurisdiction? stock companies, limited liability
companies, etc.) used in your
The Corporations Act 2001 (Cth)
jurisdiction? What are the main
(“Corporations Act”) sets out the main
differences between them (including
legal framework in which companies
but not limited to with regard to the
operate in Australia. The Corporations Act
shareholders’ liability)?
is generally administered by the Australian
Securities and Investment Commission The most common company structures in
(“ASIC”), which is an independent Australia are:
Australian Government body and acts as
Australia’s corporate, markets, financial • proprietary companies limited by
services and consumer credit regulator. shares; and

Other key legislation and rules for • public companies limited by shares
companies include the: (which may or may not be listed on the
ASX).
• Competition and Consumer Act 2010
(Cth) (“CCA”); Companies limited by shares are limited
liability structures, meaning that each
• Foreign Acquisitions and Takeovers Act shareholder’s liability is limited to their
1975 (Cth) (“FATA”); and
capital contribution to the company, and
• Listing Rules of ASX Limited (“ASX the directors will not be made personally
Listing Rules”), for Australian Securities liable for the losses of the company (except
Exchange (“ASX”) listed entities. in limited circumstances).

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Global Mergers & Acquisitions Guide 2025

Key differences between a proprietary block certain types of foreign investment,

company and a public company include: apply conditions or require disposal of
an investment into Australia. Foreign
• proprietary companies must have
investment proposals are assessed on
no more than 50 non-employee
whether it is contrary to Australia’s national
shareholders, whereas there is no limit
on the number of shareholders a public interest or national security.
company can have; There is a compulsory notification regime
• proprietary companies must have which applies to: an action which is a
at least 1 (one) director who must “notifiable action” and a “significant action”,
ordinarily reside in Australia, whereas or an action which is a “notifiable national
public companies must have a security action”. The Treasurer has power
minimum of 3 (three) directors, at least to re-review actions notified after January
two of which must ordinarily reside in 1, 2021 on national security grounds in
Australia and at least 1 (one) secretary certain limited circumstances.
who must ordinarily reside in Australia; There is also a voluntary notification regime
and which applies to: “significant action” or a
• public companies generally have more “reviewable national security action”. If prior
onerous financial reporting, disclosure approval is not sought for these types of
and regulatory compliance obligations actions, the transaction will be subject to
(for example, listed public companies the Treasurer’s power to call in for review of
also have to comply with the ASX the transaction and make adverse orders
Listing Rules) and are subject to more (such as requiring disposal) for 10 (ten)
onerous takeover rules. years after the transaction.
There are also other, less common, business Key actions that constitute “notifiable
structures in Australia, including companies actions” and “significant actions” include
limited by guarantee, partnerships, no foreign investors:
liability companies and trusts.
• acquiring a substantial interest
(generally at least 20% but can be 10%
B. Foreign Investment or lower if the acquirer is a foreign
government investor or associate or the
3. Are there any restrictions on foreign target is a national security business,
investors incorporating or acquiring agribusiness, media business or land
the shares of a company in your rich) in an Australian entity that is
jurisdiction? valued above the relevant monetary
Australia’s foreign investment approval threshold; and
regime regulates certain types of • acquiring an interest in Australian land
investment by foreign persons of equity valued above the relevant monetary
interests in Australian companies, trusts threshold.
and interests in Australian businesses and
real property. A “notifiable national security action”
includes a foreign person:
The Australian Treasurer (the “Treasurer”),
who is advised by the Australian • acquiring at least 10% (and in some
Government’s Foreign Investment Review cases less) in a “national security
Board (“FIRB”), has the power to review, to business”;

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• starting a “national security business”; 5. Are there any specific considerations

or for employment of foreign
employees in companies
• acquiring an interest in national
incorporated in your jurisdiction?
security land.
It is the responsibility of an employer in
A “national security business” is generally Australia that an employee is eligible to
1 (one), which is publicly known, or work in Australia. There is a free online
could be known upon the making of government service Visa Entitlement
reasonable inquiries, to be connected Verification Online system (“VEVO”) that
with a “critical infrastructure asset”, enables these checks. In addition, an
telecommunications, Australian or a foreign employer must ensure that superannuation
intelligence community or its supply contributions will be made to a complying
chains. A “critical infrastructure asset” superannuation fund on behalf of the
captures certain assets within the following employee, as well as deductions of
sectors: communications, data storage appropriate tax. There is no limitation on
or processing, defence, energy, financial the number of foreign employees in a
services and markets, food and grocery, company.
health care and medical, higher education
and research, space technology, transport, C. Corporate Governance
and water and sewerage. 6. What are the standard management
structures (e.g., general assembly,
A foreign person is generally an entity
board of directors, etc.) in a corporate
that is a foreign government investor
entity governed in your jurisdiction
or in which a foreign person holds a
and the key liability issues relating
substantial interest of at least 20% or where
to these (e.g., liability of the board
at least 2 (two) foreign persons hold an
members and managers)?
aggregate interest of at least 40%. When
calculating whether a foreign person holds A board of directors generally has oversight
a substantial interest, the interests of an of the operations of a company in Australia.
associate of the foreign person are included While certain directors, such as executive
in the calculation. Tracing can apply to directors and non-executive directors, are
interests of at least 20% through a chain of appointed by the company to the board,
companies, trusts and limited partnerships, other directors, such as de-facto directors
so that entities can qualify as foreign (i.e., individuals who act as directors)
persons based on upstream ownership or shadow directors (i.e., individuals
interests. upon whose instruction the board is
accustomed to acting), may not be formally
4. Are there any foreign exchange appointed. Importantly, Australian law
restrictions or conditions applicable does not distinguish between these types
to companies such as restrictions to of directors, whether they are formally
foreign currency shareholder loans? appointed or not.
Currency exchange controls are not Directors exercise the powers of the
usually seen in Australia. However, for the company in accordance with the company’s
purposes of countering money laundering constitution and the Corporations
and tax evasion, there are cash reporting Act. While the board of directors are
obligations for foreign currency transfers empowered to act for the company
over a certain threshold. generally, there are certain matters which

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the board must refer to the shareholders for 7. What are the audit requirements in
approval (please see question 9 for further corporate entities?
details).
While all Australian companies are required
Executive management is generally to keep financial records, the requirement
responsible for implementing the decisions to prepare financial reports and have those
of the board of directors and running the reports audited will vary depending on the
day-to-day operations of the company. type of company in question. This response
will focus on the most common companies
The Corporations Act imposes duties
in the context of M&A in Australia,
on “officers”, which includes directors, being public companies and proprietary
company secretaries or persons who companies.
participate in making decisions that
affect the whole or a substantial part Public companies and ‘large’ proprietary
of the business of the company or who companies (defined below) are required
has the capacity to significantly affect to lodge a financial report and a directors’
the company’s financial standing. These report for each financial year. Unless
duties include the duty to act in the best ASIC grants relief, the accounts of these
interests of the company and for a proper companies must be audited.
purpose and not to use their position A large proprietary company is a company
and/or information improperly to gain that meets at least two of the following
an advantage or cause detriment to the criteria:
company.
• the consolidated revenue for the
Officers may face civil liability for breaches financial year of the company and the
of these duties, which may involve the entities it controls (if any) is at least AUD
imposition of a pecuniary penalty or 50,000,000 (fifty million);
disqualification from managing a company.
Officers may also commit a criminal offence • the consolidated gross assets at the end
(punishable by imprisonment and/or a of the financial year of the company
pecuniary penalty) if they are reckless or and the entities it controls (if any) is
dishonest and breach the duty to act in at least AUD 25,000,000 (twenty-five
good faith or if they are dishonest in the million); and
use of information or of their position. • the company and any entities it control
Directors also have a duty to prevent (if any) have at least 100 employees at
insolvent trading by the company. Subject the end of the financial year.
to exceptions, directors may be personally ‘Small’ proprietary companies, being
liable for the company’s debts where proprietary companies that do not meet at
they are incurred when the company is least two of the above criteria, are generally
insolvent. not required to prepare and lodge audited
financial statements annually. However,
There are also duties and responsibilities
certain exceptions exist, including where
imposed on directors in other federal and
the company is directed to do so by ASIC
state statutes, common law and equity.
or where the company is controlled by a
While some of the duties overlap, they are
foreign company in certain circumstances.
not identical and the consequences for
breaching the duties may be different.

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D. Shareholder Rights • a selective capital reduction;

8. What are the privileges that can • a selective buy-back of shares;

be granted to shareholders? In • the giving of financial assistance by
particular, is it possible to grant a company for the acquisition of its
voting privileges to shareholders for shares; and
appointment of board members?
• a voluntary winding up.
The company’s constitution sets out the
Shareholders also have the right to
rights and limits attached to shares.
determine the following matters:
If a private company has more than one
• shareholders holding at least 5% of
shareholder, rights and obligations of
voting rights in the company can call a
shareholders may also be included in
general meeting; and
a shareholders’ agreement. Different
share classes may attach different rights. • shareholders holding at least 5% of
Shareholder rights may include the right voting rights can prevent a general
of the shareholders to appoint board meeting (other than the annual general
members, the right to attend and vote at meeting) being held on short notice.
general meetings, the right to receive a
dividend, veto rights in respect of specified Minority shareholders also have the right
matters, drag-along rights and tag-along to bring a claim for oppressive or unfairly
rights. prejudicial conduct.

Shareholder rights for public companies 10. Is it possible to impose restrictions

and proprietary companies may differ. For on share transfers under the
example, an ASX listed public company corporate documents (e.g., articles
generally only has 1 (one) class of ordinary of association or its equivalent in
shares, unless ASX approves an additional your jurisdiction) of a company
class. incorporated in your jurisdiction?

9. Are there any specific statutory rights Proprietary companies can impose share
available to minority shareholders transfer restrictions. These are often
available in your jurisdiction? provided for in the constitution and
shareholders’ agreement (if applicable).
Under the Corporations Act, certain matters
must be decided by shareholders holding Shares in public companies must
at least 75% of the votes, including: generally be freely tradeable, with transfer
restrictions only in rare circumstances.
• adoption of a constitution after the
registration of the company; 11. Are there any specific concerns or
other considerations regarding the
• amendment or repeal of the
composition, technical bankruptcy
constitution;
and other insolvency cases in your
• change of company name; jurisdiction?
• change of company type;
Directors of Australian companies are
• variation of rights attached to shares under a specific statutory duty not to trade
in a class of shares where a company while insolvent. If a director suspects that
does not have a constitution, or has a the company is, or may become insolvent,
constitution that does not set out the they should take mitigating steps including
procedure for varying those rights; avoiding the incurrence of additional debts,

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Global Mergers & Acquisitions Guide 2025

commencing a “safe harbour” process Public company acquisitions commonly

(discussed below), or placing the company occur via a scheme of arrangement or an
into an insolvency process. In addition to off-market takeover bid. Most friendly
insolvent trading liability, directors must deals are undertaken via a scheme of
consider the interests of the company’s arrangement, largely given its all-or-
creditors to a greater degree in discharging nothing outcome.
their directors’ duties of care and diligence
and good faith. 13. What are the advantages and
disadvantages of a share purchase
Insolvent trading or breach of directors’
as opposed to other methods?
duties claims can expose directors to
significant personal, and potentially The main advantage of a share purchase
criminal (although this is uncommon) over other acquisition methods is that
liability if proven. the share purchase process is relatively
The “safe harbour” process is a defence to straightforward. An acquisition of all
insolvent trading claims (but not directors’ of the shares in a company means that
duty and other claims) which can be a purchaser does not generally need
invoked by directors if they are developing to arrange for the transfer of specific
or implementing a restructuring plan. assets of the company (although the
There are several conditions which company’s contracts may be subject to
must be met to take advantage of safe change of control provisions granting
harbour, including the appointment of third parties the right to terminate if
an appropriately qualified advisor. A “safe consent is not obtained) and no new
harbour” process is not a formal insolvency offers of employment are required for the
process and can be flexible and private. employees.
In implementing any restructuring plan,
directors should take advice to ensure they Another key advantage of share purchases
comply with the relevant provisions of the is that they are, in most cases, more cost
Corporations Act, including prohibitions efficient from a tax perspective.
on creditor-defeating dispositions and on
One disadvantage of the share purchase is
transactions reducing the amount of assets
available to pay employee entitlements that the purchaser will acquire exposure to
when they fall due. all of the liabilities of the target company
along with all of the assets, through
Alternatively, if the company’s financial the value of the target company shares.
situation is more dire, the directors can For example, if a target company was
consider placing the company in voluntary involved in litigation, the buyer would
administration, the most common
have exposure to a potential decrease in
insolvency process for restructuring, or
value of the shares given the litigation
potentially other insolvency processes.
liability of the target company. Purchasers
E. Acquisition considering a share purchase should always
12. Which methods are commonly used ensure that they carry out a thorough due
to acquire a company, e.g., share diligence process on the target company
transfer, asset transfer, etc.? and negotiate sufficient protection against
liabilities in the transaction documents.
The most common methods for acquiring
proprietary companies in Australia On the other hand, the sale of assets
are share acquisitions and business involves selecting specific assets and
acquisitions. liabilities in the target company to be

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 Global Mergers & Acquisitions Guide 2025

transferred and specifying the transfer It is customary for the buyer and seller
process for each asset class, as well as to agree to workarounds for contractual
making new offers of employment to staff counterparty consent for less material
(where applicable). contracts.
14. What are the approvals and 15. What are the regulatory
consents typically required (e.g., competition law requirements
corporate, regulatory, sector applicable to private acquisitions in
based and third-party approvals) your jurisdiction?
for private acquisitions in your The current Australian merger control
jurisdiction? regime is voluntary (i.e., there is no
Two of most common approvals that may obligation to notify a transaction to the
be required for private acquisitions are ACCC) and non-suspensory. However, a
from the Treasurer under Australia’s foreign new mandatory and suspensory regime
investment regime (please see question will take effect from 1 January 2026, with
3 for further details) and the Australian parties having the option of notifying the
Competition and Consumer Commission ACCC under the new regime on a voluntary
(“ACCC”) (please see question 15 for further basis from 1 July 2026, which they will
details). mainly do to avoid the risk of having to
renotify a transaction if ACCC clearance is
Acquisitions of target companies in certain not received by 31 December 2025. More
sectors in Australia require government information about the new regime is
or regulatory approval to implement an provided in response to Question 30 below.
acquisition, including banking, insurance,
trustees of registrable superannuation Under the current regime, parties may
entities, and media / telecommunications. proceed to complete transactions without
There are also specific ownership notification or clearance. However, the
restrictions for foreigners in certain Competition and Consumer Act 2010 (Cth)
Australian airports and for Australian (CCA) prohibits acquisitions of shares or
ships. Acquisitions of certain assets may assets that would have the likely effect of
also attract government or regulatory substantially lessening competition in an
consent, including under Australian State Australian market. The ACCC has the power
and Territory electricity, mining and gas to investigate any acquisition of shares or
legislation. assets pre- or post-completion, but cannot
seek injunctions, penalties or divestiture
On a share sale, the consent or wavier of orders without bringing proceedings in the
third parties to material contracts may be Australian Federal Court.
required to avoid termination rights on a
Parties can seek to de-risk completion in
change of control, depending on the terms
three ways. First, by applying to the ACCC
of the contract. Shareholder approval may
for ‘informal clearance’ (the route used in
also be required for a share sale, depending
the significant majority of transactions). If
on the terms of the constitution and
the ACCC considers that the transaction will
shareholders’ agreement (if applicable).
not have the likely effect of substantially
On an asset sale, the consent of third lessening competition, it will provide
parties to material contracts is generally a ‘comfort letter’ indicating that it will
required to formally assign or novate the not oppose the transaction. The ACCC
contract to the buyer. recommends that parties notify if their

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Global Mergers & Acquisitions Guide 2025

products or services are substitutes • more than 25%: provides the ability to
or complements and their combined block a shareholders’ special resolution
market shares are above 20%. Second, and scheme of arrangement;
parties can seek ‘merger authorisation’. If
the ACCC is satisfied that a transaction • more than 50%: provides the ability to
would not be likely to substantially lessen pass an ordinary resolution;
competition or would be likely to result in • at least 75%: provides the ability to pass
a net public benefit that outweighs any a special resolution; and
public detriment (including any lessening
of competition) it can grant a statutory • at least 90%: gives rise to an entitlement
immunity from ACCC or third-party action. to undertake a compulsory acquisition
Finally, parties may make an application process to acquire complete ownership.
to the Federal Court for a declaration that 17. Is there a requirement to disclose
a transaction will not substantially lessen a deal, for instance to regulatory
competition. authorities? Is it possible to keep a
16. Are there any specific rules deal confidential?
applicable for acquisition of public Listed companies have an obligation
companies in your jurisdiction? to immediately disclose to the ASX any
Acquisitions of (i) listed companies, (ii) information concerning it that a reasonable
listed Australian managed investment person would expect to have a material
schemes or (iii) unlisted companies with effect on the price or value of the securities
more than 50 shareholders, are subject of the listed company. One exception
to Australian takeover rules, which are a to this requirement is for confidential
combination of legislation and regulatory information related to incomplete
policy. proposals or negotiations. A confidential
indicative proposal for a control transaction
In broad terms, a person cannot acquire is likely to fall within this exception,
a relevant interest in the voting securities provided there are no leaks.
of an entity subject to the takeover rules
if the consequence is a person’s voting Public company M&A transactions that
have retained confidentiality are typically
power exceeding 20%, unless an exception
announced on ASX once the target
applies. The common exceptions include
company board determines to accept the
(i) acquisitions of relevant interests under a
offer.
scheme of arrangement, (ii) takeover bids,
(iii) acquisitions with target securityholder All transactions which require regulatory
approval, (iv) creep acquisitions (3% every 6 approval would be required to be notified
(six) months), (v) downstream acquisitions to the relevant regulator. Regulatory
(acquisition of listed securities in an entity approvals are generally sought once
that holds securities in the target), (vi) a public M&A transaction has been
rights issues or (vii) exercising security announced to the market.
interests.
Private M&A transactions are typically
Other key shareholder thresholds for an kept confidential between the transacting
ASX listed company are: parties excluding where disclosure is
required for any regulatory or third-party
• at least 5%: triggers an obligation to
consents.
file a substantial holder notice, which is
publicly available;

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18. Can sellers be restricted from approvals (if applicable) and in a private
shopping around during a company context, material third party
negotiation process? Is it possible consents to be obtained.
to include break fee or other
In private M&A transactions, a no Material
penalty clauses in acquisition
Adverse Change (“MAC”) condition
documents to procure deal
precedent is becoming increasingly more
exclusivity?
common, and in public M&A transactions, a
It is common in Australia for the parties no MAC condition precedent is typical.
to a transaction to enter into exclusivity
Under Australian private company sale
agreements, pursuant to which the
agreements, it would be highly unusual
seller agrees not to negotiate with any
for the obligations of the parties to
prospective third-party purchaser for a
consummate a transaction to be subject to
specified period of time. In private M&A
the continued accuracy of the warranties
transactions, exclusivity obligations are
and covenants. If there is a breach of a
often included as a binding clause within
warranty or covenant between signing and
the term sheet.
completion, unless the breach triggers a “no
In public M&A transactions, a no-shop MAC” condition precedent, the parties must
restriction preventing the target soliciting still close the transaction and a post-closing
alternatives is generally permissible. On the claim can be made for breach.
other hand, a no-talk restriction preventing
20. What are the typical warranties
a target negotiating with any potential
and limitations in acquisition
competing bidder and a restriction on
documents? Is it common to obtain
providing due diligence to a competing
warranty insurance?
bidder is generally only agreed provided
there is a fiduciary out which allows target Most private M&A transactions in Australia
directors to fully exercise their fiduciary involve a broad suite of warranties, which
duties without unreasonable constraints. are provided for in the main transaction
There is also the Takeovers Panel (“Panel”) document. The warranties provided will
guidance on when notification obligations often depend on the bargaining positions
and matching rights for a competing of the parties involved, however, a typical
proposal may give rise to unacceptable suite of seller share sale warranties might
circumstances. include (i) warranties relating to title and
capacity, (ii) the information provided in
Break fees are legally permissible provided
respect of the target company as part of the
it does not constitute a penalty. In public
transaction, (iii) the accounts of the target
M&A transactions the Panel provides
company, (iv) the legal and regulatory
general guidance that a break fee payable
compliance of the target company, (v)
by a target less than 1% of the equity value the employees, (vi) the assets (contracts,
of the target is generally not unacceptable properties, IP, IT, etc.) and (vii) liabilities of
in the absence of other factors. the target company.
19. What are the conditions precedent
Tax liabilities are generally addressed in
in a typical acquisition document?
the warranties, as well as in a separate
Is it common to have conditions to
tax indemnity which is included in a
closing such as no material adverse
separate clause under the sale agreement.
change?
This separate clause generally provides
A typical acquisition document would indemnity for the target’s pre-completion
include conditions precedent for regulatory unpaid or unreserved tax liabilities.

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The typical remedy for a breach of warranty its associates for a share in the bid class
by the seller is for the purchaser to bring during the 4 (four) months before the bid.
a claim under the terms of, and subject to
22. What types of acquisition financing
the limitations contained in, the transaction
are available for potential buyers in
documents. These limitations typically
include time periods within which claims your jurisdiction? Can a company
must be made (with such time periods provide financial assistance to a
varying depending on the warranty that is potential buyer of shares in the
breached), the imposition of a maximum target company?
liability cap, de minimis and basket. Sale The principal types of acquisition finance
agreement warranties are almost always available for potential buyers in Australia
qualified by reference to the full contents are senior debt, unitranche debt and
of a data room (which disclose against all term loan B debt. Other types of finance
of the warranties) and frequently, also a include subordinated debt provided at the
disclosure letter for specific matters. operating company level and mezzanine
holdco debt which is structurally
Warranties are also often qualified by
subordinated to the senior debt.
“general disclosure”, such as information
discoverable by making searches of online A company may provide financial assistance
public registers. Although the scope of to a potential buyer of shares in the target
materials qualifying the warranties is very company or its holding company if the
broad, a disclosure will generally only financial assistance would not materially
be effective in qualifying the relevant prejudice shareholders or creditors of the
warranty to the extent that sufficient facts relevant companies. Alternatively, the
and circumstances are “fairly disclosed” (as Corporation Act provides for a shareholder
defined in the sale agreement). approval regime, commonly referred
to as a financial assistance ‘whitewash
W&I insurance is present in about 30%
process’. Under this regime the financial
of private M&A transactions in Australia.
assistance may be provided if approved
It would most commonly be seen in
by the requisite threshold of shareholders
transactions above AUD 10,000,000 (10
of the company giving the financial
million) involving private equity exits,
assistance and the shareholders of the
private seller (e.g., family trust) exits, sellers
company which will, on completion of
staying on with the target company, and
the acquisition, be the target’s ultimate
multiple sellers.
Australian holding company.
Warranties are not generally provided in
23. What are the formalities and
public M&A transactions.
procedures for share transfers and
21. Is there a requirement to set a how is a share transfer perfected?
minimum pricing for shares of a
In private M&A transactions, shares are
target company in an acquisition?
transferred by way of a share transfer form,
There is a requirement to set a minimum which is signed by the buyer and seller
price for shares, however, this only applies and exchanged on the completion of the
in respect of takeover bids for listed transaction. At completion, the seller must
companies. In this regard, the consideration hand back their original share certificate to
offered for shares in the bid class must the company for cancellation. If the seller
equal or exceed the highest price paid, or does not have its original share certificate,
agreed to be paid, by the bidder or any of a buyer should request an indemnity in

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 Global Mergers & Acquisitions Guide 2025

respect of its lost share certificate. Once typically prepared by an appropriately

the share transfer form has been signed, qualified translator (e.g., accredited by
stamp duty must be paid (if applicable). The the National Accreditation Authority for
register of members of the target must be Translators and Interpreters (“NAATI”)).
updated to reflect the purchaser as the new
26. Can acquisition documents be
holder of the shares on completion of the
governed by a foreign law?
transaction. Once the register of members
has been updated, a new share certificate Yes. Australian contract law respects party
can be issued to the purchaser. Finally, ASIC autonomy in choice of governing law
must be notified of certain details of the provided the parties’ choice is bona fide,
share transfer so that the public companies legal and not contrary to public policy.
register can be updated. There may also be certain “mandatory laws
of the forum” (typically, statutes) that an
In M&A transactions involving listed Australian court will apply to the contract
companies, shares are transferred in irrespective of the parties’ choice of law.
accordance with the ASX rules. These
transfers are generally perfected on an 27. Are arbitration clauses legally
electronic register. permissible or generally included in
acquisition documents?
24. Are there any incentives (such
as tax exemptions) available for Yes, arbitration clauses are permissible, but
acquisitions in your jurisdiction? the vast majority of M&A deals in Australia
typically refer disputes to courts (as a last
Non-resident shareholders are generally resort). However, it is more common to
exempt from Australian capital gains tax use arbitration clauses for deals in the
on sale of shares in an Australian resident construction sector or for deals involving
company, provided that the shares do foreign parties.
not constitute an “indirect Australian real
property interest” and do not relate to a 28. Are there any specific formalities
business carried on by the foreign resident for the execution of acquisition
through a permanent establishment documents? Is it possible to
in Australia. An “indirect Australian real remotely/digitally sign documents?
property interest” generally includes an If the sale agreement includes a power of
interest of 10% or more in a company, the attorney or there is a lack of consideration,
underlying value of which is principally the sale agreement will need to be
derived from Australian real property. executed as a deed which requires specific
F. Enforceability formalities.

25. Can acquisition documents be Generally speaking, it is possible for

executed in a foreign language? companies to sign acquisition documents
(including deeds) electronically. The law
Yes, Australian contract law does not of execution draws on federal and state
prohibit contracts being executed or legislation and as such, tailored legal advice
expressed in a foreign language. However, should be obtained where electronic
if a contract in a foreign language is to be signing is proposed by a party as the
relied on in court proceedings, or provided requirements may differ depending on
to an Australian Government authority, the Australian State or Territory in which
it will be necessary to provide the court signing occurs and the type of document
or authority with an English translation, signed.

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G. Trends and Projections are notifiable irrespective of whether the

monetary thresholds are satisfied.
29. What are the main current trends in
M&A in your jurisdiction? The monetary thresholds will be confirmed
by the Government in secondary
2024 has been a year marked by
legislation, which at the time of writing
macroeconomic uncertainties, geopolitical
has not been passed. The Government
tensions and raising interest rates, which
has previously suggested that there will
contributed to a market riddled with
be three sets of thresholds, and a merger
unpredictability and risks. Despite that,
will be notifiable where either one of
Australia continues to be a significant
them is met, as set out below. However, as
attraction for foreign bidders. In 2024,
confirmation of the thresholds is expected
public M&A deals in Australia were higher
at any time, merger parties should check
compared to previous years but the
the current position:
overall deal value has dropped whereas
deal volume in private M&A deals has not • ‘Economy-wide’: the target has a
recovered as hoped at the start of 2024. material connection to Australia; and
The top three industries with the most M&A the combined Australian turnover
activities in 2024 in Australia were energy, of the merger parties (including the
mining & utilises, followed by financial acquirer group) is at least $200 million;
services and TMT in joint second place. and either the Australian turnover
Despite inflation easing and interest rates of each of at least two of the merger
stabilising, cash remains the preferred parties is at least $50 million or the
consideration across the board. global transaction value it at least $250
30. Are any significant development million; OR
or change expected in the near • ‘Very large acquirers’: the acquirer
future in relation to M&A in your group’s Australian turnover is at least
jurisdiction? $500 million; and the Australian
As a result of the Treasury Laws turnover of each of at least two of the
Amendment (Mergers and Acquisitions merger parties is at least $10 million; OR
Reform) Act 2024 (Cth), which makes a • ‘Cumulative turnover’: either (i) the
number of amendments to the CCA, a new combined Australian turnover of the
Australian merger control regime will apply merger parties (including the acquirer
from 1 January 2026. group) is at least $200 million, and the
While a number of details regarding the cumulative Australian turnover from
new regime are still to be confirmed, the acquisitions by the merger parties
new regime introduces an obligation to involving the same or substitutable
notify the ACCC of acquisitions of shares goods or services over the previous
(that result in a change of control) or three-year period is at least $50 million;
assets that exceed prescribed monetary or (ii) the acquirer group’s Australian
thresholds (based on the merger parties’ turnover is at least $500 million, and
turnover and/or the transaction value) and the cumulative Australian turnover
to suspend completion pending receipt from acquisitions by the merger parties
of ACCC approval. The Government may in the same or substitutable goods or
also designate classes of acquisitions (for services over a three-year period is at
example in certain industry sectors) that least $10 million.1

1 Under both cumulative tests, there is a de minimis exception for acquisitions of entities or assets with less than $2
million Australian turnover and a further exception for previously notified acquisitions.

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Each contravention of the obligations to lessening competition in any market in

notify and suspend completion is subject Australia, although the test has been
to maximum penalties of $50 million, three clarified to include acquisition that would
times the gain from the contravention be likely to have the effect of creating,
or 30% of the corporation’s Australian strengthening or entrenching a substantial
turnover during the relevant period. degree of power in a market.
Merger parties may notify an acquisition A ‘Phase I‘ investigation will last up to 30
to the ACCC on a voluntary basis in a business days and a ‘Phase II’ investigation
transitional period from 1 July 2025, which will last up to 90 business days. If the ACCC
they may elect to do to avoid the risk of concludes after Phase II that an acquisition
having to renotify where approval under will have the likely effect of substantially
the current regime remains outstanding as lessening competition, the merger parties
at 1 January 2026.
may apply for a determination that the
The legal test has not significantly changed acquisition results in a public benefit, which
and remains whether the transaction would the ACCC will consider in ‘Phase III’ lasting
be likely to have the effect of substantially up to 50 business days.

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 Global Mergers & Acquisitions Guide 2025

AUSTRIA
BRANDL TALOS

Stephan Strass Daniel Habich Lara Präthaler

Partner Associate Associate
strass@ habich@ praethaler@
brandltalos.com brandltalos.com brandltalos.com

A. General
1. What is the main legal framework In particular, the following additional laws
applicable to companies in your are relevant for Austrian companies:
jurisdiction?
• Act on the Societas Europea (SE-G);
There is no single law regulating companies
• Demerger Act (SpaltG);
in Austria. In principle, the Austrian Civil
Code (Allgemeines Bürgerliches Gesetzbuch; • Corporate Transformation Act (UmwG);
ABGB) and the Austrian Commercial Code
• Reorganisation Tax Act (UmgrStG);
(Unternehmensgesetzbuch; UGB) set forth
the basic legal framework applicable to • EU Reorganisation Act (EU-UmgrG);
companies. In addition, specific laws apply
depending on the company form, such • Minority Shareholder Squeeze-Out Act
as the Act on Limited Liability Companies (GesAusG);
(GmbH-Gesetz; GmbHG) for limited liability • Stock Exchange Act (BörseG);
companies (Gesellschaften mit beschränkter
Haftung; GmbH), the Act on Flexible • Takeover Act (ÜbG);
Companies (Flexible Kapitalgesellschafts- • Investment Control Act (InvKG)
Gesetz; FlexKapGG) for flexible companies
(Flexible Kapitalgesellschaften or FlexCo) • Cartel Act (KartellG);
or the Austrian Stock Corporation Act
• Labour Constitution Act (AVRAG)
(Aktiengesetz; AktG) for joint stock
corporations (Aktiengesellschaften; AG).

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2. What are the most common types divided into shares held by the company’s
of corporate entities (e.g., joint shareholders. The corporation’s governance
stock companies, limited liability consists of a two-tier structure: A joint stock
companies, etc.) used in your corporation is represented by its board of
jurisdiction? What are the main directors, appointed by the supervisory
differences between them (including board which is, in turn, appointed by the
but not limited to with regard to the shareholders. Neither the supervisory board
shareholders’ liability)? nor the shareholders can issue binding
instructions to the board of directors.
In principle, the Austrian legal system
Certain reserved matters require the
distinguishes between partnerships
approval of the supervisory board.
(Personengesellschaften) and corporations
(Kapitalgesellschaften). Generally, the FlexCo is based on the
limited liability company, but comes with
The majority of companies in Austria
certain elements that have been reserved
are corporations with the 2 (two) main
for joint stock corporations so far. Therefore,
types being limited liability companies
the FlexCo can be classified as a “hybrid”
(Gesellschaften mit beschränkter
between the limited liability company and
Haftung) and joint stock corporations
the joint stock corporation. FlexCos are
(Aktiengesellschaften). As of January 1, 2024,
represented by their managing directors,
the FlexCo (Flexible Kapitalgesellschaft)
who are bound by directives (Weisungen) of
has been introduced as a new legal entity.
the company’s shareholders. Shareholders
Corporations acquire legal personality
benefit from substantial (minority)
through registration with the Austrian
shareholder rights. In contrast to the limited
companies’ register (Firmenbuch). The
liability company, the FlexCo offers capital
shareholders of corporations are generally
measures like contingent capital (bedingtes
not personally liable for the company’s
Kapital) or authorized capital (genehmigtes
obligations and liabilities (there are only
Kapital), which have been reserved for the
few exceptions to such principle).
joint stock corporation thus far. Further,
By far the most prominent company form the minimum share capital contribution of
in Austria is the limited liability company. each share quota amounts to EUR 1.00 and
The limited liability company has – since certain formalities have been eased (e.g.,
January 1, 2024 – a minimum share FlexCo shares can be transferred without
capital of EUR 10,000, of which EUR 5,000 a notarial deed, if a private deed before a
need to be paid in. The minimum share lawyer or a notary is set up).
capital contribution of each shareholder
In general partnerships (Offene Gesellschaft;
must amount to at least EUR 70. Limited
OG), shareholders are personally liable for
liability companies are represented
the company’s obligations and liabilities.
by their managing directors, who are
The same applies to the general partner
bound by directives (Weisungen) of the
(Komplementär) of limited partnerships
company’s shareholders, which results
(Kommanditgesellschaft, KG). However, a
in a strong control over the company by
limited partnership also includes at least
the shareholders. Further, shareholders of
1 (one) limited partner (Kommanditist),
a limited liability company benefit from
whose liability does not go beyond the
substantial (minority) shareholder rights.
registered capital contribution. In a limited
The minimum share capital of joint stock partnership, the general partner can also be
corporations is EUR 70,000, which is a limited liability company (GmbH & Co KG).

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B. Foreign Investment However, the acquirer may

apply for a clearance certificate
3. Are there any restrictions on foreign (Unbedenklichkeitsbescheinigung) to clarify
investors incorporating or acquiring whether a transaction actually requires
the shares of a company in your approval (this can be done any time before
jurisdiction? the acquisition). While the BMAW has a
The acquisition of a shareholding exceeding period of 2 (two) months to decide upon
certain thresholds or a controlling influence such application, the BMAW typically
by non-EU/EEA/Swiss nationals) in an decides prior to the expiry of such period.
Austrian target requires prior approval 4. Are there any foreign exchange
under the Austrian Foreign Investment restrictions or conditions applicable
Control Act (Investitionskontrollgesetz, to companies such as restrictions to
“ICA”), if, inter alia, the Austrian target foreign currency shareholder loans?
is active in certain sectors. In addition
to certain “highly sensitive” sectors, the The capital contribution of limited
ICA contains a demonstrative list of liability companies, FlexCo’s or joint stock
other sectors, in which prior approval is corporations must be paid in Euro. Apart
required if the relevant activities/areas are from that, there are no foreign exchange
considered critical infrastructure, critical restrictions.
technology or concern the supply with
5. Are there any specific considerations
critical resources.
for employment of foreign
The competent authority applies a very employees in companies
broad interpretation to the scope of incorporated in your jurisdiction?
application of the ICA, with the effect that
Non-EEA citizens require a work and
the sectors explicitly listed in the Austrian
residence permit. However, this does
Foreign Investment Control Act are per se
not apply to non-EU/EEA/Swiss citizens,
considered to be critical (with the degree
who must only register with the Austrian
of criticality being irrelevant for purposes
authorities within 4 (four) months after
of determining a filing requirement exists).
entering Austrian territory.
In practice, this has resulted in every M&A
transaction involving the investment by a C. Corporate Governance
foreign person in a sector which is explicitly
6. What are the standard management
listed in the ICA being notified to the
structures (e.g., general assembly,
competent authority (which is currently the
board of directors, etc.) in a corporate
Austrian Ministry for Labor and Economy;
entity governed in your jurisdiction
Bundesministerium für Arbeit und Wirtschaft,
and the key liability issues relating
“BMAW”).
to these (e.g., liability of the board
The approval process under the ICA takes members and managers)?
approx. 9 (nine) weeks (following an
a) Limited Liability Companies
EU-wide consultation mechanism of 35
calendar days, the BMAW has to decide A limited liability company is represented
within 1 (one) month whether to approve by 1 (one) or more managing directors
the transaction or initiate an in-depth with sole or joint power of representation.
examination) – if a transaction is subject to The scope of the power of representation
the ICA, closing may only take place once is prescribed by law and cannot be
such approval has been granted. changed in the articles of association or

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by a shareholders’ resolution towards third c) Joint Stock corporations

parties. The managing director is bound by
In a joint stock corporation, the
the shareholders’ instructions. The general
management board consists of at least
assembly consists of all shareholders and
1 (one) member that represents the
is the supreme decision-making body.
corporation externally and oversees the
Its main task consists of reviewing and
approving the annual financial statements, company’s internal operations. If the
the distribution of retained earnings and management board consists of several
other structural measures of the company. members, in general all members represent
the corporation jointly. The management
The managing director is obliged to board is obliged to provide regular reports
exercise the due care of a prudent to the supervisory board. Further, it is
businessman. Therefore, the managing responsible for the preparation of annual
director is fully liable to the company for financial statements and the arrangement
a willful or negligent breach of such duty. of general meetings. The management
Several managing directors are jointly board is not bound by instructions of the
and severally liable. Only in exceptional supervisory board or the shareholders.
cases, such as in case of violation of legal The general meeting consists of all
provisions that aim to protect creditors, shareholders and is the highest body of
the managing director may be held liable
the company. Certain decisions are to be
vis-à-vis creditors. In principle, there is no
made exclusively by the general meeting,
obligation for limited liability companies to
such as among others, adopting the
establish a supervisory board. However, the
annual financial statements, appropriating
law provides for a compulsory supervisory
the balance sheet profit, electing the
board in case certain size requirements
supervisory board members.
are met (essentially (i) a share quota of
more than EUR 70,000 and more than The management board has a duty to
50 shareholders or (ii) more than 300 the company to exercise the due care of
employees) which does not have great a prudent businessman. Members of the
practical significance. The same standard management board who violate their
of liability applies to members of the obligations are jointly and severally liable to
supervisory as for managing directors, compensate the company for any resulting
however, restricted to their scope of duties. damage. In principle it is possible to define
b) Flexible Companies business fields, however, there are certain
major obligations (Kardinalpflichten) for
The statements set out in item a) above also which all board members are responsible.
apply to FlexCos. The same standard of liability applies for
However, the obligation to establish members of the supervisory board, but is
a supervisory board already applies if restricted to their scope of duties.
a FlexCo qualifies as a medium-sized 7. What are the audit requirements in
company pursuant to section 221 corporate entities?
paragraph 2 and 4 Austrian Commercial
Code. FlexCos are considered medium-sized Generally, limited liability companies and
companies if two of the following criteria FlexCos are obliged to have their annual
are met: (i) EUR 5 million in balance sheet financial statements audited by an external
total, (ii) EUR 10 million in revenues and/or auditor. Only limited liability companies
(iii) an annual average of 50 employees. and FlexCos not meeting certain revenue

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thresholds are exempt from this obligation, basis in the articles of association, CVS
unless they are required by law to establish may be issued up to a maximum of 25%
a supervisory board (see Question 6). The of the FlexCo’s share capital. CVS grant a
auditor is elected by the shareholders; if a right to participate in the net profit and
supervisory board exists, it must submit a liquidation proceeds of the FlexCo, but
proposal for the election. unlike ordinary shares – in principle – do
not have voting rights. However, CVS come
Joint stock corporations are obliged to have
with participation rights in shareholder
their financial statements audited by an
meetings as well as information and
independent auditor, which is elected by
inspection rights.
the general meeting based on a proposal of
the supervisory board. In joint stock corporations, the board
members are not appointed by the
D. Shareholder Rights
shareholders. In practice, however,
8. What are the privileges that can shareholders can influence the
be granted to shareholders? In appointment of board members via the
particular, is it possible to grant supervisory board, which is appointed by
voting privileges to shareholders for the shareholders. Under Austrian law it is
appointment of board members? feasible to grant shareholders preferential
There are no different share classes in rights to nominate members of the
limited liability companies. However, the supervisory board.
Act on Limited Liability Companies is quite 9. Are there any specific statutory rights
flexible in this respect. It is possible and available to minority shareholders
quite common in practice to contractually available in your jurisdiction?
establish different share classes by
granting certain preferential rights to Both the Act on Limited Liability Companies
specific shareholders, such as the right to as well as the Joint Stock Corporations
preferential profit distribution, to nominate Act provide for certain minority rights
managing directors or to veto certain depending on the shareholding.
specific corporate or operative measures
a) Limited Liability Companies and
(e.g., capital increases, reorganization
FlexCos
measures, etc.).
In the case of limited liability companies
FlexCos may issue fractional shares and
have different share classes. Thus, FlexCo and FlexCos, shareholders holding at least
shareholders can hold several shares of one third of the company’s outstanding
different share classes (e.g., common-shares share capital are entitled to appoint a
and series-A shares) and dispose of them minority representative to the supervisory
separately. Furthermore, shareholders with board (if established). Shareholders holding
multiple votes can engage in split voting, at least 10% of the outstanding share
which can be especially advantageous in capital may convene general meetings or
case of trusteeships. In addition, a new place a specific item on the agenda of the
share class concept – the company value same. In addition, shareholders holding
shares (Unternehmenswert-Anteile, “CVS”) more than 25% of the outstanding share
– has been introduced. CVS are primarily capital form a so-called blocking minority
designed for (but not limited to) employee with respect to matters that – pursuant to
participation in early-stage companies law – require a majority decision of at least
(start-ups). With a corresponding legal 75%.

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b) Joint stock corporations transfers are less frequent. The choice of

the transfer method generally depends
Regarding joint stock corporations, a
on various considerations such as tax
minority shareholder or a collective of
implications, the scope and complexity
shareholders holding a minimum of 5% of
of the target business and liability risks
the outstanding share capital are entitled to
connected with the acquisition. Usually
request the convocation of a shareholders’
only smaller transactions and those
meeting or the addition of a specific matter
involving a limited number of assets are
to the agenda of such a meeting. Further,
structured as an asset deal.
a minority representing at least 10% of the
outstanding share capital can demand the 13. What are the advantages and
removal of a member from the supervisory disadvantages of a share purchase
board for cause through a court ruling. as opposed to other methods?
Similar to limited liability companies, When acquiring a company through a
decisions on particular issues that require share deal the legal entity of the target
a 75% majority are subject to a blocking remains unchanged. All rights and
minority, when 25% plus 1 (one) vote of the obligations of the target company are
capital stock is attained. transferred by way of universal succession
10. Is it possible to impose restrictions (Gesamtrechtsnachfolge) to the acquirer.
on share transfers under the While this makes the share deal generally
corporate documents (e.g., articles the easiest option to acquire a company
of association or its equivalent in it also comes with some risk, because, in
your jurisdiction) of a company particular, the company is acquired with
incorporated in your jurisdiction? all its obligations and contingencies.
However, there will be no direct liability
The articles of association of a limited for the acquirer since in a limited liability
liability company, FlexCo or a joint stock company only the company itself but not
corporation may restrict the transfer of the shareholders are liable for company
shares. Further, syndicate agreements may obligations. Further, in Austria the
subject a share transfer to prior consent of transfer of shares requires a notarial deed.
all or certain shareholders or lay out formal Consequently, for a share deal involving a
requirements which must be complied limited liability company, a public notary
with. is required which comes with additional
11. Are there any specific concerns or costs. However, the transfer of shares in
other considerations regarding the a FlexCo can be documented through a
composition, technical bankruptcy private deed (Privaturkunde) executed by
and other insolvency cases in your either an attorney-at-law or a public notary
jurisdiction? – a notarial deed is not required.

N/A In asset deals, on the other hand, assets are

transferred by way of singular succession
E. Acquisition (Einzelrechtsnachfolge) which means
they must be identified individually
12. Which methods are commonly used
and for each asset the right transfer act
to acquire a company, e.g., share
(Verfügungsgeschäft) must be executed. The
transfer, asset transfer, etc.?
main advantage of an asset deal consists in
Share transfers are the most common choosing whether to acquire certain or all
acquisition method in Austria, while asset assets including liabilities attached thereto.

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However, Austrian mandatory law provides There are regulatory control provisions
for special liability provisions applicable in certain sectors such as the banking,
to asset deals pursuant to which certain insurance, utilities, gambling and
contracts (e.g., employment contracts) or telecommunications industries and
liabilities attached to the acquired business other highly regulated sectors, that may
are transferred to the acquirer. Under influence the process of an acquisition.
such provisions, the acquirer’s liability is Changes of target ownership will usually
generally limited with the purchase price. require advance notification to the relevant
Asset deals are entered into with the target government agencies in cases where
company. Unless the asset deal is to be certain thresholds of stake ownership
considered an extraordinary measure or the are reached or exceeded. For example,
articles of association subject the transfer transactions involving Austrian banks
of assets to the shareholders’ approval require the approval of the Financial Market
the permission of the shareholders is not Authority (Finanzmarktaufsicht).
required. Under the ICA, the direct or indirect
14. What are the approvals and acquisition by foreign investors requires in
consents typically required (e.g., some cases the advance approval by the
corporate, regulatory, sector Austrian Minister of Economy and Labor
based and third-party approvals) (see Question 3).
for private acquisitions in your 15. What are the regulatory
jurisdiction? competition law requirements
a) Corporate approval applicable to private acquisitions in
your jurisdiction?
Asset deals are carried out by the
respective representative body of the Transactions not exceeding the
company, the managing director in a transaction volumes of the EC Merger
limited liability company and in a FlexCo, Control Regulation but exceeding the
or the management board in a joint stock following thresholds prescribed by
corporation. However, depending on the Austrian cartel law are subject to approval
corporate governance of the respective by the Federal Competition Authority
company, certain transactions may require (Bundeswettbewerbsbehörde, “FCA”):
the approval of the company’s shareholders • the undertakings participating in
or the supervisory board. In particular, the the acquisition had a turnover in the
acquisition or sale of subsidiaries requires business year prior to the merger of
the approval of the supervisory board of a more than EUR 300 million worldwide,
joint stock corporation.
• the undertakings participating in
Share deals, on the other hand, are entered the acquisition had a turnover in the
into by the respective shareholders. business year prior to the merger of
more than EUR 30 million in Austria,
b) Regulatory/sector based approval
• at least 2 (two) of the undertakings
Depending on the industry of the acquired
each had a turnover of more than EUR 5
company, the prior approval by or
million worldwide.
notification to a regulatory authority may
be required. Or the following cumulative conditions:
• the combined turnover of the

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undertaking must be at least EUR 300 • Voluntary offers aimed at control

million worldwide and EUR 15 million are triggered if a non-controlling
domestically, shareholder (i.e., with a shareholding of
• the “value of consideration” for the less than 30%) submits an offer aimed
transaction must be above EUR 200 at control. Such offers are subject to
million (new transaction value element), the rules on mandatory bids (Equal-
Treatment-Rule), particularly on cash
• the target must be active in Austria to a offers and minimum price. However,
significant degree. voluntary offers aimed at control are
Austrian cartel law prohibits completing subject to a mandatory statutory
notifiable transactions before being cleared 50% acceptance threshold. However,
by the authority. The FCA examines within voluntary offers aimed at control may
a 4 (four) week period whether the planned be subject to conditions, particularly
transaction will create or strengthen a upon reaching or exceeding a higher
dominant position and, thus, could have acceptance threshold.
the effect of restricting competition.
• Voluntary offers (which are not aimed
16. Are there any specific rules at control or launched by an already
applicable for acquisition of public controlling shareholder) are not subject
companies in your jurisdiction? to minimum pricing rules and the
The Austrian Takeover Act mandatory cash offer rule does not
(Übernahmegesetz, “ATA”) regulates both apply. As in case of offers aimed at
voluntary and mandatory public takeover control, partial offers may be subject to
bids for shares of a joint stock corporation conditions.
or a Societas Europea based in Austria,
There are no minimum pricing rules or cash
provided that the shares are admitted to
trading on the Vienna Stock Exchange requirements in voluntary bids. However,
at a regulated market. The Takeover in a mandatory offer and a voluntary bid
Commission (Übernahmekommission) is the aimed at control, the price shall not be
competent authority. lower than the highest consideration of the:

Austrian law recognizes mandatory offers, • average share price during the
voluntary offers aimed at control and 6 (six) month period prior to the
voluntary offers: announcement of the offer and
• Mandatory offers are triggered if a • highest price paid or offered for target
controlling shareholding is acquired. shares by the bidder in the 12 months
Control is defined as a shareholding before the offer is filed with the TC.
of more than 30% of the voting
rights. A mandatory offer is subject to 17. Is there a requirement to disclose
minimum pricing rules, it must be an a deal, for instance to regulatory
unconditional offer (except for legal authorities? Is it possible to keep a
conditions like regulatory approvals) deal confidential?
and requires a cash offer (but can have a) Merger Control
a paper alternative in addition) and
sufficient funds. It must be made to A deal must be disclosed to the FCA if the
all other shareholders to acquire their criteria of a merger control are met (see
shares. Question 15).

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b) Public Takeover 19. What are the conditions precedent

in a typical acquisition document?
A public takeover must be disclosed if the
Is it common to have conditions to
transaction falls under the scope of the ATA,
closing such as no material adverse
which is only applicable for acquisition of
change?
a controlling interest in a listed joint stock
corporation. This is the case if any person Conditions precedent are fairly common.
acquires a direct or indirect controlling Besides merger control clearance, which
interest in a target company, whereas a regularly must be covered by conditions
direct or indirect controlling interest exists precedent, the transaction agreement
if at least 30% are reached or exceeded may also be subject to the obtaining of
directly or via another company. If this certain (legally required) approvals (e.g.,
threshold is met, the Takeover Commission by authorities or shareholders) or no-
must be informed about the acquisition occurrence of certain material adverse
of the controlling interest in the target changes prior to completion of the
company. In addition, the acquirer must transaction.
make a public offer for all equity securities
of the target company. 20. What are the typical warranties
and limitations in acquisition
18. Can sellers be restricted from documents? Is it common to obtain
shopping around during a
warranty insurance?
negotiation process? Is it possible
to include break fee or other In principle, the practice distinguishes
penalty clauses in acquisition between fundamental warranties covering
documents to procure deal authority, capacity and title and business
exclusivity? warranties relating to aspects of the
operational business of the target. The
Since Austrian law is based on the principle
liability for warranty breaches is typically
of freedom of contract, the transaction
limited in time and amount (usually, caps,
parties are free to seek any type of
security measures as long as they do not hurdles, and baskets are agreed upon).
violate moral principles (Sittenwidrigkeit). Further, the warranties are typically subject
Exclusivity clauses are usually included to additional limitations (such a disclosure
as part of a legally (non) binding letter of concept) and a defined process for the
intent or term sheet. However, exclusivity enforcement of liability claims.
agreements can also be concluded as Warranty and indemnity (commonly known
stand-alone agreements. Even without an as W&I) insurance is frequently used on
agreement on a break fee, under Austrian larger transactions. To ensure coverage, the
law, breaking off negotiations without agreed warranties must be included in the
cause may entitle negotiating partners to share purchase agreement. W&I insurance is
reimbursement of frustrated costs which, becoming increasingly important in Austria.
however, has no great practical significance.
If the acquisition documents do not outline
In public M&A transactions, break fees are specific remedies, the general warranty
not prohibited but are not quite common
rules of the Austrian Civil Code apply.
because the payment of a break fee must
be disclosed in the offer document and, 21. Is there a requirement to set a
if excessive, may violate the ATA, if they minimum pricing for shares of a
hinder competing offers. target company in an acquisition?

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Generally, there is no obligation to set a of the shareholders must be registered

minimum price for the shares of a company. with the Austrian companies’ register
However, in case the target company is a (Firmenbuch), whereby the registration of
stock listed corporation, mandatory offers the share transfer is only declarative and
and voluntary offers aimed at acquiring does not affect the legal ownership of the
control are subject to statutory minimum shares.
price rules (see Question 16).
No specific form requirements apply to
22. What types of acquisition financing
the transfer of joint stock corporation
are available for potential buyers in
shares. Shares in non-listed companies
your jurisdiction? Can a company
must be issued in the form of registered
provide financial assistance to a
potential buyer of shares in the shares (Namensaktien). Registered shares
target company? are transferred by means of written
endorsement by the seller. The company
The type of financing depends on the size must be notified of the transfer of
of the transaction and whether the acquirer registered shares. However, the transfer
is strategic or private equity. In practice,
may require the consent of the company.
financing is often provided through equity
or bank financing, or a mixture of both. 24. Are there any incentives (such
However, alternative sources of financing as tax exemptions) available for
such as debt funds are becoming more acquisitions in your jurisdiction?
common.
Equity contributions of a direct shareholder
In principle, security is provided by equity in its Austrian subsidiary are not taxable.
and debt commitment letters, corporate However, waivers on impaired receivables
guarantees and bank guarantees. may trigger corporate income tax at the
Due to strict capital maintenance rules level of the Austrian company. A merger
and prohibitions on financial assistance in may be exempt, under certain conditions,
Austria, target companies are, apart from from capital transfer tax and value added
few exceptions, restricted from providing tax (VAT) and the rate of the real estate
financial assistance in the acquisition of transfer tax (RETT) may be lowered.
their own shares.
F. Enforceability
23. What are the formalities and
procedures for share transfers and 25. Can acquisition documents be
how is a share transfer perfected? executed in a foreign language?

The transfer of shares in a limited liability In general, acquisition documents can

company requires the execution of a be executed in any language, however, if
share transfer agreement in the form of the involvement of a notary is required,
a notarial deed (physical or electronic), the certifying notary also has to be a
whereby the involvement of a public court-certified translator in the language
notary is required. However, the transfer of the respective acquisition document.
of shares in a FlexCo has been simplified Further, certain documents which need to
and can be documented through a private be submitted to the Companies’ Register
deed (Privaturkunde) executed by either Court (Firmenbuchgericht) or to other
an attorney-at-law or a public notary – a (supervisory) authorities must be translated
notarial deed is not required. The change into or provided in German language.

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26. Can acquisition documents be tensions, rising inflation, high energy prices
governed by a foreign law? and production costs, the Austrian M&A
Acquisition documents are not required to market continues to develop in a relatively
be governed by Austrian law. However, if stable manner.
governed by foreign law, certain mandatory Accordingly, the number of transactions
provisions of Austrian law apply to the with Austrian parties involved has increased
acquisition (e.g., the requirement of an compared to the previous year, whereas
execution of the share transfer purchase
the transaction volume on the international
agreement in form of a notarial deed).
market has decreased. Although company
27. Are arbitration clauses legally valuations remain at a high level, they
permissible or generally included in have declined compared with the previous
acquisition documents? year due to the high level of interest rates
Arbitration clauses are legally permissible and uncertainty about future economic
in Austria. In principle, arbitration clauses developments.
are not included in acquisition documents, In the domestic market, the main trend is
however, especially in cross-border
towards increasing internationalization.
transactions international investors tend to
This is reflected in the rising number of
prefer arbitration proceedings.
outbound transactions, in which Austrian
28. Are there any specific formalities companies take over target companies
for the execution of acquisition abroad.
documents? Is it possible to
remotely/digitally sign documents? In general, high interest rates and financing
costs tend to slow M&A activity down, but
When concluding transactions, the freedom on the other hand private equity funds
of form applies, unless otherwise provided
that have accumulated liquidity are on the
by law (e.g., guarantee contract) or contract.
lookout for investment opportunities and,
This means that legal transactions can be
thus, are expected to become more active.
concluded in writing, orally or by conclusive
behaviour. The outlook seems particularly good with
However, the involvement of a public respect to companies in the pharmaceutical
notary is required for the transfer of shares and healthcare sectors, technology
in limited liability companies since the companies, companies concerned with
share transfer purchase agreement must energy, sustainability and the environment
be executed in form of notarial deed. This and online retailers. Investor demand
can also be done via online notarial services is likely to increase in these areas. In
(pursuant to Section 90a Notarial Code. the future, environmental, social and
(NotaktsG)) and therefore acquisitions can governance (“ESG”) issues will also come
usually be concluded completely remotely. to the fore, as due diligence request lists
G. Trends and Projections regularly target ESG risks.

29. What are the main current trends in 30. Are any significant development
M&A in your jurisdiction? or change expected in the near
future in relation to M&A in your
Despite the general downward trend
jurisdiction?
in the M&A market and the influence of
macroeconomic factors such as geopolitical N/A

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AZERBAIJAN
MGB LAW OFFICES

İsmail Askerov Amina Mammadova

Senior Partner Junior Associate
ismail.askerov@ amina.mammadova@
mgb-law.com mgb-law.com

A. General
1. What is the main legal framework 2. What are the most common types
applicable to companies in your of corporate entities (e.g., joint
jurisdiction? stock companies, limited liability
companies, etc.) used in your
In Azerbaijan, the primary legal framework jurisdiction? What are the main
governing companies, including aspects differences between them (including
related to mergers and acquisitions, is but not limited to with regard to the
established by several key legislative shareholders’ liability)?
documents. These include:
There are four types of companies available:
• The Civil Code of the Republic of Limited Liability Company “LLC”, Open Joint
Azerbaijan dated December 28, 1999 Stock Company “OJSC”, Closed Joint Stock
(the “Civil Code”); Company “CJSC” and Additional Liability
• Law of the Republic of Azerbaijan on Company.
State registration and state registry of Notably, among various types of
legal entities dated December 12, 2003 companies, the limited liability company
(the “Law on State Registration”); emerges as the most frequently established
entity in Azerbaijan.
• Law of the Republic of Azerbaijan on
Securities Market dated May 15, 2015 Limited Liability Company (LLC):
(“Law on Securities Market”) Established by one or several individuals
(natural and/or legal persons), the charter
capital of an LLC is divided into shares as
determined by the charter. Participants do

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not bear responsibility for the company’s on Insurance Activity dated December
obligations and risks associated with the 25, 2007 (the “Law on Insurance”), the
company’s activities limited to the extent of Azerbaijani legal framework does not
value of their share capital contributions. impose any other restrictions on foreign
investors when it comes to establishing or
Additional Liability Company: Similar to
acquiring shares in a company within the
LLCs, but with shareholders assuming a
country. According to the Law on Insurance,
higher degree of liability. The participants
with the exception of international financial
jointly bear subsidiary liability for the
organizations to which the Republic of
company’s obligations with their property,
Azerbaijan is a member, foreign insurers,
which amounts to a multiple of the value
as well as foreign institutional investors
of their contributions as specified in the
(banking and credit organizations, pension
company’s charter. This is rarely used for of
funds, investment funds), the total share
legal entity.
of foreign legal entities in the authorized
A joint-stock company (JSC) is a business charter capital of the insurer shall be less
entity characterized by a share capital that than 50 percent of the shares. The share of
is segmented into a specified quantity one foreign individual in the authorized
of stock units. Exclusively, JSCs possess capital of the insurer shall not exceed 10
the privilege to the sale of stock shares percent of shares, and the total volume of
through stock exchange. These companies shares owned by foreign individuals shall
can be structured as either an Open Joint not exceed 30 percent thereof.
Stock Company (OJSC) or a Closed Joint
4. Are there any foreign exchange
Stock Company (CJSC). Shareholders are
restrictions or conditions applicable
safeguarded from personal liability relating
to companies such as restrictions to
to the company’s obligations.
foreign currency shareholder loans?
B. Foreign Investment In Azerbaijan, the governance of foreign
3. Are there any restrictions on foreign currency transactions, including those
investors incorporating or acquiring pertaining to shareholder loans, is
the shares of a company in your primarily regulated by the Decision of the
jurisdiction? Management Board of the Central Bank
of the Republic of Azerbaijan No. 45/1 on
In accordance with the legislative the approval of the Rules on conducting
framework established by the Law of the foreign currency operations by residents,
Republic of Azerbaijan on Investment as well as foreign currency operations by
Activities, dated April 22, 2022 (the “Law non-residents of the Republic of Azerbaijan
on Investment”) foreign investors are (the “Currency Regulations”). Under
generally granted a favorable environment Currency Regulations, a specific list of
for investment in the country. This law operations (i.e., transactions on funds
stipulates the foreign investors and their transferred by residents and non-residents
investments are to be treated under
for the payment of goods and services
a national regime, which ensures that
imported to the Republic of Azerbaijan,
they are not subjected to less favorable
including those paid in advance) has been
conditions compared to local investors and
characterized as permitted transfers in
their respective investments.
foreign currency to bank accounts situated
Apart from a specific provision outlined outside the Republic of Azerbaijan. The
in the Law of the Republic of Azerbaijan transactions that fall outside the scope of

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the listed operations are not authorized activity about foreigners engaged in paid
to be conducted in foreign currency labor activities in the country is determined
to overseas bank accounts, as per the annually by the Cabinet of Ministers of the
provisions of the Currency Regulations. Republic of Azerbaijan (the “Cabinet of
Beyond the restrictions outlined in the Ministers”).
Currency Regulations, there are no further
Moreover, it is vital to underscore that in
restrictions imposed by the Azerbaijani
Azerbaijan, local content requirements also
legal framework on the inflow of foreign
play a significant role, under the Production
currency into Azerbaijan. Furthermore, it is
Sharing Agreements (PSAs) signed for
important to highlight that when it comes
to shareholder loans, the Azerbaijani legal development of major oil and gas fields.
framework does not impose any restrictions They often delineate specific percentages
on transactions conducted in foreign or preferences for the employment of local
currency. personnel, thereby fostering a collaborative
environment that encourages the growth
5. Are there any specific considerations and development of local expertise and
for employment of foreign resources.
employees in companies
incorporated in your jurisdiction? C. Corporate Governance
In Azerbaijan, the employment of foreign 6. What are the standard management
nationals in locally incorporated companies structures (e.g., general assembly,
is primarily governed by provisions outlined board of directors, etc.) in a corporate
in the Migration Code of Azerbaijan dated entity governed in your jurisdiction
July 2, 2013 (the “Migration Code”). and the key liability issues relating
Two crucial aspects to consider for the to these (e.g., liability of the board
employment of foreign employees in members and managers)?
companies incorporated in Azerbaijan are In Azerbaijan, corporate entities generally
these: adopt the following standard management
Work Permits. According to the Migration structures, each having its own set of
responsibilities.
Code foreign nationals who wish to
temporarily live in the territory of the The general meeting of participants
Republic of Azerbaijan and engage in (shareholders) is the supreme governing
paid labor activities must obtain a work body of the company. The general
permit in addition to a temporary residence meeting is the main form of exercising the
permit. A work permit is an official management powers and voting rights
document that allows foreigners and of shareholders on significant corporate
stateless persons to engage in paid labor matters such as mergers, acquisitions, and
activities in the territory of the Republic of other major business decisions.
Azerbaijan.
The chief executive officer or the
Quota. The employment of foreign workers management board primarily handles
is also regulated through a quota system, the day-to-day business operations.
which is applied with the aim of effective While a board of directors is a common
use of local labor resources and increasing feature, it is not mandatory for privately
the effectiveness of work in the field of held companies. The board of directors,
regulating labor migration processes. if present, is generally responsible for
Quota information on types of economic overseeing the company’s strategic

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direction and governance, and it operates Financial Reporting Standards, and the
under the supervision of the shareholders. establishment of internal audit and risk
management functions.
When it comes to liability, those acting on
behalf of the company, including directors 7. What are the audit requirements in
and officers, are bound by specific duties. corporate entities?
They must act in good faith, conduct
External Auditing. Both LLCs (except for
themselves in a professional manner, and
micro and small enterprises) and JSCs are
take decisions which are in interests of the
mandated to engage an external auditor for
company. Board members, managers, and
their annual financial review.
the chief executive officer are bound by
fiduciary duties to act in the best interests Internal Auditing. In joint stock companies
of the company and its shareholders. They with more than fifty shareholders, an
are obligated to act in good faith and audit commission is established by the
best interests of the company. In other board of directors (supervisory board) for
words, they should not prioritize their own the preparation and implementation of
interests over those of the company while the internal audit policy and strategy and
performing their duties. Legal repercussions organization of auditor control.
can arise if these duties are not upheld.
Optionally, JSCs with fewer than 50
In cases of financial mismanagement or
shareholders and LLCs can also elect an
bankruptcy, board members and managers
audit commission.
may be held financially liable. Conflicts of
interest are another area requiring careful The primary role of auditors is to oversee
management; individuals in positions of the company’s financial operations. The
authority must disclose any conflicts and internal auditors are granted the authority
generally abstain from decision-making in to review all financial and economic
related matters. documents of the company. They can also
request any necessary documentation from
Under the Civil Code, in the event that the
company officers and other organizational
value of transaction with related party is
bodies.
equal or exceeds 5% of the relevant legal
entity’s assets, such transaction requires D. Shareholder Rights
an opinion of the independent auditor to
8. What are the privileges that can
be engaged by the legal entity in addition
be granted to shareholders? In
to issuance of resolution of the general
particular, is it possible to grant
meeting of shareholders approving such
voting privileges to shareholders for
transaction.
appointment of board members?
In the banking sector, The Central Bank
In Azerbaijan, shareholders have a set of
of Azerbaijan (the “Central Bank”) has
rights defined in the company’s charter and
established corporate governance
the Civil Code. These rights include making
standards for banks in accordance with
significant decisions about the company,
the Law of the Republic of Azerbaijan on
receiving regular financial updates,
Banks dated January 16, 2004 (the “Law on
participating in profit distribution, and
Banks”) and international best practices.
overseeing the company’s transactions.
These standards are applicable to local
branches of foreign banks and mandate According to the Azerbaijani Corporate
the creation of an efficient organizational Governance Standards approved by
structure, compliance with International the Decree of the minister of Economic

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Development of Azerbaijan Republic there is a change in majority ownership. As

dated January 28, 2011 (the “Corporate per the Civil Code, if an individual or entity
Governance Standards”) shareholders acquires more than 50% of the shares in a
enjoy the following rights: limited liability company, they are obligated
to extend an offer to all other participants.
– Right to receive dividends
Furthermore, any participant owning at
– Right to participate and vote in general
least 5% of the charter capital of a legal
meetings
entity can hold those acting on behalf of
– Equal voting rights the legal entity and the board of directors
or the executive body of the entity is
– Right to elect and be elected
accountable for any breach of the director’s
– Right to information regarding the duties speficied in the Civil Code.
actions of the company
10. Is it possible to impose restrictions
– Right to request share redemption on share transfers under the
– Right to request company examination corporate documents (e.g., articles
of association or its equivalent in
– Preemptive right to purchase new your jurisdiction) of a company
shares incorporated in your jurisdiction?
– Right to participate in liquidation Under the Civil Code, a shareholder
residue company can alienate its shares to third
In accordance with the Civil Code, the parties. However, other shareholders of
general meeting of shareholders holds the the company (except for open joint stock
exclusive authority to appoint members companies) and the company itself (for
to the board of directors. Additionally, if closed joint stock companies) can use their
there is a specific shareholder agreement pre-emptive rights, which give them the
in place, it may provide alternative first opportunity to buy shares before the
mechanisms for board appointments. For owner sells them to an external third party.
example, the agreement could stipulate Other mechanisms can also be stipulated
that certain shareholders have the right to in the shareholders’ agreement. However,
appoint a specified number of members it is not uncommon to see the provisions
to the board of directors. Therefore, while such as put and call options in shareholder
the formal appointment of board members agreements of local companies. It remains
is generally conducted by the general to be seen how such provisions be
meeting of shareholders, there are avenues interpreted by local judges in practice.
through which shareholders can influence 11. Are there any specific concerns or
this process, either by proposing candidates other considerations regarding the
or through provisions in a shareholder composition, technical bankruptcy
agreement.
and other insolvency cases in your
9. Are there any specific statutory rights jurisdiction?
available to minority shareholders
In Azerbaijan, the insolvency and
available in your jurisdiction?
bankruptcy landscape are governed by
In Azerbaijan, minority shareholders a complex set of legal procedures, with
are afforded specific statutory rights to distinct rules for banks and other entities.
safeguard their interests, particularly when While banks are subject to a special

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procedure outlined in the Law on Banks, 13. What are the advantages and
other entities fall under the Law of the disadvantages of a share purchase
Republic of Azerbaijan on Insolvency and as opposed to other methods?
bankruptcy dated June 13, 1997 (the “Law
Opting for a share purchase can simplify
on Insolvency and bankruptcy”).
the acquisition process. This method
Once insolvency proceedings are is generally more straightforward
underway, the debtor’s operational and involves fewer steps and less
flexibility becomes significantly limited. documentation compared to asset
For instance, the debtor is restricted from purchases. The continuity is particularly
disposing of any assets without prior court beneficial as there’s no need to transfer
authorization or approval from a property individual assets, licenses, or contracts,
administrator. which can be both time-consuming and
costly.
On bankruptcy of companies other than
banks, funds available to meet unsecured From a tax perspective, share purchases
claims are applied in the following order offer significant advantages. In a share
of priority: (1) bankruptcy costs; (2) claims purchase, only the seller is liable for taxes
arising out of an injury and death of a for any profit margin made as a result of
person and claims on alimony; (3) claims share sale, while the buyer is generally
exempt from any tax obligations. This
of employees related to the payment of
contrasts sharply with asset purchases,
salaries and allowances, and claims of
where large assets could be subject to
persons related to copyrights fees; (4)
Value Added Tax (VAT), thereby increasing
payments to state and municipal budgets
the financial burden on the buyer.
and budget of social security fund falling
Therefore, from a tax standpoint, a share
due during the period beginning one year
purchase is often the more favorable
before the bankrupt debtor was declared
option.
bankrupt; and amounts owed to banks
and other credit organizations in respect One significant concern regarding share
of loans and interest thereon (including purchase is the inheritance of all the
those of non-residents) that arose before company’s liabilities, both known and
13 June 1997 (i.e., before the date of the unknown. This could include debts, legal
enactment of the Law of the Republic of issues, or other financial obligations.
Azerbaijan on Insolvency and Bankruptcy); 14. What are the approvals and
(5) other unsecured claims; and (6) claims consents typically required (e.g.,
of the entity’s owners. However, creditors of corporate, regulatory, sector
the same category can change their order based and third-party approvals)
of priority within the category by entering for private acquisitions in your
into an agreement. jurisdiction?
E. Acquisition In Azerbaijan, the requirement for
12. Which methods are commonly used approvals and consents in the context of
to acquire a company, e.g., share private acquisitions varies depending on
the type of company involved and the
transfer, asset transfer, etc.?
specifics of the transaction. For regulated
In Azerbaijan, the most commonly used market participants (i.e., banks, investment
method for acquiring a company is through fonds, insurance companies, etc.) approval
a share transfer. from the Central Bank of the Republic

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of Azerbaijan (the “Central Bank”) is l Similar provisions apply to limited

generally required. However, for most other liability companies, with thresholds
types of companies, there are no such set at one-third, 50%, and 75% of the
regulatory approvals mandated, except charter capital (Articles 26.1.2.4 to
when the transaction falls under the ambit 26.1.2.6).
of Azerbaijani antitrust laws. Transfer of Significant Assets: The transfer
15. What are the regulatory of more than 20% of the balance value of
competition law requirements main assets, including main production
applicable to private acquisitions in means and intangible assets, from one
your jurisdiction? economic entity to another (Article
26.1.2.7).
The new Competition Code of the
Republic of Azerbaijan, approved by the Rights over Key Assets: Entering into
President, was published on January 23, long-term or indefinite contracts granting
2024, and came into force on July 1, 2024. rights over the use, lease, management, or
This Code replaces the previous laws influence on decisions of key assets (Article
“On Antimonopoly Activities,” “On Unfair 26.1.2.8).
Competition,” and “On Natural Monopolies.” Acquisition of Financial Institution
What constitutes a concentration is Assets: Acquiring significant assets
(excluding cash) of a financial institution
depicted under the article 26 of the
by another financial institution (Article
Competition Code of the Republic of
26.1.2.9).
Azerbaijan, these include:
Entrepreneurial and Executive Functions:
Merger of Independent Entities: This
Acquiring rights to perform entrepreneurial
includes the merger or combination of two
activities or executive functions of another
or more independent economic entities or
economic entity (Article 26.1.2.10).
their specific parts (e.g., fields of activity),
including the merger and acquisition of Foreign Entities: Acquiring the right to
legal entities (Article 26.1.1). dispose of more than 50% of the voting
shares or stakes in a legal entity registered
Acquisition of Control over Shares or abroad operating in the same or related
Stakes: field (Article 26.1.2.11).
l Acquiring the right to dispose of more Joint Management: Participation of
than 25% of the voting shares in a individuals in executive or management
joint stock company by an entity that bodies capable of determining the market
previously did not own such shares behavior of two or more economic entities
or had control over up to 25% (Article (Article 26.1.2.12).
26.1.2.1).
Joint Ventures: Creation of a new jointly
l Acquiring control over more than controlled economic entity, where control
50% of the voting shares if previously and management are based on joint
holding more than 25% but not more decisions of the founders (joint ventures,
than 50% (Article 26.1.2.2). Article 26.1.3).
l Acquiring control over more than Article 27 of the Competition Code of
75% of the voting shares if previously the Republic of Azerbaijan provides the
holding more than 50% but not more thresholds for the concentration to be
than 75% (Article 26.1.2.3). notified to the Competition Authority.

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Following the notification, a consent must 16. Are there any specific rules
also be obtained from the Competition applicable for acquisition of public
Authority. Please note that a concentration companies in your jurisdiction?
must be notified if any of the following
In Azerbaijan, the acquisition of
thresholds are met:
public companies is subject to specific
1. One of the economic entities regulations, particularly when it involves
participating in the concentration holds entities classified as natural monopolies.
a dominant position in the relevant According to the Competition Code the
market (27.1.1) anti-monopoly authority has oversight
over certain types of transactions involving
2. The resale of shares (stakes) by natural monopoly entities.
financial institutions, considering the
requirements of Article 26.2 (Financial According to Article 39.5 of the
institutions are prohibited from Competition Code, if a person who has
exercising voting rights to acquire the right up to 10 percent of the voting
shares (stocks) of any undertaking for shares (or interest) (acquired as a result of
the purpose of resale within one year the acquisition of shares (or interest) in the
from the date of acquisition), is not charter capital of natural monopoly entities
possible. (27.1.2) or other transactions (pledge, assignment
of management, etc.)) subsequently
3. The total turnover of one of the disposes its voting shares to a person who
economic entities participating in the as a result of this disposal acquires more
concentration or the economic entity than ten percent of the voting shares (or
that will be formed as a result of the interest) in the natural monopoly shall in
concentration exceeds 25 million its turn inform the competition authority
manats. (27.1.3) about it within 15 (fifteen) days.
4. The total turnover of the economic Article 39.2.3 outlines conditions under
entities participating in the which the transfer of ownership or usage
concentration in the last reporting year rights of main assets of natural monopoly
within the country and abroad exceeds subjects to other economic entitites must
35 million manats. (27.1.4) be regulated. Specifically, if the value of
5. The turnover of one of the economic main asset exceeds 0,5% of the balance
entities participating in the sheet value of the natural monopoly
concentration within the country in the subject’s assets at the beginning of the
last reporting year exceeds 15 million current year, such transactions should be
manats, and the turnover of other closely monitored to avoid anti-competitive
outcomes.
participating undertakings exceeds 5
million manats domestically in their last 17. Is there a requirement to disclose
financial year. (27.1.5) a deal, for instance to regulatory
authorities? Is it possible to keep a
6. When the combined turnover of all
deal confidential?
participating undertakings in their last
financial year is less than the specified According to Article 45.2 of the
amounts set out in Article 27.1.4 and Competition Code, if a deal falls within the
27.1.5 (points 4 and 5, respectively) of scope of the Competition Code, parties
the Competition Code, but exceeds involved may need to provide necessary
20% of the total turnover in the relevant information to the competition authority,
market. including confidential or proprietary

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information. Such disclosures can include – A reference concerning the turnover of

trade secrets, financial data, and other the entity involved.
sensitive information. However, the
– A reference confirming whether or not
confidentiality of the disclosed information
there are any encumbrances on the shares
is protected by law, and the competition
of the company.
authority is required to handle such
information in accordance with legal If an immovable property is part of the
requirements for confidentiality (e.g., laws acquisition, a certificate must be obtained
governing state secrets, statistical secrets, from the state registry; this certificate will
commercial secrets, tax, customs, and confirm whether the entity in question
banking confidentiality). owns immovable properties.
18. Can sellers be restricted from For joint-stock companies, an additional
shopping around during a requirement is to obtain a certificate
negotiation process? Is it possible from the National Depository Center. This
to include break fee or other certificate will provide information about
penalty clauses in acquisition any encumbrances or limitations on the
documents to procure deal shares being acquired.
exclusivity?
It’s important to note that these
In Azerbaijan, there are no statutory conditions are specific to contracts signed
restrictions preventing sellers from in Azerbaijan and are in line with the
shopping around during a negotiation requirements set forth by the Azerbaijani
process for a merger or acquisition. It is notaries.
possible to include terms in a preliminary
agreement to restrict the seller from In Azerbaijan, it is not common to have
engaging with other potential buyers conditions related to closing, such as
during the negotiation phase. Such clauses stipulating that there should be
terms could be designed to secure deal no material adverse change affecting the
exclusivity. These terms could stipulate transaction or default conditions.
that the seller is not allowed to engage in 20. What are the typical warranties
negotiations with other potential buyers and limitations in acquisition
for a specified period. Additionally, break documents? Is it common to obtain
fees or other penalty clauses can also be warranty insurance?
incorporated into acquisition documents to
ensure commitment from both parties. There are no standard set of warranties and
limitations which are typically used in local
19. What are the conditions precedent acquisition contracts.
in a typical acquisition document?
Is it common to have conditions to While warranty insurance can be used
closing such as no material adverse when English law governs the acquisition,
change? it’s worth noting that this is not a common
requirement in Azerbaijan. The practice
In a typical acquisition document such
in Azerbaijan tends to be different.
as share sale agreement in Azerbaijan,
Specifically, obtaining warranty insurance is
there are certain conditions precedent
not commonly done in our jurisdiction.
incorporated that must be met before
the deal can be finalized. Such conditions In some English law governed contracts,
would include obtaining two specific tax one can across the following warranties in
references from the tax authority including: respect of selling shareholder:

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(a) he has full power, unrestricted legal is material to be known by the buying
capacity and authority to enter into shareholder has been disclosed in
and perform his obligations under the writing to the latter before the date of
Agreement, and that this Agreement the agreement, the selling shareholder
constitutes binding obligations on the shall provide such further information
Controlling Shareholder in accordance of which it becomes aware.
with its terms;
21. Is there a requirement to set a
(b) he has obtained all permits and minimum pricing for shares of a
spousal consents, required to empower target company in an acquisition?
him to enter into and to perform his
obligations under the Agreement and In Azerbaijan, generally, there’s no such
there are no actions by or before any requirement of setting a minimum pricing
competent governmental authority for shares. The rules for setting a minimum
pending or threatened in any written price for shares during an acquisition are
notice, against the shareholder that, if nuanced and depend on the specifics of the
adversely determined, would prohibit transaction.
the consummation of the transactions When shares are acquired from an existing
contemplated by this Agreement; shareholder, the parties can agree that
(c) neither the entry into this Agreement a minimum price should be established
nor the implementation of the as the remaining shareholders have a
transactions contemplated by this preemptive right to acquire the shares
Agreement by the selling shareholder at such minimum price. Conversely, in
will: scenarios where the entire company is the
subject of acquisition, there exists no legal
(i) violate or breach any law, regulation, requirement to establish a minimum price
lien, order, decree or judgment for the shares, thereby providing greater
of any court or governmental or latitude in the negotiation of transaction
regulatory authority applicable to terms.
the selling shareholder;
Furthermore, according to the Civil Code,
(ii) result in a breach of, or constitute mandatory offer must be extended to all
a default under, any agreement or existing shareholders beforehand if third
instrument to which the shareholder party individual or entity seeks to acquire a
is a party or by which it is is bound; majority stake, defined as 50% or more of
the limited liability company’s shares. This
(d) he is not insolvent (bankrupt) or unable
requirement is non-negotiable and serves
to pay his debts within the meaning of
as a constant regulatory feature in majority-
applicable law;
stake acquisitions.
(e) at completion, the shares will be free
22. What types of acquisition financing
from any encumbrance;
are available for potential buyers in
(f) the shares are not and at completion your jurisdiction? Can a company
will not be subject to any litigation, provide financial assistance to a
arbitration or similar proceedings or potential buyer of shares in the
investigation; and target company?
(g) such information relating to target as In Azerbaijan, potential buyers interested in
is known to the shareholder and which acquisitions generally have 2 (two) primary

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financing avenues: equity financing and National Depository Center at the stock
debt financing. Equity financing involves exchange. This registration is a crucial step
the buyer using their own capital to in the share purchase and sale process,
fund the acquisition, a straightforward serving to validate the transaction and
approach that avoids the complexities of provide an official record of the change in
debt obligations. On the other hand, debt ownership.
financing allows the buyer to borrow the
24. Are there any incentives (such
necessary funds, usually from a financial
as tax exemptions) available for
institution, to complete the acquisition.
acquisitions in your jurisdiction?
Azerbaijani law imposes specific constraints
on acquisition financing. As per the Civil In Azerbaijan, tax incentives available for
Code, the conversion of loans into equity acquisitions are in relation to Value Added
is explicitly prohibited.1 The lender cannot Tax (VAT). According to the Tax Code of
lend for the purpose of buying a share in the Republic of Azerbaijan dated July 11,
authorized capital of a legal entity. 2000 (the “Tax Code”), certain types of
transactions are exempt from VAT, including
As for the possibility of the target company the provision as to alienation of shares by
providing financial assistance to a potential legal entities.
buyer, there is no explicit prohibition
against this in Azerbaijani law although we F. Enforceability
have not come across to such financing in 25. Can acquisition documents be
practice. executed in a foreign language?
23. What are the formalities and Yes, there are no language restrictions
procedures for share transfers and imposed by law, however, it is required
how is a share transfer perfected? to have an official translation of the
In Azerbaijan, the formalities and documents into Azerbaijani for purposes of
procedures for share transfers are governed their filing to state registration authorities.
by specific legal requirements to ensure 26. Can acquisition documents be
the validity and legality of the transaction. governed by a foreign law?
One of the primary requirements is that
the share transfer must be executed in a The governing law for acquisition
notarial form. This means that the transfer documents can be a foreign law, offering
agreement must be notarized to be legally flexibility to parties involved in cross-border
binding. transactions. Conversely, if both parties to
the transaction are Azerbaijani entities or
Even if the share transfer takes place
individuals, then the governing law must
outside of Azerbaijan, it is imperative
be Azerbaijani law.
that the transaction be registered within
the state register of commercial entities 27. Are arbitration clauses legally
in Azerbaijan to validate and perfect the permissible or generally included in
transfer. acquisition documents?
For joint-stock companies, an additional In Azerbaijan, arbitration clauses are both
layer of formality is required. The share legally permissible and can be included in
transfer must be registered with the acquisition documents.

1 Article 90.3 of the Civil Code

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28. Are there any specific formalities There is an emphasis on regulating

for the execution of acquisition economic concentration to prevent anti-
documents? Is it possible to competitive practices. The Competition
remotely/digitally sign documents? Code provides detailed regulations
regarding horizontal and vertical
One of the primary requirements is that the
agreements, aiming to restrict transactions
documents must be executed in a notarial
that could lead to significant market
form meaning that acquisition documents
dominance. Companies engaging in M&A
must be notarized to be legally binding,
activities must now carefully assess the
ensuring their validity and enforceability.
potential competitive impact of their
When the acquisition is concluded at transactions to comply with the new rules.
the stock exchange, the requirement The Code also strengthens the enforcement
for notarization is waived. In such cases of rules against unfair competition,
involving joint-stock companies, the establishing penalties for violations.
registration of the share transfer is carried
30. Are any significant development
out at the National Depository Center, and
or change expected in the near
the shares are recorded in a depository
future in relation to M&A in your
account.
jurisdiction?
Currently, digital or remote signing of
Significant developments are expected in
acquisition documents is generally not
the M&A landscape in Azerbaijan, largely
exercised in Azerbaijan primarily because of
driven by the ongoing implementation
the requirement for notarization.
of the new Competition Code. Within six
G. Trends and Projections months of its implementation, the Cabinet
of Ministers must approve regulations
29. What are the main current trends in
concerning exceptions and limitations to
M&A in your jurisdiction?
the Competition Code, criteria for assessing
In Azerbaijan, the mergers and acquisitions the restrictive effects of agreements,
(M&A) landscape is evolving, driven by exclusions for technology transfer, market
recent legislative changes and economic research, and development agreements,
developments. The introduction of the procedures for calculating market shares
new Competition Code has significantly and determining market boundaries,
impacted the M&A environment, shaping market concentration limits and assessment
the trends and projections for the market. rules, inspection rules for market entities
and natural monopolies, rules for handling
The new Competition Code, which consists
goods taken for inspection, and criteria and
of 12 chapters and 84 articles, provides a
rules for financial sanctions.
comprehensive legal framework regulating
competition, antitrust issues, monopolistic These upcoming regulations aim to
practices, and the rights and duties of modernize competition law in Azerbaijan,
market participants. The Code introduces creating a more detailed and structured
new rules and concepts, leading to regulatory environment. This shift is
increased scrutiny of M&A transactions, expected to significantly impact M&A
especially in sectors prone to monopolistic activities as companies will need to
behavior. This trend reflects a shift towards adapt to the new requirements, ensuring
a more regulated and transparent market, compliance with the updated rules and
where compliance with antitrust laws is a potentially making strategic adjustments to
critical consideration for M&A deals. their transactions.

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BAHRAIN
TROWERS & HAMLINS

Brian Howard Benjamin O’Brien- Amina AlWazzan James Kay Arslaan Mahmood
Partner McQueenie Paralegal Senior Associate Associate
bhoward@ Partner aalwazzan JKay@ AMahmood
trowers.com bobrienmc- trowers.com trowers.com trowers.com
queenie@
trowers.com

A. General a. With Limited Liability companies

(W.L.L.) which is the most commonly
1. What is the main legal framework
used type of company in Bahrain;
applicable to companies in your
jurisdiction? b. Public Joint Stock Companies BSC;
c. Closed Joint Stock companies BSC (c);
The main legal framework applicable to
companies registered in Bahrain is Law d. Branch of Foreign Companies;
Decree No. (21) of 2001 promulgating the e. General Partnership Companies;
Commercial Companies Law as amended f. Limited Partnership Companies;
(“Companies Law”). Companies Law relates
to company formation, shareholders’ rights g. Limited Partnership by Shares;
and obligations, management, mergers, h. Protected Cells Company; and
and termination of companies. i. Non-Profit Companies.
2. What are the most common types A Limited Liability Company allows a
of corporate entities (e.g., joint single person ownership to the company
stock companies, limited liability with a maximum number of 50 partners.
companies, etc.) used in your The liability of a shareholder is limited
jurisdiction? What are the main to the value of its share in the company
differences between them (including with respect to the company’s liabilities
but not limited to with regard to the
and debts. Furthermore, not all activities
shareholders’ liability)?
are allowed to be assumed when using
The corporate entities specified under the a limited liability company such as the
Companies Law are: activities of banking and insurance.

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A Public Joint Stock Company is a public The Companies Law states that provided
company whose shares are listed on the the company satisfies all prerequisites
BH Bourse. The shareholders are liable for of the Companies Law, on the whole, it
the company’s debts and obligations to is permissible for companies with full
the extent of the value of their shares only. foreign ownership to fully incorporate in
In contrast to limited liability companies Bahrain. There are certain activities that a
(W.L.L.) and general partnership company company can only undertake with Bahraini
where the minimum capital requirement is ownership or partnership. This list of
BHD50, a minimum capital of BHD1 million reserved activities has been shrinking in
is required to establish the company. recent years and the Council of Ministers
A Privately Held Joint Stock Company may grant exemptions for projects of
does not generally permit a public offering strategic importance.
of shares via BH Bourse (unless a specific 4. Are there any foreign exchange
application is made) and requires at least restrictions or conditions applicable
two shareholders. Moreover, the minimum to companies such as restrictions to
requirement of capital is BHD 250,000 for foreign currency shareholder loans?
non-financial related activities.
Currently, no foreign exchange restrictions
Both privately held and public joint stock are applicable, including those on foreign
companies must adhere to the applicable currency shareholder loans. Banks in
Corporate Governance Code.
Bahrain are required to verify the source
Foreign companies that undertake business of funds for transactions exceeding BHD
in Bahrain are encouraged to register 6,000.
under the umbrella of a branch of a foreign
5. Are there any specific considerations
company, in which no local partner is
for employment of foreign
required. Foreign branch companies do
employees in companies
not require minimum capital. The parent
incorporated in your jurisdiction?
company is required to guarantee the
obligations and liabilities of the foreign A foreign employee working in Bahrain
branch companies. will be required to enroll with the Labour
A protected cell company is a single Market Regulatory Authority, upon arrival
legal entity which consists of a core and of the employee in Bahrain where the
one or more parts which are referred to employee would be required to provide
as cells, which can hold each asset and their fingerprints, picture, work permit
liabilities thereby segregating the assets and passport to be issued an ID Card. This
of one cell from the ‘laboratory’ of another. process can either be done upon arrival
A protected cell company can have an or one month following arrival. When
unlimited number of cells. The approval applying for the work permit a fee of
of the Central Bank of Bahrain (“CBB”) is BHD100 is required. A foreign employee is
required for the registration of a protected subject to the Labour Law for the Private
cell company. sector (Law No. 36 of 2012) just like Bahraini
employees.
B. Foreign Investment
C. Corporate Governance
3. Are there any restrictions on foreign
investors incorporating or acquiring 6. What are the standard management
the shares of a company in your structures (e.g., general assembly,
jurisdiction? board of directors, etc.) in a corporate

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entity governed in your jurisdiction Public and closed joint stock companies
and the key liability issues relating are required to submit an annual audited
to these (e.g., liability of the board financial statement of the company to
members and managers)? the Ministry of Industry and Commerce.
The appointed auditors are required to be
With Limited Liability Company (W.L.L.)
licensed auditors.
In limited liability companies, a general
D. Shareholder Rights
manager must be appointed to manage
the company and has the role and 8. What are the privileges that can
responsibilities of a director in a joint be granted to shareholders? In
stock company. The manager shall be particular, is it possible to grant
liable towards the company, partners and voting privileges to shareholders for
third parties for any mismanagement of appointment of board members?
the company or breach of the law or the
In public joint stock companies, a
constitutional documents of the company.
shareholder that owns shares with a
If a limited liability company has more nominal value of at least BHD 10,000 or
than ten shareholders, then a board of owns at least 1% of the shares has the right
managers or a control board consisting of to become a board member. Whereas the
representatives of at least three partners shareholders who own 10% or more of the
shall be appointed. A general assembly capital have the right to appoint a person
consisting of all partners shall convene to represent them in the board, and if
at least once a year within four months there is a remaining percentage that is not
following the company’s financial year. enough to appoint another member the
shareholder may use this percentage in
Public and Closed Joint Stock Companies
voting.
Public joint stock companies shall have
Law No. 28 of 2020, which amended the
a board of directors consisting of at least
Companies Law has expanded on the
five members, whilst closed joint stock
provisions that allow the issuance of
companies shall have a board of directors
preference shares and ordinary shares
consisting of at least three members for a
subject to the company’s constitutional
three-year term and will meet at least four
documents permitting such change
times during a financial year. The board
whereby a company may issue preference
members shall be jointly liable to the
shares subject to obtaining approval of
company and to the shareholders for any
the extraordinary general assembly. The
misuse of power, fraud, or mismanagement.
new preference shares shall be issued in
The joint liability of the directors can be
accordance with CBB Law and Financial
personal and the company has the right
Institutions promulgated by Law No. 64 of
to file an action of liability against board
2006 to the current holders of preference
members who cause damage to the
shares first. If there are more than one type
shareholders.
of classification, the holders of these classes
The corporate governance code requires shall have the priority right to subscribe
such companies to establish audit, into the new preference shares within the
remuneration, nomination and corporate same class.
governance committees.
9. Are there any specific statutory rights
7. What are the audit requirements in available to minority shareholders
corporate entities? available in your jurisdiction?

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A shareholder in a joint stock company E. Acquisition

may file a lawsuit or declaration that any
12. Which methods are commonly used
resolution passed by the general assembly
to acquire a company, e.g., share
or by the board of directors is null and void
transfer, asset transfer, etc.?
on the basis that it contravenes the law,
public order or constitutional documents. A We have seen both forms of acquisition
shareholder in a joint stock company may commonly used in share transfer.
file a claim against the company where 13. What are the advantages and
the shareholder believes the company’s disadvantages of a share purchase
operations are being conducted in a as opposed to other methods?
manner prejudicial to the shareholders.
A share purchase is more straightforward in
Shareholders in joint stock companies who Bahrain than asset acquisition as there is no
hold at least 10% of the capital are entitled statute transfer process and therefore each
to access documents relating to conflicts of asset and liability needs to be provided
interest of the directors. for. Specifically, with asset acquision,
10. Is it possible to impose restrictions employment must be terminated and
on share transfers under the employees must be rehired as there is no
corporate documents (e.g., articles automatic transfer.
of association or its equivalent in 14. What are the approvals and
your jurisdiction) of a company consents typically required (e.g.,
incorporated in your jurisdiction? corporate, regulatory, sector
based and third-party approvals)
It is possible to impose restrictions on
for private acquisitions in your
share transfer under the memorandum of
jurisdiction?
association and articles of association in
Bahrain, provided that such restrictions do All share transfers require approval from
not conflict with applicable laws (i.e., they the Ministry of Industry, Commerce
may be more restrictive than law but not and Tourism (“MOICT”). If the entity is a
less). financial institution, then the consent of the
CBB is required. Also, consent of the related
11. Are there any specific concerns or regulatory authority may be required,
other considerations regarding the depending on the sector and whether there
composition, technical bankruptcy is a land transfer.
and other insolvency cases in your
jurisdiction? 15. What are the regulatory
competition law requirements
The Bahrain Law No. 22 of 2018 concerning applicable to private acquisitions in
Restructuring and Insolvency Law allows your jurisdiction?
both the debtor and its creditor to
commence insolvency proceedings when The requirements for acquisitions,
the debtor is unable to pay debts within competition concerns are stated in Law No.
thirty days of their maturity, or when the 31 of 2018 with respect to the promotion
financial obligations exceed the value of its and protection of competition. The law
assets. outlines that, prior to any acquisition with
a potential company concerned, the party
The above law allows for a reorganization or its representatives (i.e., the company)
whilst managing the company and the must submit to the relevant authority a
trustee oversees the transactions and request to obtain its approval, which may
management of the debtors. be accepted or rejected within 90 days.

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16. Are there any specific rules The conditions precedent will depend upon
applicable for acquisition of public whether the target is a public or private
companies in your jurisdiction? entity. If a public takeover offer is being
made, then the conditions will need to be
Acquisitions of interests in publicly listed approved by the CBB. We have seen deals
companies in Bahrain are governed by the more recently where public acquisitions
rules set out in the CBB Rule Book under have included material adverse change as
the Take-over, Mergers and Acquisitions a condition. Deals in relation to non-listed
Module of Volume 6 (“TMA”). This module companies usually contain full suite of
is the governing regulation for mergers and conditions precedents including material
acquisitions of publicly listed companies adverse change and obtaining regulatory
in Bahrain. It sets out the process for approvals due to the requirements for split
acquisition or increase of an interest in exchange and compliance.
a listed entity, as well as the disclosure
20. What are the typical warranties
requirements.
and limitations in acquisition
17. Is there a requirement to disclose documents? Is it common to obtain
a deal, for instance to regulatory warranty insurance?
authorities? Is it possible to keep a Acquisition documents typically have
deal confidential? extensive warranties in deals we have
If the deal involves a listed entity, then worked on. This will vary depending on
there are strict requirements in respect of the sector of the target, but usually we see
announcements and regulatory consent. warranties around compliance trading and
Any announcements related to listed litigation, as key to previous deals. We have
entities must also comply with these not commonly seen warranty insurance.
requirements. 21. Is there a requirement to set a
18. Can sellers be restricted from minimum pricing for shares of a
target company in an acquisition?
shopping around during a
negotiation process? Is it possible Yes, there is. In accordance with article 2.22
to include break fee or other of the TMA, when the offer is made for each
penalty clauses in acquisition class of shares of a publicly listed company,
documents to procure deal the offer price must not be less than the
exclusivity? highest price paid by the offeror during the
offer period and within 6 months prior to
It is possible to include such terms in MoUs the commencement.
or head of agreements.
22. What types of acquisition financing
On the other hand, it is unclear whether are available for potential buyers in
break fee clauses and penalties are your jurisdiction? Can a company
permissible and enforceable in the Bahraini provide financial assistance to a
courts due to the absence of clear laws and potential buyer of shares in the
regulations concerning the acquisition of target company?
non-listed companies.
The major source of acquisition finance in
19. What are the conditions precedent Bahrain is debt from traditional banking
in a typical acquisition document? institutions. Companies may also finance
Is it common to have conditions to acquisitions via debt securities, but
closing such as no material adverse these are only open to certain types of
change? companies in Bahrain. Private Equity deals

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are regularly seen in Bahrain. In terms of Yes, according to Legislative Decree No.54
financial assistance to potential buyers, of 2018 promulgating the Electronic
there are restrictions for public joint stock Communications and Transactions Law,
companies, but we have not seen similar Article 7, it is permissible for documents
restrictions for other forms of corporate to be signed remotely. However, any
entities. documents required to be notarized must
be signed in person before a notary.
23. What are the formalities and
procedures for share transfers and G. Trends and Projections
how is a share transfer perfected? 29. What are the main current trends in
Yes, there are certain formalities to be M&A in your jurisdiction?
followed. They would be subject to MOICT We are seeing an era of consolidation
pre-approval, then it would have to be within the Bahrain marketplace, particularly
notarized before a notary, the documents within the financial services and banking
will have to be lodged and then it would section. This is driven by the instructions of
have to be registered in Sijilat. the CBB. The government is also providing
a boost to investment by reducing the
24. Are there any incentives (such
burden of regulation in certain areas, as
as tax exemptions) available for
well as innovation to improve ease of
acquisitions in your jurisdiction?
business.
No tax applicable to acquisition. 30. Are any significant development
F. Enforceability or change expected in the near
future in relation to M&A in your
25. Can acquisition documents be jurisdiction?
executed in a foreign language?
There are plans by the government in
Yes, it can be executed in any language but Bahrain for more companies in Bahrain
it needs to be accompanied by a translation to be listed on the Bourse, as well as
for the notary and the MOICT. The Notary continued consolidation in the marketplace
and the MOICT usually accept Arabic and where companies are taking advantage of
English dual text documents. strong balance sheets built up in recent
years, especially because of Covid.
26. Can acquisition documents be
governed by a foreign law?
Yes.
27. Are arbitration clauses legally
permissible or generally included in
acquisition documents?
Yes, arbitration clauses are generally
included in acquisition documents.
28. Are there any specific formalities
for the execution of acquisition
documents? Is it possible to
remotely/digitally sign documents?

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BANGLADESH
DOULAH & DOULAH

A.B.M. Nasirud Doulah Amina Khatoon

Partner Partner
[email protected] [email protected]

A. General
1. What is the main legal framework Companies are incorporated in Bangladesh
applicable to companies in your with an authorised share capital as set out
jurisdiction? in their memorandum of association. The
The Companies Act, 1994 of Bangladesh authorised share capital represents the total
(the “Companies Act”) governs all share capital that companies may issue to
Bangladeshi companies from incorporation their shareholders. Out of the authorised
up to winding-up and dissolution. Pursuant share capital, the actual share capital, which
to the Companies Act, private companies is issued to the shareholders is called the
are required to have a minimum of two “issued” or “subscribed” share capital, and
shareholders and two directors whereas the total amount paid and received by
public companies are required to have a the company on those issued shares is
minimum of seven shareholders and three called “paid-up” capital of the company.
directors. The Companies Act also requires There is no minimum capitalisation
the companies, among other things, to hold requirement for the initial equity injection
directors’ meeting quarterly and one annual
in a company under the Companies Act.
general meeting every year followed by
As such, a company can be incorporated
filing of annual return along with audited
accounts with the Registrar of Joint Stock with minimum paid-up capital. There is no
Companies and Firms (the “RJSC”). The requirement on the minimum authorised
Companies Act also sets out the procedures capital that a company may have at the
for passing special and extraordinary time of incorporation. For foreign investors
resolutions, transfer of shares, maintenance capital can either be contributed in cash
of books, accounts and registers, and issue through banking channel or in form of
of capital. capital machinery.

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Any investment activities conducted by 2. What are the most common types
foreign investors in Bangladesh are subject of corporate entities (e.g., joint
to the Guidelines to Foreign Exchange stock companies, limited liability
Transactions 2009 (“GFET”) issued by companies, etc.) used in your
the Bangladesh Bank (“BB”) - the central jurisdiction? What are the main
Bank of Bangladesh, pursuant to the differences between them (including
but not limited to with regard to the
Foreign Exchange Regulation Act, 1947
shareholders’ liability)?
(the “FERA”). According to GFET, foreign
investments are allowed in all commercial The main business vehicles used include
and industrial sectors in Bangladesh, the following:
except for certain reserved sectors those • Proprietorship.
restricted by applicable Bangladesh laws or
• Partnership.
regulations.
• Limited liability company (public and
Inward remittance of foreign investment, private limited).
encashment of foreign exchange, • Branch office (foreign company).
repatriation of dividend by non-residents,
• Liaison office.
remittance of royalty, technical and
consultancy fees etc., obtaining credit • Societies.
facilities or loans, opening and operation of • Associations (not for profit).
foreign currency accounts by non-residents A trust can be created under the Trusts Act
in a bank in Bangladesh, etc. are regulated 1882 for any lawful purpose and is seldom
by BB under FERA and GFET and various used as a business vehicle other than as a
circulars issued by the Bangladesh Bank tax planning instrument.
from time to time.
Limited companies (private limited and
Bangladesh has a strict foreign exchange public limited), branch and liaison offices
control regime in force. Dealings in foreign are most commonly used due to their:
currency are strictly regulated by the Limited liability nature.
Bangladesh Bank and only authorised
dealers, that are licensed bank branches, Flexible corporate structure.
are allowed to remit foreign currency out Well-defined governance framework.
of Bangladesh. Further, no other person
Branches of foreign companies are only
may deal in foreign exchange without the
allowed in commercial service sectors.
prior consent of the Bangladesh Bank.
Functions of liaison offices are further
Remittance of money out of Bangladesh is
limited to local liaison, facilitation of sales,
allowed only under specific circumstances marketing, research and exhibition. Liaison
and is required to be supported by offices cannot generate revenue or perform
appropriate documentation. commercial activities.
Other important laws applicable in this The Companies Act, 1994 regulates all
context include Labour Act, 2006 read with types of companies and branch of foreign
Labour Rules, 2015, The Environmental companies in Bangladesh. There is not
Conservation Act, 1995 read with that much difference between public
Environmental Conservation Rules, 1997 and private limited companies as far as
and so on. shareholder liabilities are concerned. A

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limited company is treated as a separate • Arms and ammunition and other

legal entity with limited liability for its defense equipment and machinery;
shareholders. As contrasted to a public
• Forest plantation and mechanized
limited company, a private limited company
extraction within the bounds of
has the following features:
reserved forests;
• It can restrict transfer of its shares by its • Production of nuclear energy; and
shareholders;
• Security printing.
• It cannot invite the public to subscribe
for its shares or debenture; and In addition to the four sectors reserved
for government investment, there are
• The upper-limit of the number of its 17 controlled sectors that require prior
shareholders is fifty. clearance/ permission from the respective
For a private limited company, minimum line ministries/authorities (by way of
number of shareholders is 2 and maximum public procurement or licensing or public
number of shareholders is 50. In terms of private partnership) and indirectly this is
number of shareholders of a public limited being used for a few sectors to maintain
company, minimum is 7 and maximum is Government monopoly such as power
unlimited. One third of the directors need (electricity) transmission and distribution.
These are:
to resign in public limited every year and
in addition in every year statutory auditor • Fishing in the deep sea
needs to be changed in a public limited
• Bank/financial institutions in the private
company.
sector
Private limited companies are most used as
• Insurance companies in the private
SPV or project company for foreign direct
sector
investment (“FDI”) in Bangladesh due to
their autonomy, less corporate governance • Generation, supply, and distribution of
requirements and less oversight by power in the private sector
authorities. • Exploration, extraction, and supply of
B. Foreign Investment natural gas/oil

3. Are there any restrictions on foreign • Exploration, extraction, and supply of

investors incorporating or acquiring coal
the shares of a company in your • Exploration, extraction, and supply of
jurisdiction? other mineral resources
In general, there are no restrictions on • Large-scale infrastructure projects (e.g.
foreign investors incorporating or acquiring flyover, elevated expressway, monorail,
the shares of a company in Bangladesh. The economic zone, inland container depot/
major policy related to foreign investment container freight station)
in Bangladesh is the Bangladesh industrial
policy 2016. Foreign and domestic private • Crude oil refinery (recycling/refining of
lube oil used as fuel)
entities can establish and own, operate,
and dispose of interests in most types of • Medium and large industries using
business enterprises. Four sectors, however, natural gas/condensate and other
are reserved for government investment: minerals as raw material

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• Telecommunications service (mobile/ The commission is yet to quantify the

cellular and land phone) meaning of a ‘significant adverse effect’
• Satellite channels and the relevant thresholds for mandatory
approval. Until these rules have been
• Cargo/passenger aviation
set out, the commission enjoys the
• Sea-bound ship transport discretion to decide on the possible
• Seaports/deep seaports effects of any combination. If, during or
after the completion of an investigation,
• VOIP/IP telephone
the respondent, the commission, and the
• Industries using heavy minerals complainant agree on the terms of an
accumulated from sea beaches appropriate order, the commission will
While discrimination against foreign confirm the agreement as a consent order,
investors is not widespread, the subject to:
government frequently promotes local
• publication of the order in the Official
industries, and some discriminatory policies
and regulations exist. For example, the Gazette within seven working days for
government requires majority or more comments within a period of 30 days;
than majority local ownership of new • the commission receiving, reviewing
shipping, logistics, freight forwarding, and hearing representations from third
banking and insurance etc. companies,
parties with material interest;
albeit with exemptions for existing foreign-
owned firms, following a prime ministerial • the consent order being made as
directive. agreed and proposed with or without
The Competition Commission of changes; and
Bangladesh, constituted under the • the commission’s refusal to issue the
Competition Act, 2012, (“Competition order if additional information warrants
Act”) is responsible for supervising M&A this.
activity in Bangladesh. However, the
provisions set out in the Competition 4. Are there any foreign exchange
Act are currently operating in reactive restrictions or conditions applicable
mode pending the incorporation of the to companies such as restrictions to
underlying competition rules needed to foreign currency shareholder loans?
impose proactive measures.
Any investment activities conducted by
Any combination (including any M&A foreign investors in Bangladesh are subject
transaction) that would have an adverse to the Guidelines to Foreign Exchange
effect on competition is prohibited. Transactions 2009 (“GFET”) issued by
The commission has wide powers,
the Bangladesh Bank (“BB”) - the central
among other things, to investigate any
Bank of Bangladesh, pursuant to the
combination, either on its own motion
or following a complaint from any third Foreign Exchange Regulation Act, 1947
party. Statutory and regulatory authorities (the “FERA”). According to GFET, foreign
can seek a reference from the commission investments are allowed in all commercial
to determine whether a proposed and industrial sectors in Bangladesh,
combination is anti-competitive. The except for certain reserved sectors those
commission will issue its decision within 60 restricted by applicable Bangladesh laws or
days. regulations.

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Inward remittance of foreign investment, Accordingly, dividends, sale of share

encashment of foreign exchange, proceeds and liquidation residuals are
repatriation of dividend by non-residents, freely repatriable subject to meeting
remittance of royalty, technical and taxation and other compliances as
consultancy fees etc., obtaining credit applicable. Transfer of shares involving
facilities or loans, opening and operation of non-residents is required to be at fair value
foreign currency accounts by non-residents determined by an accredited auditor as
in a bank in Bangladesh, etc. are regulated per central bank guidelines. In addition,
by BB under FERA and GFET and various approval is needed from BB for non-
circulars issued by the Bangladesh Bank resident to resident transfers, especially for
from time to time. repatriation of purchase price. However,
such prior approval has been exempted
Bangladesh has a strict foreign exchange
for sale price below BDT100million and
control regime in force. Dealings in foreign
fair price valuation has been exempted in
currency are strictly regulated by the
case a net asset value approach is adopted
Bangladesh Bank and only authorised
under certification from the auditors.
dealers, that are licensed bank branches,
are allowed to remit foreign currency out Foreign Currency Borrowing & Accounts
of Bangladesh. Further, no other person
Foreign currency borrowing for industrial
may deal in foreign exchange without the
enterprises is allowed under due
prior consent of the Bangladesh Bank.
permission from BB as facilitated and
Remittance of money out of Bangladesh is
processed by BEPZA. There is a well-
allowed only under specific circumstances established approval process for loans
and is required to be supported by obtained from foreign lenders. This
appropriate documentation. approval allows Bangladeshi borrowers
Restrictions in dealing with foreign currency to remit interest payment and principal
amounts. Shareholders’ loans are as
The FERA and the GFET stipulate that, working capital is also allowed without
without a general or special permission any further BB approval and is repayable in
from the Bangladesh Bank, a company maximum of six years bearing maximum
incorporated in Bangladesh cannot 3% interest.
make any payment to, or for the credit
of, any person who is resident outside Transfer of Shares
Bangladesh, or draw, issue or negotiate Whereas there are no restrictions under
any bill of exchange or promissory note, or the foreign exchange regime on general
acknowledge any debt, which would mean acquisitions and issue of shares of a
that a right to receive a payment is created target. However, all transfers involving
or transferred in favour of any person foreign shareholders must take place at
residing outside Bangladesh. The FERA also a fair price. In the case of foreign sellers
restricts the creation or transfer of a security up to BDT 10 million sale proceed may
interest to any place outside of Bangladesh be repatriated without valuation and up
without general or special permission from to BDT 100 million sale proceed may be
the Bangladesh Bank. repatriated by the bank based on valuation
Repatriation of investment proceeds by a chartered accountant / merchant
bank without central bank approval. Prior
The Government guarantees all foreign approval must be sought from the central
investors repatriation of investment bank for repatriable sale proceed over BDT
proceeds from Bangladesh businesses. 100 million. In other cases involving local

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shareholder to foreign buyer transfer and • The number of expatriates should not
foreign seller to foreign buyer transfer, exceed 5% in the industrial sector and
a simple post-closing notification to the 20% in the commercial sector.
central bank along with the valuation
report shall suffice. • The initial work permit is for two years,
extendable on a case-by-case basis.
The fair market valuation must be
conducted by an accredited chartered • Security clearance is required from the
account or a licensed bank, following an Ministry of Home Affairs.
approximate mix of the asset-based, market To obtain a work permit, an application
value and income approaches. However, is filed with the BIDA for an e-visa
such valuation is exempted to repatriate recommendation. On receipt of the
the sale proceeds if the fair value of the recommendation, the Bangladesh Embassy
shares is determined based on the net asset provides the employee with an e-visa
value (“NAV”) approach, based on the latest that is valid for three months. On arrival
audited financial statements together with in Bangladesh, the employee must apply
tax returns without any consideration to to the BIDA for the work permit. The
tangible assets. Under such circumstances applications are filed by the employer and
an undertaking is issued by the target
the application stage takes about two
specifying that the impairment of assets
weeks. The following documents must be
have been adjusted in arriving at the NAV;
filed:
and the remitting bank is satisfied that
there is no abnormal growth in total assets • Copy of the employer’s incorporation
in any of the last three years, particularly in certificate with the MoA and AoA/
the last year. permission letter.
5. Are there any specific considerations • Board resolution for the employment,
for employment of foreign mentioning salary and benefits.
employees in companies
incorporated in your jurisdiction? • Passport size photographs and passport
copy.
Expatriates must have a work permit
to work in Bangladesh, with separate • Service contract/agreement or
residency permits required for family appointment letter/transfer order.
members. The following conditions apply in • Certificates of all academic
relation to issuing a work permit: qualifications and professional
• Nationals of countries recognised experience.
by Bangladesh are considered for • Copy of advertisement made for local
employment (that is, only nationals of recruitment before appointment of the
those countries can apply for a work expatriate.
permit).
• Specific activities of the company and
• Employment must be in establishments
statement of manpower, showing a
registered by the appropriate authority
list of local and expatriate personnel
(that is, the RJSC and/or the BIDA).
employed with designation, salary
• Local experts/technicians are not break-up, nationality, and date of first
available. appointment.
• Persons below 18 years of age are not • Encashment certificate of inward
eligible for a work permit. remittance of a minimum of USD50,000.

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C. Corporate Governance Board of Directors

6. What are the standard management Each private limited company must have
structures (e.g., general assembly, a minimum of two directors and public
board of directors, etc.) in a corporate limited companies three. Directors can be
entity governed in your jurisdiction nominated and appointed by shareholders,
and the key liability issues relating or by the board of directors. If a director is
to these (e.g., liability of the board a nominee of a shareholder, such director
members and managers)? is not required to hold any shares of the
company. If a director is appointed by the
In Bangladesh shareholders’ liability
board of directors, such director must hold
towards a company is limited to the
extent of their shareholding and related at least one common share of the company
contributions. Below is the typical (the “qualification share”, as outlined in the
corporate governance structure for a Articles of Association) within two months
company in Bangladesh. from the date of appointment, and such
director can hold such qualification share
Shareholders Meetings on trust for the benefit of a shareholder.
Whereas general matters at the shareholder The day-to-day business of a company
meeting are resolved by simple majority is run by its board of directors. Except
resolution, special resolutions (approved by for the matters that are reserved for the
minimum 75% of the voting shareholders) shareholders’ meeting by law and the
are required for major decisions to be articles of association, all other matters
made for the company. Shareholders shall be decided by the board of directors.
cannot contractually agree to modify the Unless otherwise specified in the Articles
shareholder approval requirement for
of Association, matters are resolved by
general and special resolutions. However,
simple majority votes. Approval from board
they can contractually agree to pass
of directors is required for transfer of any
general and special resolutions and upon
shares, issuance of new shares and variation
a breach to such arrangement the contract
of rights attached to any class of shares.
may be enforced to pass such resolution. In
addition, they can also agree contractually Each company must have a managing
to pass certain resolutions with a higher director, who is elected by the board or
percentage of approvals from shareholders shareholders. The managing director
than what is statutorily required. cannot hold other position in any other
Every company is required to hold at least entity. The powers and obligations of the
one shareholder’s general meeting in a managing director are determined by
calendar year. Schedule-2 sets forth the virtue of an agreement with the company
matters, required to be decided through or of a resolution passed by the company
shareholders’ general resolution (approval in its general meeting of shareholders or
by shareholders holding more than 50% by its board of directors or by virtue of its
of the voting shares). A list of required memorandum or articles of association.
resolutions to be passed under different Classification of shares
meetings of members for different agendas
is attached. In addition, to change any right The company is initially incorporated with
associated with a class of shares, approval only a single class of ordinary / common
from the shareholders holding more than shares. In another word, a private limited
90% of the shares belonging to such class company is not permitted to have different
of shares is required. classes of shares at its incorporation.

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Thereafter, different classes of shares may reasonable diligence in discharging the

be issued with different rights, including duties and to act honestly, and act with
preference shares with preference over such care as is reasonably expected from
rights to receive dividends and residual him, having regard to his knowledge and
proceeds at liquidation. experience. A director will be personally
liable on a company contract when he has
Reporting Requirements accepted personal liability either expressly
The company must file in each year an or impliedly. Directors are the agents or the
annual report outlining the authorized, trustees of a Company. Director’s liability to
paid-up capital, shareholder details, the Company may arise where:
directors’ detail, along with a directors’ (1) the directors are guilty of negligence,
report and an audited account of the
company duly passed in the Annual (2) the directors committed breach of trust,
General Meeting (“AGM”) of the company (3) there has been misfeasance and
with RJSC. In AGM the shareholders are
required to appoint an auditor, accredited (4) the director has acted ultra vires and the
by the Institute of Chartered Accountants funds of the company have been applied
of Bangladesh, to audit the accounts of for such an act.
the company in the next year closing. A director is required to act honestly
An auditor may be appointed for three and diligently applying his mind and
subsequent terms. In addition, a six- discharging his duties as a man of prudence
monthly foreign investment report is of his ability and knowledge would do.
required to be lodged with Bangladesh It has been explained in the duties of
Investment Development Authority and directors as to what is standard or due
Bangladesh Bank. care and diligence expected from him. Any
wilful misconduct or culpable negligence
Dividends and distributions falls within the category of misfeasance.
Following a recommendation by its board Directors must hold the meeting even
of directors, a Bangladeshi company may, though the accounts are not ready or
in a shareholders’ general meeting, declare the company is not functioning or the
dividends to its shareholders from time to management of the business is vested in
time. Dividends are subject to withholding the Central Government. The holding of
taxes. the meeting must be within the period of
Scheduled banks arrange summary 15 months after the preceding AGM. The
approvals from central bank for repatriation Board of Directors shall at the meeting
of dividends to the non-resident lay a balance sheet and a profit and loss
shareholders. Before applying to central account for the financial year. For default,
the Directors are liable to be punished with
bank for an approval, the bank is required
fine of BDT 10,000 and BDT for each day of
to verify the financial statements, tax status
continuing default.
and non-residency status of the relevant
foreign shareholder. There is no statutory Directors having any interest in any
or regulatory requirement of any reserve contract shall disclose the nature at the
balance beyond which dividends may be Directors’ meeting. Also directors having
declared. such interest are not entitled to vote in
the deciding meetings. Failing to do so is
Directors’ liability
punishable with BDT5,000 fine. Directors
Directors are bound to use fair and are liable to compensate a person who

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has subscribed shares on the faith of within 48 months immediately before the
a prospectus, which contained untrue filing of bankruptcy they incur any debt
statement. The Director should compensate without having any responsible ground of
every such subscriber for any loss or expectation of his repaying the debt.
damage he/she may have sustained by
In addition there are certain operational
reason of such untrue statement. The
laws such as labour laws and environment
Directors are liable to criminal prosecution
laws and under such acts where an offence
for inducing or attempting to induce a
punishable under the act or under any
person by statement or even forecast
which is false or misleading to enter into rule, regulation or scheme is committed
or to offer to enter into any agreement to by a company or other body corporate or
buy shares of the company. They shall be by a firm, every director partner manager
punishable with imprisonment for a term secretary or other officer or agent thereof
which may extend to five years, or with fine shall, if actively concerned in the conduct
which may extend to BDT5,000, or with of the business of such company, body
both. corporate or firm, be deemed to have
committed the offence unless he proves
For unregistered charges over assets of the that the offence was committed without his
company Directors are liable and penalty knowledge or consent or that he exercised
is a fine up to BDT2,000. Where directors all due diligence to prevent the commission
manage a company then each director shall of the offence. Such directors would be
be responsible (if there is no managing subject to same sanction as would have
director) that the company should maintain been applicable to a company or the
and keep proper books of account. Default individual committing such offence.
or non-compliance will make the Director
punishable with imprisonment for a 7. What are the audit requirements in
term not exceeding six months or fine of corporate entities?
BDT5,000 or both. For auditor appointment Every company incorporated in Bangladesh
related incompliance Fine up to BDT 1,000. must appoint a statutory auditor within
A Director of a company in liquidation must thirty days of incorporation. Thereafter,
co-operate with the liquidator in realizing the auditor needs to be reappointed in
the assets of the company and distributing every general meeting. For public limited
them among the creditors and contributors companies, an auditor cannot serve a
of the company. If they fail to do so they are company for more than continuous three
liable to imprisonment, which may extend years. The auditor needs to submit an
to seven years and fine. Therefore, Directors audited account of the company to the
are liable for theft of the company’s board of directors after conclusion of each
property or for false accounting. Directors of the financial year closing. Upon approval
are liable to prosecution on several issues. from the directors, such audit report must
If a company is adjudged bankrupt, the be approved by the shareholders in the
only consequence for the directors is general meeting of the shareholders within
imprisonment or fine if they are found nine months of the financial closing date on
to perform any offences as referred to in which the audit has been done. Thereafter
the Bankruptcy Act, 1997. According to the audit report approved in the general
Section 86 of the Bankruptcy Act, 1997 meeting is required to be filed with the
Directors of such a bankrupt company regulator within thirty days from the date of
shall be punishable with imprisonment, the general meeting along with the annual
which may extend to two years and fine if, return of the company.

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D. Shareholder Rights The company is free to grant any right to

the shareholders by way of incorporating
8. What are the privileges that can
relevant terms in its articles of association
be granted to shareholders? In
in addition to the following statutory rights
particular, is it possible to grant
already granted:
voting privileges to shareholders for
appointment of board members?

General
Type of
Meeting of List of Agenda Notice
Resolution
Shareholders

Ordinary  Resolution on appointment of auditors; 14 days

Resolution  Resolution for approval of annual accounts and before
declaration of dividend the
(requires meeting.
majority  Resolution for appointment of managing agent
vote)  Appointment of director at the place of
removed director
 Remove member from committee of
Inspection in compulsory winding up
 All other matters which are required to be
Annual
approved through shareholders except
Meeting of
for the matters to be approved by special /
Shareholders
extraordinary resolutions
Extraordinary  Removal of any Director 14 days
Resolution  Declare that it cannot by reason of its liabilities before
continue its business, and that it is advisable to the
(requires meeting.
vote from wind up
shareholders  Commence winding up and appointment of
holding liquidator
minimum  Propose arrangement with creditors
75% shares)
 Sanction of scheme of liquidation

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General
Type of
Meeting of List of Agenda Notice
Resolution
Shareholders

Ordinary  Resolution for appointment of managing agent 21 days

Resolution  Appointment of director at the place of before
removed director the
(requires meeting.
majority  Remove member from committee of
vote) Inspection in compulsory winding up
 All other matters which are required to be
approved through shareholders, except for all
other special / extraordinary resolutions
Special  Change of name 21 days
Resolution  Increase or decrease of authorized capital before
the
(requires  Alternation of Articles & Memorandum of
meeting.
vote from Association
shareholders  Fix reserve capital
holding
 Making liability of directors unlimited
minimum
75% shares  Fix remuneration of Managing Agent
with the  Payment of interest out of capital
Extraordinary meeting  To declares that the affairs of the company
Meeting of notice ought to be investigated by an inspector
Shareholders containing appointed by the Government
the agendas
subject  Removal of auditor
to special  Conversion of company into public/private
resolution)* limited company
 Commence winding up and appointment of
liquidator
 Authorize liquidator to accept shares, etc. as
consideration for sale of property of company
 Substitute memorandum and articles for deed
of settlement**
Extraordinary  Removal of any Director 21 days
Resolution  Declare that it cannot by reason of its liabilities before
continue its business, and that it is advisable to the
(requires meeting.
vote from wind up
shareholders  Commence winding up and appointment of
holding liquidator
minimum  Propose arrangement with creditors
75% shares)
 Sanction of scheme of liquidation
* The only difference between the process of the special resolution and the process of the
extraordinary resolution is that the special resolution should provide agenda in the meeting notice.

** This is applicable to companies intending to substitute their bylaws by way of a deed of settlement
among the shareholders rather than altering the Articles.

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9. Are there any specific statutory rights 11. Are there any specific concerns or
available to minority shareholders other considerations regarding the
available in your jurisdiction? composition, technical bankruptcy
and other insolvency cases in your
Following protections are available for
jurisdiction?
minority shareholders of companies
incorporated in Bangladesh: No.
• Derivative Actions: Shareholders having E. Acquisition
at least 10% interest in any class of
12. Which methods are commonly used
shares may bring law suit on behalf
to acquire a company, e.g., share
of the company against the directors,
transfer, asset transfer, etc.?
management, other shareholders or
other third party when the company Acquisition of shares (transfer and issue
has a valid cause of action but fails to of shares): An acquisition of shares can
bring a law suit. take place either by subscribing to fresh
equity in a company or by purchasing
• Minority Interest: Any shareholder
existing equity in the target from another
or debenture holder may bring an
shareholder. For publicly listed companies,
action against the company if there is
shares may be bought either:
any discriminatory act or act unfairly
prejudicial to his/her interest by the • through the stock exchange at market
company. price;
• Class Action: Shareholders having • through the stock exchange at a
at least 10% of a specific class of negotiated price; or
shares can bring an action against the • by private arrangements (generally
company in case the company makes known as ‘private investment in public
any variation to such shareholders’ equity’).
rights without their prior consent.
Merger (amalgamation): The target
The default position under law is that merges into the acquiring entity following a
no decision of the company requires court order and the target is then dissolved.
unanimous approvals of all shareholders. All assets and liabilities of the target vest
However, shareholders can agree on veto in the buyer. The purchase consideration
rights of minority shareholders through is paid by the buyer to the shareholders of
contracts and such rights will be recorded
the target, either by allotting shares or by
in the articles of association of the
paying cash for the value of their shares.
company.
Demerger: This structure is adopted to
10. Is it possible to impose restrictions
on share transfers under the avoid the tax inefficiencies of an itemised
corporate documents (e.g., articles sale of assets. The target’s undertaking or
of association or its equivalent in division is demerged from the target under
your jurisdiction) of a company a court order and then transferred to the
incorporated in your jurisdiction? buyer.

It is possible to impose restrictions on share Asset/liability transfer (itemised sale of

transfers under the corporate documents assets and liabilities): Specific assets and
(e.g., articles of association or its equivalent liabilities are sold under a sale and purchase
in Bangladesh) of a private company agreement with an itemised list of assets
incorporated in Bangladesh. and liabilities to be transferred.

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Asset transfer (sale as a going concern): procured afresh. The transfer of employee is
All assets and liabilities of an entity or a required by way of termination followed by
business division or plant are sold as a reappointment.
going concern under this structure. Like
13. What are the advantages and
amalgamation, this requires approval from
disadvantages of a share purchase
the court.
as opposed to other methods?
What are the key differences and
A. Share Purchases: Advantages/Asset
potential advantages and disadvantages
Purchases: Disadvantages
of the various structures?
A share purchase is a very simple and
Share purchase: A share purchase involves
straightforward process that is easy to
a very simple and straightforward process,
execute and implement for the following
which is easy to execute and implement.
reasons:
The only tax incidence is stamp duty, levied
at 1.5% of the purchase consideration; no • Value added tax (“VAT”) and other
other direct or indirect tax is payable. There indirect taxes are not payable. The
is minimal disruption to the target business only incidence of indirect transfer tax
in a share purchase. A share purchase is stamp duty, levied at 1.5% of the
does not trigger the need to obtain fresh purchase consideration. Both VAT and a
consents or licences. There is no question higher rate of stamp duty are levied on
of transferring employees. The only risk is an itemised sale of assets.
that all liabilities of the target, disclosed
• There is minimal disruption to the
or undisclosed, are also transferred
target business in a share purchase.
automatically; but this can be addressed
through indemnification. A share purchase does not trigger
the need to obtain fresh consents or
Merger/demerger/sale as going concern: licences. An asset transfer necessitates
Taxes can be avoided, but the process is obtaining fresh business licences and
complex and time consuming, and the consents.
scheme requires approval by 75% of the
creditors. Share acquisition from dissenting • There is no question of transferring
shareholders may also be considered as a employees. In addition, no employee
potential risk. On the positive side, all assets consent is required unless the
and liabilities – including employees – are employment agreement states
automatically transferred; and there is no otherwise. Other than slump sale, in an
need to obtain fresh consents or licences. asset purchase, the employees must be
terminated and then rehired, as local
Asset transfer: On the positive side, laws do not acknowledge transfer of
liabilities may be segregated and thus are
employment.
not automatically transferred. The scope
and extent of the due diligence process B. Share Purchases: Disadvantages/
are reduced, and the transaction can Asset Purchases: Advantages
thus be implemented relatively quickly.
The following must be considered:
However, this structure is tax inefficient,
as various stamp duties (some at a rate • In an asset purchase the liabilities are
of 3%) and direct or indirect must be not automatically transferred. Assets
paid. All operational licences must be can also be specifically selected in an

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itemised sale, thereby mitigating a an approximate mix of the asset-based,

number of legal risks for the buyer. This market value and income approaches.
will in turn reduce the scope and extent However, such valuation is exempted to
of the due diligence process over the repatriate the sale proceeds if the fair value
target company. Therefore, an asset of the shares is determined on the basis
purchase can be implemented relatively of the NAV approach, based on the latest
quickly. audited financial statements together with
tax returns without any consideration to
• If the asset purchase is structured as intangible assets. Under such circumstances
a slump sale, there can be significant an undertaking is issued by the target
direct tax and indirect transfer tax specifying that the impairment of assets
savings. have been adjusted in arriving at the NAV;
and the remitting bank is satisfied that
• Carry-forward and setting-off of losses there is no abnormal growth in total assets
is permitted in asset sales, facilitating in any of the last three years, particularly in
further tax benefits to the buyer. the last year.
14. What are the approvals and Approvals from the original company
consents typically required (e.g., jurisdiction of the high court: Merger
corporate, regulatory, sector and sale as a going concern both require
based and third-party approvals) approval from the original jurisdiction
for private acquisitions in your of the high court. Amalgamations in
jurisdiction? Bangladesh must also be sanctioned by the
high court.
Approvals under the Foreign Exchange
Approval from the Bangladesh Security
Regulations Act: There are no restrictions
and Exchange Commission: A listed
under the foreign exchange regime on
company requires approval from the
general acquisitions and issue of shares of
Bangladesh Security and Exchange
a target. However, all transfers involving
Commission to issue any capital if its total
foreign shareholders must take place at
paid-up capital would exceed BDT 100
a fair price. In the case of foreign sellers
million as a result.
up to BDT 10 million sale proceed may
be repatriated without valuation and up Regulatory approval: In certain industries
to BDT 100 million sale proceed may be where share lock-in applies, M&A approval
repatriated by the bank based on valuation must also be obtained from the regulators
by a chartered accountant / merchant – for example for financial institutions,
bank without central bank approval. Prior insurance companies, telecommunication
approval must be sought from the central companies, power generation companies
bank for repatriable sale proceed over etc.
BDT100 million. In other cases involving Post-closing: Certain perfections for the
local shareholder to foreign buyer transfer transaction post-closing must also be made
and foreign seller to foreign buyer transfer, at the Office of the Registrar of Joint Stock
a simple post-closing notification to the Companies and Firms and BIDA followed by
central bank along with the valuation a notification to the central bank.
report shall suffice.
15. What are the regulatory
The fair market valuation must be competition law requirements
conducted by an accredited chartered applicable to private acquisitions in
account or a licensed bank, following your jurisdiction?

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The Competition Commission of 16. Are there any specific rules

Bangladesh, constituted under the applicable for acquisition of public
Competition Act, 2012, is responsible for companies in your jurisdiction?
supervising M&A activity in Bangladesh.
Where there is no additional requirements
However, the provisions set out in the
for public limited companies, deal process
Competition Act are currently operating in
for listed companies is as follows:
reactive mode pending the incorporation
of the underlying competition rules needed Purchase through exchange: The typical
to impose proactive measures. timetable for an offer is one week, as
Any combination (including any M&A follows:
transaction) that would have an adverse • Once an irrevocable offer has been filed,
effect on competition is prohibited. together with the relevant documents,
The commission has wide powers, with a corresponding stock broker
among other things, to investigate any or merchant bank, this notice will be
combination, either on its own motion circulated immediately.
or following a complaint from any third
party. Statutory and regulatory authorities • The corresponding stock broker or
can seek a reference from the commission merchant bank will complete the
to determine whether a proposed purchase within a week and report
combination is anti-competitive. The to the regulator. The offer may be
commission will issue its decision within 60 cancelled if there is no seller for the
days. shares.

The commission is yet to quantify the Private purchase: The typical timetable of
meaning of a ‘significant adverse effect’ an offer is one week, as follows:
and the relevant thresholds for mandatory • A detailed sale and purchase agreement
approval. Until these rules have been set is executed between the seller and the
out, the commission enjoys the discretion purchaser.
to decide on the possible effects of any
combination. If, during or after completion • The seller gives an irrevocable sell
of an investigation, the respondent, the order to the corresponding broker or
commission and the complainant agree merchant bank.
on the terms of an appropriate order, the • The broker freezes the shares and sends
commission will confirm the agreement as a confirmatory notice to the exchange.
a consent order, subject to: • The purchaser deposits 20% of the
• publication of the order in the Official purchase price at the exchange by
Gazette within seven working days for cheque.
comments within a period of 30 days;
• The exchange immediately circulates
• the commission receiving, reviewing the news.
and hearing representations from third
• Once the news has been circulated, the
parties with material interest;
broker will complete the transaction.
• the consent order being made as
agreed and proposed with or without • On completion, the cheque will be
changes; and returned to the purchaser.
• the commission’s refusal to issue the  Acquisition through building up a
order if additional information warrants stake in the target before and/or
this. during a transaction process;

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A purchaser cannot build up a stake 17. Is there a requirement to disclose

during the transaction process. Before this, a deal, for instance to regulatory
however, it can build up a stake as long as authorities? Is it possible to keep a
it holds less than 10% of the shares in the deal confidential?
target. Other than for publicly listed companies,
Under the Bangladesh Securities and there is no such disclosure requirements.
Exchange Commission (Substantial 18. Can sellers be restricted from
Acquisition of Shares and Takeovers) shopping around during a
Rules, 2018, the acquisition of shares negotiation process? Is it possible
corresponding to 10% or more of the to include break fee or other
issuer’s total voting shares is considered penalty clauses in acquisition
a ‘substantial acquisition’ of shares. The documents to procure deal
following activities require disclosure in the exclusivity?
stock exchange’s online news circular:
Yes, sellers may be restricted from shopping
• any buy order or transaction that would around during a negotiation process by
result in this 10% threshold being met way of executing an exclusivity clause.
or exceeded;
There is no express prohibition on break
• any purchase of shares corresponding fee payment arrangements in Bangladesh.
to 10% or more of the voting rights in However, this is not common practice,
the issuer; or although in some cases a break cost
payment obligation is incorporated in the
• once an initial shareholding
sale and purchase agreement.
corresponding to a 10% or more of the
voting rights in the issuer has been Generally, when a sale and purchase
achieved, any further acquisition of agreement is short of closing, the
shares. defaulting party is required to pay the
non-defaulting party the break cost. In the
 Squeeze-out of any remaining case of the purchase of shares from other
minority shareholders: shareholders, the seller and/or the buyer
There are no provisions on the squeeze-out assumes such liability. In case of asset sell
of any remaining minority shareholders and share issue, the target and/or the buyer
and there is no possibility for minority assumes such liability.
shareholders to ‘sell out’. However, once However, as ‘break cost’ as a term is
a consortium ends up owning 90% of not defined in the foreign exchange
the shares in the target, it can purchase regulations, it is difficult to make such
the remaining 10% at the price below arrangements in practice. In such cases
(whichever is highest) and delist the the parties often agree to pay accrued
company: management fees in the form of constancy
or legal fees.
• the last trade price;
19. What are the conditions precedent
• the weighted average price over the
in a typical acquisition document?
last six months; or
Is it common to have conditions to
• the NAV per share, as per the latest closing such as no material adverse
financial statements. change?

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Common conditions precedent in share Seller warranties or indemnities are

sale agreements include as listed below, typically included in an acquisition
while it is also common to have conditions agreement. These cover areas such as:
to closing such as no material adverse
• Title and marketability to shares, assets
change:
and properties of the target.
• Obtaining the necessary corporate
• Shares, assets and properties, free of
approvals including resolutions from
any encumbrances.
the board of directors.
• Organisation and authorities of the
• Completion of due diligence to the
target company and the sellers.
satisfaction of the buyer.
• Approvals obtained to complete the
• Obtaining the necessary regulatory transfer.
approvals, if relevant.
• Capitalisation of the target.
• Obtaining approvals (or non-
objections) from shareholders with pre- • Lack of conflicts or consents.
emptive rights, customers, suppliers • Financial statements.
and financial institutions, if applicable.
• Undisclosed liabilities.
• Obtaining a valuation certificate/
approval from the central bank for • Absence of certain changes, events and
repatriation if the seller is a non- conditions.
resident. • Material contracts.
• Identification of an escrow agent if the • Condition and sufficiency of business
transaction contemplates interim price assets.
adjustment.
• Inventory.
• Representations and warranties being
• Accounts receivable and accounts
true and correct as on the closing date.
payable.
• Settlement of certain identified
• Customers and suppliers.
litigations, tax, disputes, regulatory
issues/proceedings or providing • Insurance.
adequately for their resolution. • Legal proceedings and governmental
• Delivery of the physical shares along orders.
with duly executed share instruments • Compliance with laws and permits.
and affidavits or electronic transfer in a
depository account. • Employee benefit plans and employee
matters.
• Resignation of directors nominated by
the seller, if relevant. • Real property and leases.

• Payment of the sale consideration into • Taxes.

the buyer’s bank account. • Books and records.
20. What are the typical warranties • Related party transactions.
and limitations in acquisition
• Bank accounts and power of attorney.
documents? Is it common to obtain
warranty insurance? • Environmental matters.

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The indemnity clause allows the holder to Formalities involved specifically for listed
require an indemnity providing that it be companies have been described in 16
compensated for any losses or damages. above. At closing, the following steps are
However, warranty insurances are not generally followed by companies:
common in local context.
• A fair market valuation is conducted
The following limitations are generally by a chartered accountant for transfers
imposed: involving non-residents.

• limitation periods overriding statutory • Lenders consent for transfer is obtained

limitations; by the target company.
• Sale and purchase agreement, share
• a cap on damages or compensation
transfer instruments and seller’s
payable;
affidavits are executed by the relevant
• the exclusion of indirect damages; parties and exchanged as CPs. Share
transfer instruments and seller’s
• matters disclosed in a disclosure
affidavits require notarization and
schedule; and
legalization from Bangladesh embassy
• minimum thresholds for making claims. in case of non-resident sellers.

21. Is there a requirement to set a • Conditions precedent satisfaction letter,

minimum pricing for shares of a along with documents evidencing the
target company in an acquisition? satisfaction of the conditions precedent
are exchanged.
In general, there is no such requirements
• Relevant corporate resolutions
other than for tax purpose for which
recording the closing of the transaction,
purchase consideration cannot be below
including approval of the transfer,
25% of fare price. However, for transfers
change in by-laws and resignation/
involving non-residents, purchase must be
appointment of directors are executed.
done at fair market value.
• Central Bank approval for remittance to
22. What types of acquisition financing a foreign seller is obtained, if relevant.
are available for potential buyers in
• Bank remittance certificate from the
your jurisdiction? Can a company
receiving bank.
provide financial assistance to a
potential buyer of shares in the • Share transfer instruments and seller’s
target company? affidavits are lodged and stamped
through regulator and then filed with
Under the Companies Act, a company in the target company.
Bangladesh is prohibited from providing
• Target company issues share certificates
any financial assistance, whether directly or
in favour of the buyer and inserts
indirectly, to a potential buyer of shares in
relevant entries in the corporate
that company. General source of fund for registers and books.
acquisition in Bangladesh comprises of own
fund and debt / bank financing. • Resignation of the seller’s nominees
from the board of directors and
23. What are the formalities and appointment of the buyer’s nominees
procedures for share transfers and to the board of directors are lodged
how is a share transfer perfected? with the regulator.

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• Notification to the central bank about Parties can also agree to waive certain
any change in foreign shareholding. rights under the Arbitration Act.
The documents in an asset sale are more 28. Are there any specific formalities
or less the same. A scheme of arrangement for the execution of acquisition
must be filed in court with respect to a documents? Is it possible to
merger or de-merger by the target and remotely/digitally sign documents?
buyer.
Acquisition documents may be executed
24. Are there any incentives (such remotely / as digitally sign documents
as tax exemptions) available for except for the share transfer instruments
acquisitions in your jurisdiction? and seller’s affidavit which must be wet
signed.
No such incentives other than those
provided in double taxation avoidance G. Trends and Projections
agreements.
29. What are the main current trends in
F. Enforceability M&A in your jurisdiction?
25. Can acquisition documents be Bangladesh has one of the most liberal
executed in a foreign language? M&A regimes in the world and almost zero
restrictions on country-specific FDI. This
Acquisition documents must be executed
notwithstanding, however, this market of
either in Bengali or English language.
around 200 million consumers has seen
26. Can acquisition documents be little of the surge in M&A deals in evidence
governed by a foreign law? elsewhere in the world in recent years, and
even less so since the start of the COVID-19
Bangladesh courts uphold a choice of
pandemic. Some global mergers and
foreign law and party autonomy as agreed
transactions have involved assets located
between the parties when entering into the
in Bangladesh, but there are few actual
contract. It was decided in PLD 1964 Dacca
acquisitions of local businesses. However,
637, that when the intention of the parties
the country is an attractive destination for
to a contract is expressed in words, this
FDI, which suggests that there is still space
express intention determines the proper
in the market for greenfield investments
law of the contract and overrides every
rather than brownfield projects.
presumption. A share purchase agreement
can provide for a foreign governing law if 30. Are any significant development
the parties agree to it. In practice, if all the or change expected in the near
parties to the agreement are Bangladeshi, future in relation to M&A in your
Bangladesh law is adopted as the jurisdiction?
governing law.
31.
27. Are arbitration clauses legally
The Competition is expected to enact
permissible or generally included in
a M&A rule soon, which shall outline
acquisition documents?
mandatory filing procedures, thresholds
Yes, arbitration clauses are legally and other important requirements for such
permissible and generally included in transactions.
acquisition documents. Bangladesh
arbitration law permits enforcement of
foreign arbitral awards in Bangladesh.

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BOLIVIA
AGUILAR CASTILLO LOVE

José Carlos Bernal Ismael Franco Edgar Yamil Daza Abraham Maman
Rivera Gonzáles Campos Rendon
Partner Partner Associate Associate
jbr@ ifg@ ydc@ amr@
aguilarcastillolove.com aguilarcastillolove.com aguilarcastillolove.com aguilarcastillolove.com

A. General companies, etc.) used in your

jurisdiction? What are the main
1. What is the main legal framework differences between them (including
applicable to companies in your but not limited to with regard to the
jurisdiction? shareholders’ liability)?
The main framework applicable to According to a 2021 report by the Registry
companies in Bolivia is the Commercial of Commerce, there are 2 (two) types of
Code, which contains the most important corporate entities which are most used in
norms regarding company structures, Bolivia (excluding sole proprietorship of a
obligations, and M&A. business, which is the most common type
Companies participating in specific of business structure in the country). The
industries (financial entities, first one is “Sociedad de Responsabilidad
telecommunications, energy, oil & gas, Limitada” (Limited Liability Partnership
(“LLP”)); and the second one is “Sociedad
and others) are also subject to specific
Anónima” (Joint Stock Companies
regulations and supervision by State
(“Corporation”)).
authorities. These regulations may contain
specific provisions relevant for M&A Both kinds of corporate entities provide
analysis. limited liability to the shareholders. The
main differences are:
2. What are the most common types
of corporate entities (e.g., joint LLPs require a minimum of 2 (two) partners
stock companies, limited liability and may have a maximum of 25; on the

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other hand, the Corporations must have at Under the General Labor Law (“Ley General
least 3 (three) shareholders, and there is no del Trabajo”) Supreme Decree N°26877 the
limit regarding the number of shareholders number of foreign employees in Bolivian
of the company. companies cannot exceed 15% of the
total work force. Foreigners must obtain a
Shares in Corporations are freely
specific purpose visa to work in the country.
transferable, while any modification of
the partners structure of an LLPs must be C. Corporate Governance
approved by the partners.
6. What are the standard management
Finally, with regards to the administration, structures (e.g., general assembly,
the LLP can be managed by the partners board of directors, etc.) in a corporate
or a designated manager, while the entity governed in your jurisdiction
Corporation is managed by a board of and the key liability issues relating
directors. In general, Corporations are to these (e.g., liability of the board
subject to more corporate obligations than members and managers)?
LLPs. The standard management structures are
B. Foreign Investment the following:

3. Are there any restrictions on foreign For LLPs the General Assembly of Partners
investors incorporating or acquiring (“Asamblea General de Socios”) is the
the shares of a company in your main governing entity of the company,
jurisdiction? (appointment of a board of directors and
general manager is optional).
There is a constitutional limitation
For Corporations, the Shareholder´s
regarding private ownership (foreign or
Assembly (“Junta de Accionistas”) is the
national) in Bolivia’s natural resources,
most senior governing entity of the
particularly hydrocarbons and mining,
company and must gather at least once
as a result of which foreign entities must
after the end of every fiscal year, to make
enter into agreements with state-owned
relevant decisions (review the financial
hydrocarbons or mining companies to
statements, appoint board members, and
participate in these industries. others). The Corporation must also have
In addition, foreigners may not own real a board of directors, which is the main
estate property within 50 kilometers of executive body of the company. Although
Bolivian international borders. appointing a general manager is common,
it is not mandatory, as representation of the
4. Are there any foreign exchange corporation is automatically granted to the
restrictions or conditions applicable president of the board.
to companies such as restrictions to
foreign currency shareholder loans? 7. What are the audit requirements in
corporate entities?
No, there are no restrictions for companies
regarding foreign exchange. All companies must file their financial
statements annually. Some companies
5. Are there any specific considerations subjected to specific industry regulations
for employment of foreign (e.g., financial services), must go through
employees in companies external audits every year to ensure
incorporated in your jurisdiction? transparency.

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D. Shareholder Rights agreements and enforced under

contractual law (not business law).
8. What are the privileges that can
be granted to shareholders? In 11. Are there any specific concerns or
particular, is it possible to grant other considerations regarding the
voting privileges to shareholders for composition, technical bankruptcy,
appointment of board members? and other insolvency cases in your
jurisdiction?
Besides specific statutory rights,
shareholders may contractually agree to No specific considerations.
specific privileges (such as the right of first E. Acquisition
refusal before transferring shares to third
parties) in a share purchase agreement. 12. Which methods are commonly used
There are no restrictions regarding to acquire a company, e.g., share
privileges which can be granted to transfer, asset transfer, etc.?
shareholders. The number of publicly traded firms in
Bolivia is small. Share transfers are more
Voting privileges for appointment of
common than asset transfers.
board members can also be contractually
negotiated and enforced. 13. What are the advantages and
disadvantages of a share purchase
9. Are there any specific statutory
as opposed to other methods?
rights available to minority
shareholders available in your Asset purchase deals provide the possibility
jurisdiction? of ‘cherry picking’ (which requires adequate
identification of the productive assets that
The Commercial Code grants the following
are of interest) but may take more time
statutory rights to minority shareholders than a share purchase and may involve a
who represent at least 20% of the share tax impact on the value of the assets being
capital of the company: acquired.
- Appointment of one third of the board of On the other hand, share purchases are
directors. faster. In the case of Corporations, share
- Appointment of a comptroller purchases do not require the registration of
the transfer in public records.
10. Is it possible to impose restrictions
on share transfers under the 14. What are the approvals and
corporate documents (e.g., articles consents typically required (e.g.,
of association or its equivalent in corporate, regulatory, sector
your jurisdiction) of a company based and third-party approvals)
incorporated in your jurisdiction? for private acquisitions in your
jurisdiction?
Articles of incorporation may contain
conditions on share transfer, but not Private acquisitions in Bolivia are generally
unreasonable limitations, as such not subject to specific merger control
approvals. On the other hand, acquisition
limitations would be considered in violation
in specific regulated industries (financial
of the Commercial Code.
entities, telecommunications, energy, oil &
More stringent restrictions may be gas, and others) are subject to approval of
negotiated and contractually agreed the regulatory authorities overseeing those
between shareholders in share purchase industries.

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15. What are the regulatory Yes, specific provisions regarding the
competition law requirements project may be contractually agreed by the
applicable to private acquisitions in parties.
your jurisdiction?
19. What are the conditions precedent
The State Constitution prohibits the in a typical acquisition document?
monopolization of companies as any other Is it common to have conditions to
association of national or foreigner persons closing such as no material adverse
or companies that intend to get exclusivity change?
on providing goods or services. Also,
Conditions precedent commonly include
the Supreme Decree N°29519 regulates
performance of covenants, issuance of
competition and consumer protection
legal opinions, and execution of related
against harmful practices that negatively
contracts.
influence the market. Other than that,
mergers and acquisitions in the private “Material adverse event” clauses are also
sector do not require prior authorization commonly used.
of governmental entities (except for
20. What are the typical warranties
companies operating in specific industries,
and limitations in acquisition
as explained above).
documents? Is it common to obtain
16. Are there any specific rules warranty insurance?
applicable for acquisition of public
Typical warranties include material
companies in your jurisdiction?
contracts, litigation intellectual property,
The number of publicly traded companies licenses and permits, anti-money
in Bolivia is small. Acquisition of public laundering, environmental matters, taxes,
companies would require disclosure employees, real property, among others.
of ownership before the Bolivian Stock
It is not common to obtain warranty
Exchange.
insurance.
17. Is there a requirement to disclose
21. Is there a requirement to set a
a deal, for instance to regulatory
minimum pricing for shares of a
authorities? Is it possible to keep a
target company in an acquisition?
deal confidential?
Shares cannot be priced lower than the
Mergers and acquisitions in specific
nominal amount declared in the share
industries (financial entities,
certificates.
telecommunications, energy, oil & gas,
and others) must be disclosed to the 22. What types of acquisition financing
corresponding regulatory authorities and are available for potential buyers in
cannot be kept confidential. your jurisdiction? Can a company
provide financial assistance to a
18. Can sellers be restricted from
potential buyer of shares in the
shopping around during a
target company?
negotiation process? Is it possible
to include break fee or other Potential buyers usually resort to financing
penalty clauses in acquisition from Bolivian banks. More complex
documents to procure deal structures (leveraged buyouts for example)
exclusivity? are not common.

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23. What are the formalities and Besides this, there are no formalities for the
procedures for share transfers and execution of acquisition documents.
how is a share transfer perfected?
Share Purchase Agreements may be
Stock certificates must be endorsed on the remotely and digitally signed.
back of the document and signed by the
seller. In order to complete the transfer, G. Trends and Projections
the buyer of the shares must present the 29. What are the main current trends in
certificates before the secretary of the M&A in your jurisdiction?
company, who must record the transaction
in the shareholders’ registration book. No The Bolivian mining industry has seen M&A
further formalities are needed. activity in the last couple of years.

24. Are there any incentives (such 30. Are any significant developments
as tax exemptions) available for or changes expected in the near
acquisitions in your jurisdiction? future in relation to M&A in your
jurisdiction?
There are no incentives.
There is a draft bill for a new Commercial
F. Enforceability Code, which, if approved, may introduce
significant changes impacting mergers and
25. Can acquisition documents be
acquisitions (M&A). The proposed code
executed in a foreign language?
aims to modernize and streamline the
Share purchase agreements executed country’s commercial regulations, including
in foreign languages can be executed those that govern corporate transactions,
in Bolivian courts, following a judicially shareholder rights, and corporate
mandated translation of such documents. governance. While the potential changes
could impact M&A processes by clarifying
26. Can acquisition documents be
or restructuring regulatory requirements,
governed by a foreign law?
there is currently no set timeline for its
While acquisition documents may be approval. Consequently, legal professionals
governed by foreign law, if the agreements and businesses are uncertain about when
are executed in Bolivia, Bolivian courts these updates will take effect and what the
would disregard the choice of law final changes will entail.
provisions and apply Bolivian law.
27. Are arbitration clauses legally
permissible or generally included in
acquisition documents?
Arbitration clauses are legally permissible
and commonly included in acquisition
documents.
28. Are there any specific formalities
for the execution of acquisition
documents? Is it possible to
remotely/digitally sign documents?
Stock certificates must be transferred by
endorsement in the back of the document.

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BOSNIA AND HERZEGOVINA

MARIĆ & CO

Bojana Basnjak-London Nebojsa Maric Ezmana Turkovic

Partner Partner Partner
bojana.bosnjak-london@ nebojsa.maric@ ezmana.turkovic@
mariclaw.com mariclaw.com mariclaw.com

A. General are jointly and severally liable for the

company obligations with their entire
1. What is the main legal framework property - general partners, and one or
applicable to companies in your more members are liable for company
jurisdiction? obligations only up to the amount of their
Company law is regulated by three contributions as entered into court register
entity/district level laws: Company Law - limited partners); c) joint stock company
of Federation of Bosnia and Herzegovina (a company whose registered capital is
(“FBH”), Company Law of Republika Srpska divided into stocks) and d) limited liability
(“RS”) and Company Law of Brčko District company (a company whose registered
(“BD”). capital is divided into shares).

2. What are the most common types Limited liability companies and joint stock
of corporate entities (e.g., joint companies are the most common legal
forms present in Bosnia and Herzegovina.
stock companies, limited liability
The main differences between the two is
companies, etc.) used in your
the minimum capital, mandatory corporate
jurisdiction? What are the main
bodies and the fact that certain activities
differences between them (including
may only be performed by a joint stock
but not limited to with regard to the
company.
shareholders’ liability)?
B. Foreign Investment
Available corporate forms are: a) general
partnership (at least two members, who are 3. Are there any restrictions on foreign
jointly and severally liable for the liabilities investors incorporating or acquiring
of the company); b) limited partnership (a the shares of a company in your
company in which one or more members jurisdiction?

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In principle, there are no restrictions and determined by the Council of Ministers in

foreign investors are granted the same accordance with the migration policy and
rights as the local investors. The only taking into consideration the situation in
limitation provided by the law is that the labor market. Within the annual quota
foreign equity ownership of business of work permits, the Council of Ministers
entity engaged in the production and sale determines the activities and professions
of arms, ammunition, explosives for the in which it is allowed to employ foreigners,
military use, military equipment and public the number of work permits for each
broadcasting shall not exceed 49% of the activity and determines the territorial
equity in that business entity. In case of distribution of work permits according to
investing in these sectors, foreign investor expressed needs.
must obtain prior approval from the
When issuing work permits, priority shall
competent authority.
be given to foreigners who already have
4. Are there any foreign exchange temporary resident permit in Bosnia and
restrictions or conditions applicable Herzegovina on the basis of bringing
to companies such as restrictions to family together or the foreigner with
foreign currency shareholder loans? temporary residence permit in Bosnia and
Herzegovina.
The general restriction is that only local
currency (“BAM”) can be used in internal C. Corporate Governance
payment transactions. Under Bosnia
6. What are the standard management
and Herzegovina financial regulation,
structures (e.g., general assembly,
foreign currency shareholder loans are
board of directors, etc.) in a corporate
defined as credit agreements. Crediting in
entity governed in your jurisdiction
foreign currency is allowed in Bosnia and
and the key liability issues relating
Herzegovina but under the condition that
to these (e.g., liability of the board
both payment and collection transactions
members and managers)?
are being made in local currency.
The corporate structure of limited liability
5. Are there any specific considerations
companies have, in principle, the following
for employment of foreign
outline (with some minor differences
employees in companies
depending on which entity the company is
incorporated in your jurisdiction?
located):
Foreign employees must obtain work
• Shareholders Assembly (mandatory)
permit if they intend to work in Bosnia and
– consists of all shareholders of a
Herzegovina. The authority responsible
company.
for employment of foreigners’ issues work
permit based on the established quota of • Supervisory Board (not mandatory,
work permits or as a working permission unless the company has at least
that is not counted in the quota. The two shareholders and at least
work permit quota is the number of work 1,000,000 BAM capital) – minimum
permits that can be issued in Bosnia three members, if not appointed
and Herzegovina in one year to certain its authorities are executed by
professions, i.e., to foreigners who perform Shareholders Assembly
certain activities that require a work permit
• Management – must have at least
to work in Bosnia and Herzegovina.
one Director, and can have one or
The annual quota of work permits is more Executive Directors. Scope of

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authorizations of each is inscribed into to request the convocation of the

the court registry. shareholders assembly, right to buy
out of the shares, extraordinary audit
• Procurator (not mandatory)
etc. In addition, all shareholders are
– procurators are authorized
entitled to (upon fulfilment of legally
representatives, inscribed into the court
prescribed conditions and within the
registry as holders of special proxy
deadlines provided by the law) initiate
for representation of the company.
the process of challenging the decisions
Procurators may not transfer their of the shareholders assembly before the
authorities to third persons. competent court.
7. What are the audit requirements in 10. Is it possible to impose restrictions
corporate entities? on share transfers under the
Internal audit is not obligatory in limited corporate documents (e.g., articles
liability companies but must be established of association or its equivalent in
in joint stock companies (all joint stock your jurisdiction) of a company
companies in FBH, and only public joint incorporated in your jurisdiction?
stock companies in RS). The external audit is The only restriction stipulated by the
obligatory for certain companies (turnover laws is the obligation to honor the
and size as determined by the applicable preemptive right in case of sale of the
laws on accounting). shares. In addition, although the laws do
D. Shareholder Rights not specifically regulate it, it is common
to agree in the charter documents lock-in
8. What are the privileges that can periods, drag along/tag along rights, as well
be granted to shareholders? In as put and call options.
particular, is it possible to grant
voting privileges to shareholders for 11. Are there any specific concerns or
appointment of board members? other considerations regarding the
composition, technical bankruptcy
Each shareholder has such number of and other insolvency cases in your
votes in the shareholders assembly that jurisdiction?
corresponds to its participation in the
share capital, and the law does not provide No specific considerations.
privileges to certain shareholders for E. Acquisition
appointment of board members. However,
we have seen cases where this was 12. Which methods are commonly used
implemented in the corporate documents to acquire a company, e.g., share
of a company and enforced through the transfer, asset transfer, etc.?
court. Both methods are used equally common
– deciding factors are usually the results
9. Are there any specific statutory rights
of the due diligence and obligations
available to minority shareholders
pertaining to the company.
available in your jurisdiction?
13. What are the advantages and
Each of the Company’s Laws guarantees
disadvantages of a share purchase
certain rights to the minority shareholders.
as opposed to other methods?
Although the exact scope of minority
protection varies from entity to entity, Share purchase is usually a simpler process
minority protection includes the right but carries more risks as all obligations

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of the company become, ultimately, the 16. Are there any specific rules
obligation of the purchaser. Although this applicable for acquisition of public
is mitigated with adequate representations companies in your jurisdiction?
and warranties and escrow account, in case Acquisition of public companies is done
some hidden obligations arise they usually by a privatization procedure. Each of the
end up in long, complex and expensive privatization agencies determines its
litigation procedures. privatization plan and implements it based
on the conditions provided in it.
14. What are the approvals and
consents typically required (e.g., 17. Is there a requirement to disclose
corporate, regulatory, sector a deal, for instance to regulatory
based and third-party approvals) authorities? Is it possible to keep a
for private acquisitions in your deal confidential?
jurisdiction? If the entities in question are non-regulated
This greatly depends on the type of the entities, it is possible to keep the deal
company in question as well as the sector confidential. However, for publicly held
in which it operates. If it is a regular joint stock companies and all regulated
entities there are reporting obligations to
limited liability company engaged in e.g.
both the stock exchange and the relevant
production of furniture it is common that
regulator authority and it is not possible to
no prior approvals are necessary. However,
circumvent these obligations.
for all regulated entities (banking, finance,
insurance etc.) prior approval of the 18. Can sellers be restricted from
regulator is necessary prior to closing the shopping around during a
deal and is usually stipulated as a condition negotiation process? Is it possible
precedent in the transaction documents. to include break fee or other
penalty clauses in acquisition
15. What are the regulatory documents to procure deal
competition law requirements exclusivity?
applicable to private acquisitions in
This is not specifically regulated by our
your jurisdiction?
laws, so the parties are free to agree on the
According to Bosnian Competition Act, a terms of the negotiations.
merger is required to be notified by parties 19. What are the conditions precedent
if the following conditions are met: a) total in a typical acquisition document?
annual income of all participants to the Is it common to have conditions to
concentration achieved by selling goods closing such as no material adverse
and / or services on the world market is change?
KM 100,000,000 (approx. EUR 51 million)
Commonly, conditions precedent include
according to the final account in the year
remedying the problems identified in
preceding the merger, or b) total annual
course of the due diligence process,
income of each of at least two participants obtaining relevant approvals for closing of
to merger achieved by selling goods and the deal (competitions and/or regulatory
/ or services on the market of Bosnia and approvals) and delivery of all documents
Herzegovina is at least BAM 8,000,000 needed for closing. Material Adverse
(approx. EUR 4.1 million) in the year Change (“MAC”) clauses used to be
preceding the merger, or if their joint share common conditions precedent in the
in the relevant market exceeds 40%. transaction documents, but considering

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the recent market developments and Formalities for share transfer perfection
instabilities, the sellers have made a strong depend on the court where the company
push against MAC clauses and these are is located, but in principle include signing
seen much less nowadays. of the share transfer agreement and
amendments to the articles of association,
20. What are the typical warranties
inscription into the Book of Shares, and
and limitations in acquisition
documents? Is it common to obtain submission of application for registration
warranty insurance? and registration with the court.

This greatly depends on the sector in 24. Are there any incentives (such
which the target is active, whether it is a as tax exemptions) available for
full or partial acquisition and negotiating acquisitions in your jurisdiction?
power of the parties. Warranty insurance Incentives and exemptions are provided
is not very common for deals in our for in the context of foreign investments.
jurisdiction, but we have used warranty The main incentives for foreign investors
insurance in cross-border deals affecting relate to tax exemptions. Therefore, foreign
several jurisdictions (including Bosnia and investment will be exempted from paying
Herzegovina). import taxes. Foreign investment also
21. Is there a requirement to set a may be exempted from other tax dues in
minimum pricing for shares of a line with the principle of equal treatment
target company in an acquisition? of domestic and foreign investors and of
stimulating foreign investments.
Minimum share price mostly applies to joint
stock companies, where the price has to be F. Enforceability
determined in accordance with the trading
25. Can acquisition documents be
patterns and cannot deviate from certain
executed in a foreign language?
thresholds provided for by the Securities
Law (thresholds and the ranges are While it is possible to execute the
regulated by each of the entity applicable acquisition documents in a foreign
securities laws). language, in order for them to be used,
22. What types of acquisition financing implemented or registered in Bosnia
are available for potential buyers in and Herzegovina, they will need to be
your jurisdiction? Can a company translated into one of the official languages
provide financial assistance to a in Bosnia and Herzegovina. Such translation
potential buyer of shares in the must be an official translation, i.e.,
target company? undertaken by a court sworn interpreter.

All commercially and internationally 26. Can acquisition documents be

developed and common financing is also governed by a foreign law?
used in Bosnia and Herzegovina. It is not If one of the parties to the acquisition
allowed for companies to provide financial documents is foreign, then it is permissible
assistance for acquisition of such company’s to agree on a foreign law in all contracts,
shares. Considering that this is explicitly
including the acquisition documents.
forbidden, any such transaction would be
Furthermore, a submission to a foreign
null.
material law is enforceable, however, as a
23. What are the formalities and rule, a Bosnian court will always be using
procedures for share transfers and domestic procedural law. However, there
how is a share transfer perfected? are mandatory principles of the local law

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which will apply even if another legal target company) to notarize the signature
system has been (effectively) agreed and/or process the acquisition documents
upon the parties (e.g., inscription in the as notarial deeds. Although it is possible
Land Registry, enforcement proceedings that the court in question would accept
on assets in Bosnia and Herzegovina, notarization by a foreign notary, it is
bankruptcy and liquidation proceedings
advisable to conduct the notarization
etc.
locally. This can be done by the parties (or
27. Are arbitration clauses legally their legal representatives) personally, or by
permissible or generally included in a locally appointed proxy.
acquisition documents?
G. Trends and Projections
The disputes will be resolved in a form
of arbitration if the parties agreed to the 29. What are the main current trends in
jurisdiction in form of written agreement M&A in your jurisdiction?
/contract, in respect of a dispute, or in
Political instability, Covid pandemic and
respect of future disputes that may arise
from contract concluded among them. the geo-political developments make it
The contract shall be deemed concluded very difficult for Bosnia and Herzegovina
also through an exchange of letters, to set trends in its economic development
telegrams and faxes, as well as when the or foreign investment. Nevertheless, our
arbitral jurisdiction clause is contained economy became quite resilient to these
in the general conditions of the contract, factors and manages to slowly grow over
which are an integral part of the contract. time. We are seeing an increased interest
Therefore, acquisition documents can in various sectors including tourism, IT,
provide for arbitration clauses, if all legally production and construction. All these
set conditions have been met.
remain steady sources of M&A activity.
28. Are there any specific formalities
30. Are any significant development
for the execution of acquisition
documents? Is it possible to or change expected in the near
remotely/digitally sign documents? future in relation to M&A in your
jurisdiction?
In order to register the share transfer
before the competent court, it may be We do not expect any significant changes
necessary (depending on the seat of the in the forthcoming period.

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BRASIL
CESCON BARRIEU

Ana Carolina Castro Reis Rodolpho Clemente Neto

Passos Associate
Partner rodolpho.clemente@
anacarolina.passos@ cesconbarrieu.com.br
cesconbarrieu.com.br

A. General Most civil, commercial, and criminal

matters, as well as most civil and criminal
1. What is the main legal framework procedures are regulated by general codes
applicable to companies in your established as Federal Laws (the Brazilian
jurisdiction? Civil Code, the Brazilian Corporations Law,
Brazil is a civil law system, influenced the Brazilian Penal Code, the Brazilian
by Roman law. The primary source Civil Procedural Code and the Brazilian
of law is legislation. Case law is not Penal Procedural Code), in each case as
generally binding, although decisions complemented by other laws, decrees and
of higher courts serve as authorities for regulations. The main legal framework
interpretation. The Brazilian legal system applicable to companies under the Brazilian
is based on the Federal Constitution national law is comprised of the Brazilian
and laws, which are subject to review Civil Code (Federal Law No. 10,046/2002)
by higher courts, such as the Federal and Brazilian Federal Law No. 6,404, dated
Supreme Court for constitutional matters, December 15, 1976 (“Brazilian Corporations
the Superior Court of Justice for legal Law”). The Brazilian Corporations Law is
issues of non-constitutional nature and applicable to the Sociedades Anônimas,
local State courts of appeal. The primary as defined below, and the Sociedades
legislation is approved by the National Empresárias Limitadas, as defined below,
Congress. The Government, the Ministers are mainly governed by the Brazilian Civil
and other governmental entities can Code, provided that certain provisions
also make, mainly, delegated legislation of the Brazilian Corporations Law may
by order. Courts can, in general, review be applicable to Sociedades Empresárias
administrative decisions. Limitadas, as defined below, that elect to

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be governed in a subsidiary form by the Empresária Limitada” or “Ltda.”) and

Brazilian Corporations Law. the corporation (“Sociedade Anônima”
or “S.A.”). In general terms, the Sociedade
Brazilian monetary, fiscal, and trade policies
Empresária Limitada is the corporate
are established and implemented at the
type with a simpler and less expensive
federal level. The main body in charge
structure. Sociedades Anônimas are
of fiscal and monetary policy in Brazil is
usually recommended whenever the entity
the National Monetary Council (Conselho
will require a complex management/
Monetário Nacional). The implementation
governance structure, stock option plans
and further regulation of such policies,
or a more sophisticated capitalization
including the issuance of the Brazilian structure, and/or has plans to carry out
currency, definition of the reference interest public offerings of securities. The Sociedade
rate and the control of foreign exchange Anônima, however, is subject to higher
reserves and transactions, are controlled disclosure and publicity standards.
by the Central Bank of Brazil (Banco Central
do Brasil). The issuance, distribution, and The main differences between a Sociedade
trade of any securities in Brazil, as well Empresária Limitada and a Sociedade
as specific provisions regarding publicly- Anônima are the following: (i) the former
held companies, is subject to regulation is not expressly allowed to access debt
and inspection by the Brazilian Securities or equity capital markets, except for
Commission (Comissão de Valores the issuance of certain specific debt
Mobiliários - CVM), as well as to further self- instruments, while the latter can access
regulation enacted by listed companies, both markets and is the corporate type
which may vary in accordance with the usually required for the public issuance of
governance requirement of the different securities; (ii) in a Sociedade Empresária
listing segments. Limitada, the quotaholders have their
liability limited to the quotas that they
Brazil’s antitrust legal framework is subscribed, provided that all quotaholders
regulated at a federal level by different are jointly liable for the payment in in
federal laws and regulations. Brazilian full of the capital stock, whereas in a
Federal Law No. 12,529, dated November Sociedade Anônima the liability of the
30, 2011, is the primary Brazilian Antitrust shareholder is limited to the subscription
Law, which implemented a pre-merger price paid for the shares; (iii) in general,
review system and improved the structure the voting power in a Ltda. is measured
of the Brazilian Administrative Council for by the percentage of the capital stock that
Economic Defense (“CADE”). is held, while in a S.A. the voting power is
2. What are the most common types measured by the number of shares held,
of corporate entities (e.g., joint provided that both corporate types may
stock companies, limited liability issue, respectively, preferred quotas or
shares without voting rights; in addition,
companies, etc.) used in your
S.A.s may also issue plural voting shares;
jurisdiction? What are the main
(iv) in a Sociedade Empresária Limitada
differences between them (including
the capital stock is divided into quotas,
but not limited with regard to the
which are not freely transferable and need
shareholders’ liability)?
to have a par value, being possible the
The two most common corporate issuance of preferred quotas, whereas in
types of legal entities in Brazil are the a Sociedade Anônima the capital stock
limited liability company (“Sociedade is divided into shares, which are freely

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transferable, except (a) in the event that 4. Are there any foreign exchange
the bylaws of a closely-held corporation set restrictions or conditions applicable
forth certain specific restrictions or (b) in to companies such as restrictions to
case a shareholders’ agreement sets forth foreign currency shareholder loans?
such limitations and/or prohibitions; and
All foreign exchange transactions in
(v) in a Ltda. the distribution of profits is
Brazil are carried out in a unified foreign
allocated in accordance with the provisions
exchange market through authorized
of the company’s articles of association,
financial institutions. This foreign exchange
being possible to provide in the articles
market encompasses the transactions of
of association the disproportional
purchase and sale of foreign currency and
distribution of profits, while in a S.A. certain
international transfers of Brazilian Reais,
percentages of the company’s profits must
which consequently includes shareholder
have the destination that was expressly
loans in foreign currency. Such transactions
provided by the Brazilian Corporations
are subject to the closing of currency
Law, and it is not possible to have a
exchange agreements with certain
disproportional distribution of profits,
registered banks. Each bank has its own
although it is possible to have preferred
requirements and operational restrictions
shares with rights to minimum and fixed
and may require certain documents and
dividends.
information related to the transaction
B. Foreign Investment and to the persons involved. Certain costs
and fees may be due in view of the need
3. Are there any restrictions on foreign
of performing such currency exchange
investors incorporating or acquiring
agreements, and taxes shall be levied
the shares of a company in your
on such transactions, which may vary
jurisdiction?
according to their nature.
In general, there are no restrictions
to foreign investments in Brazil. The
exceptions are:

acquisition of rural real estate properties and real

estate properties in frontier areas
television and radio broadcasting (Law 4,117/62)
newspapers
Subject to limitations or conditions
navigation and cabotage
mining and hydraulic energy companies
medical services
national financial system

nuclear energy
Prohibitions mail and telegraph services
launch and orbital positioning of satellites

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The Central Bank of Brazil is responsible application may be denied based on this
for the control and registration of foreign assumption.
investments, in addition to the repatriation
It is also important to highlight that, both
of capital and the remittance of profits
for the Ltda. and the S.A., the individual
abroad. In this sense, certain foreign
appointed for management positions (i.e.
exchange transactions shall need to be
manager, officer and director) may be
registered with the Central Bank of Brazil.
foreigner. For a foreign individual to be
5. Are there any specific considerations appointed to a management position, such
for employment of foreign person shall grant a power of attorney to
employees in companies a Brazilian resident, which shall need to be
incorporated in your jurisdiction? valid during the entirety of their term of
office plus a minimum period of three years
Yes, there are specific requirements for
after the end of their term of office.
the employment of foreign employees
in Brazilian companies. Except in case of C. Corporate Governance
international agreement on the contrary,
6. What are the standard management
the entrance of foreigners in Brazil is
structures (e.g., general assembly,
subject to the granting of a residence
board of directors, etc.) in a corporate
and work authorization, which must be
entity governed in your jurisdiction
obtained abroad, at the relevant Brazilian
and the key liability issues relating
embassies and consulates. The residence to these (e.g., liability of the board
and work authorization allow the entry members and managers)?
and stay of foreigners in national territory,
provided that the conditions set out in Both the Sociedade Empresária Limitada
immigration legislation in force are met, and the Sociedade Anônima need to have
but the relevant authorities can prevent the at least one individual appointed to a
entry or stay of foreigners in Brazil. statutory management position, which
does not need to own an equity interest
In the case of individuals not hired in in the company and, in general, does
Brazil, but with the intention to come to not need to be a Brazilian citizen. For the
Brazil on business, without the intent to Sociedade Empresária Limitada, such
immigrate, they may enter the country with individual is referred to as a manager and
a business trip visa. Moreover, in order to his/her powers to represent the Ltda. shall
render services to a Brazilian company, a be set forth in the company’s articles of
foreign individual must be granted with association, being possible to include the
(i) one of the temporary residence and need of prior approval by the quotaholders
work authorizations; or (ii) a permanent for the performance of certain acts.
residence and work authorization, Additionally, the Sociedade Empresária
depending on the length of stay. Limitada is also governed by a hierarchically
Finally, it is worth mentioning that there is superior body, that is the quotaholders’
a cap on work permits set by the Brazilian meeting (provided that, in the event of the
Ltda. having only one quotaholder, such
Labor Code. It establishes that there is a cap
quotaholder will still be acting solely as a
of 1/3 of foreign workers for 2/3 of Brazilian
hierarchically superior body) and which has
workers in a company. In this sense,
certain powers and authority exclusively
although the Brazilian Federal Constitution
attributed to it by law.
sets forth that Brazilian and foreign citizens
shall be treated equally, with no distinction, Regarding the Sociedade Anônima,
the residence and work authorization even though they can be managed

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by a single individual appointed to a Empresária Limitada shall have a board of

statutory management position, which directors and/or a fiscal council, in which
is its officer, the Brazilian Corporations case their structure and authority shall be
Law sets forth the legal framework for governed by the Brazilian Corporations
the Sociedade Anônima’s governance Law.
structure, providing the possibility of
existence of a board of officers and a board The management of the Sociedade
of directors. The existence of a board of Empresária Limitada and of the Sociedade
directors is mandatory only for publicly- Anônima, in general, shall not be personally
held corporations, companies that have liable for the acts performed within the
authorized capital, football corporations limits of their function. Nonetheless, they
and quasi-public companies. It shall be shall be personally liable for acts performed
composed by at least three (3) members, with willful misconduct, negligence or
which do not need to own an equity in violation of the applicable laws and
interest in the company and, in general, governing documents of the company
do not need to be Brazilian citizens. It and may be subject to certain liabilities in
is possible to appoint alternates to the view of the piercing of the corporate veil.
directors and only up to one third (1/3) of It is possible to hire D&O insurance for the
the directors may be appointed as officers. management of the company or even enter
In the event of the existence of the board of into indemnity agreements with members
directors, it shall be the body with authority of the company’s management.
for the election of the officers. 7. What are the audit requirements in
In addition to the aforementioned bodies, corporate entities?
the Sociedade Anônima is governed Corporate entities need to annually, within
by a hierarchically superior body, that
four (4) months after the end of each fiscal
is the shareholders’ meeting, which has
year, draw up their respective financial
certain powers and authority exclusively
statements and management’s accounts
attributed to it by law, which exercises
and submit them for approval by the
the formal control of the company. The
shareholders. The fiscal council, if installed,
Sociedade Anônima also has as one of
shall issue an opinion on the financial
its mandatory bodies the fiscal council
statements and the board of directors, if
(Conselho Fiscal), which, if not provided
existing, shall also resolve such documents.
by the company’s bylaws as a body that is
permanently installed (being provided that Only due to regulatory requirements posed
in quasi-public companies and in football by specific governmental authorities,
corporations, the fiscal council shall be there will be a legal obligation of having
permanently installed), it shall only be the financial statements audited by an
installed by resolution of the shareholders. independent auditor. If the company has
The fiscal council is responsible for the a board of directors, such body shall have
supervision of the company’s management, the authority for the appointment and
and it shall issue non-binding opinions destitution of independent auditors.
regarding certain events. Such body shall
be composed by, at least, three members D. Shareholder Rights
and, at the most, five members, with 8. What are the privileges that can
equal number of alternates, which shall be be granted to shareholders? In
appointed by the shareholders’ meeting.
particular, is it possible to grant
Finally, it is worth mentioning that it is voting privileges to shareholders for
possible to provide that a Sociedade appointment of board members?

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The privileges that can be granted to as long as they hold at least a certain
shareholders that own preferred shares are equity interest (which may be reduced by
the following: (i) priority in the distribution specific regulations issued by the Brazilian
of dividends, fixed or minimum; (ii) priority Securities Commission in the event that
in the reimbursement of capital in the the S.A. is a publicly-held corporation),
event of liquidation, whether with or such as follows: (i) with ten percent of
without a premium; (iii) other preferences the company’s voting capital stock, the
and advantages that may be attributed adoption of multiple voting procedure
pursuant to the company’s bylaws to for the election of the directors and the
preferred shares without voting rights; (iv) election of a member of the fiscal council
right to elect one or more members of the and its alternate in a separate election; (ii)
management in a separate election; and/ with five percent of the company’s capital
or (v) prior approval of certain amendments stock, the shareholder may (a) judicially
to the bylaws in a special meeting that request the presentation, in full, of the
are expressly indicated in the company’s company’s corporate books, (b) call a
bylaws. shareholders’ meeting in the event that
the management does not attend, within
It is also possible for a non-public S.A. to eight days, the request for the calling of
issue common shares of different classes, a meeting that they presented, which
which may grant the right to elect certain shall be duly justified, (c) request to be
members of the company’s management called to the shareholders’ meeting by
or attribute to it plural voting, provided registered mail, (d) request the disclosure
that, subject to the compliance with of certain information, by the company’s
certain requirements posed by the Brazilian management, that is provided in paragraph
Corporations Law, it is possible to maintain 1 of article 157 of Brazilian Corporations
common shares with plural voting in Law, (e) promote a derivative action against
publicly-held corporations. the company’s management, (f ) request
to the fiscal council the presentation of
In addition to those privileges arising from
certain information regarding matters
the ownership of preferred shares (which under its authority, (g) file a judicial
could also be applicable to Sociedades action for the dissolution of the company
Empresárias Limitadas that have preferred due to the non-compliance with its
quotas) or common shares of a different purpose and (h) promote a derivative
class, it is also possible to establish in the action in view of damages arising from a
shareholders’ agreements similar privileges, controlling company due to the abuse of
such as, for example, defining which the control power; (iii) with five percent
shareholder shall be entitled to elect certain of the company’s voting or non-voting
members of the management, restrictions capital stock, the shareholder may call a
to the election of such members, vetoes shareholders’ meeting in the event that
and procedures for the appointment of the management does not attend, within
members of the management. eight days, to the request for the call of a
9. Are there any specific statutory rights shareholders’ meeting for the installation
available to minority shareholders of the fiscal council; (iv) with half of a
percent of the company’s capital stock, the
available in your jurisdiction?
shareholder may request the addresses
For the Sociedades Anônimas, the of the shareholders in order to proceed
Brazilian Corporations Law sets forth with a proxy request; and (v) with ten
certain privileges to minority shareholders percent of the company’s voting stock or

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five percent of the company’s non-voting 11. Are there any specific concerns or
capital stock, the shareholder may request other considerations regarding the
the installation of the fiscal council. In a composition, technical bankruptcy
publicly-held corporation, the shareholder and other insolvency cases in your
with fifteen percent (15%) of the company’s jurisdiction?
voting capital stock or ten percent (10%)
Considering the changes implemented
of the company’s capital stock may request
by the Federal Law No 14,112/2020 that
the right to elect a director and its alternate
amended the Federal Law 11,101/2005
in a separate election, provided that, if the (“Bankruptcy Brazilian Law” or “BBL”),
shareholders were not able to obtain any the most relevant comments and concerns
of the aforementioned quora, they shall about bankruptcy and insolvency
be entitled to sum the votes of common proceedings in our jurisdiction are the
and preferred shares, in which case a following:
combined threshold of ten percent (10%)
of the company’s capital stock is required to Competent Courts. The competent court
exercise such right (it is worth mentioning for the filing of an insolvency proceeding is
that such quorum is also applicable to the court located in the jurisdiction of the
companies that issue only common shares, debtor’s main place of business. In some
in accordance with the Brazilian Securities cases, the judge might not be completely
Commission’s interpretation). familiar with insolvency law and is not
capable to issue technical decisions;
10. Is it possible to impose restrictions
on share transfers under the Accrual of interests. From the date of
corporate documents (e.g., articles the filing of the reorganization request,
of association or its equivalent in the accrual of interests, penalties,
your jurisdiction) of a company adjustment for inflation, and late charges
incorporated in your jurisdiction? are suspended. Those amounts only
become enforceable if the reorganization
Yes, it is possible to impose restrictions
plan provides for their payment or if
on share transfers under the corporate
the reorganization is converted into
documents. In a Sociedade Empresária
bankruptcy;
Limitada, the transfer of quotas to third
parties (e.g., anyone that is not already a Mutual debts – set off. Matured, clear, and
partner) is subject to the inexistence of certain debts are admitted for set off. In
opposition by owners of one-fourth of the reorganization proceedings, the set-off of
capital stock, assuming that there are no mutual debts must be expressly authorized
other restrictions established in the Ltda.’s in the reorganization plan. In bankruptcy
articles of association. In a closely-held proceedings, the set-off of debts due
Sociedade Anônima, its bylaws may set before the bankruptcy has a priority over all
forth certain specific restrictions for the other creditors (unless otherwise provided
transfer of shares. by contract);
Both for a Sociedade Empresária Limitada Alternative Plan. Creditors would be
and for a Sociedade Anônima, its entitled to present an alternative plan if
partners may enter into a quotaholders’ no reorganization plan is presented by the
agreement and a shareholders’ agreement, debtor to vote within the 180 days stay
respectively, in order to set forth additional period, or if, after the dismissal of the plan
restrictions for the transfer of equity at the general meeting of creditors. There
interests. are no restrictions for foreign creditors to

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present an alternative plan, but in case of deemed sufficiently secure by the judge;
lack of unencumbered creditor assets in
Bondholder voting. Despite the law
Brazil, a foreign creditor might be requested
not contemplating that a trustee could
to grant collateral for purposes of
split the vote among holders, Brazilian
supporting the alternative plan provisions.
case law largely admits bondholders’
Case law of Brazilian courts is still sparse
‘individualization’ procedures, consisting
in relation to the ability of shareholders of
of ancillary filings for documenting
the company under judicial reorganization
and verifying claims. Without explicit
to vote in the general creditors’ meeting
authorization, trustees have generally been
which deliberates the alternative plan
hesitant to vote on behalf of bondholders;
submitted by creditors, considering the
provision set forth in article 43 of the BBL Setting aside transactions. Under the
that prevents shareholders to vote on the Bankruptcy Law, certain transactions
General Creditors Meeting; carried out before the filing of the
bankruptcy request (or reorganization, if
DIP Lending. By providing Debtor-in-
afterward converted into a bankruptcy)
Possession (DIP) financing to the debtor,
can be declared ineffective, regardless of
creditors usually reach the best recovery
whether the contracting party was aware
rate for their existing distressed debt
of the debtor’s financial situation or the
and have priority in the payment of the
debtor intended to defraud creditors;
financing provided to the debtor, according
to provisions set forth in the BBL; UPI (Unidade Produtiva Isolada). The
Brazilian Portuguese expression for
Consolidation. In the case of substantive
‘Isolated Production Unit’ (UPI) has no
consolidation, there is the immediate
legal definition, and, therefore, there is
extinguishment of personal guarantees
flexibility for the definition of what may be
and intercompany claims (article 69-K of
sold in reorganization proceedings as UPI.
BBL). There is a clear rule providing that
Doctrine and case law then conceptualized
secured guarantees will not be affected
it as assets, tangible, or intangible. The
by substantive consolidation, except with
BBL provides for no succession of all
the approval of the holder (article 69-K of
obligations, including environmental and
BBL). Also, the judge may authorize or not
anti-corruption laws, in the acquisition of
the consolidation of the companies which
a UPI;
filed for judicial or out-of-court whether
the legal requirements are fulfilled and Pledge and fiduciary transfer of assets
according to the proof of the corporate (chattel mortgage). Credits secured by
financial relationship, pursuant to article the fiduciary assignment are not subject to
69-G of BBL; the judicial and out-of-court reorganization
proceedings or liquidation, up to the
Abusive vote. Voting rights are to be
amount of the value of the asset given as
exercised by a creditor in the interest
collateral, and therefore have super-priority
and in accordance with its judgment of
treatment over other credits. If the creditor
advisability. A vote can be declared null and
holds a pledge, it will be considered as a
void when the intention to obtain an illegal
secured creditor in insolvency proceedings
advantage is clear. The voting by creditors
and will not be able to enforce the pledge
can be virtual and may also be replaced,
agreement;
with the same effect, by a term of adhesion
signed by creditors who meet the specific Fiduciary lien (chattel mortgage) of a
approval quorum or other mechanism foreign creditor. Brazilian law forbids any

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contractual provisions authorizing the efficient structure from a tax perspective;

creditor to retain the lien in case of an event (iii) in case of a S.A., there would be no
of default, being all such provisions are corporate acts to be registered with the
deemed null and void (prohibition of pacto board of trade for the transfer; and (iv)
comissório); and it is easier to set forth price adjustment
Advance on Currency Exchange mechanisms.
Contracts (Adiantamento de Contrato It is worth mentioning the following
de Câmbio – ACC). As per the BBL, the disadvantages of a share purchase: (i) in
amount assigned to the debtor in national the event that there is no prior corporate
currency arising from an advance on a reorganization or contractual provisions
currency exchange contract is not subject allocating the liability of the company
to extrajudicial and judicial reorganization
acquired, the acquisition of a company may
proceedings, nor bankruptcy, up to the
result in the assumption of contingencies
amount of the value of the contract, and
regarding the target company’s past
could be the object of a request for a refund
activities; and (ii) the acquisition of shares
in cash if the insolvency of the company
may trigger certain regulatory approvals,
is decreed. Nonetheless, the Brazilian
Superior Court of Justice ruled that the such as the one provided in article 256 of
charges levied on such amount are subject the Brazilian Corporations Law, whereas
to the judicial recovery proceeding. other structures would not trigger such
obligations.
E. Acquisition
14. What are the approvals and
12. Which methods are commonly used consents typically required (e.g.,
to acquire a company, e.g., share corporate, regulatory, sector
transfer, asset transfer, etc.? based and third-party approvals)
To acquire a company, the following for private acquisitions in your
methods are commonly used: (i) acquisition jurisdiction?
of shares; (ii) acquisition of assets; (iii) For private acquisitions, usually, the
subscription of shares/quotas for the following approvals and consents are
acquisition of the company’s control; (iv) required (which may vary according to a
execution of convertible debt instruments specific case): (i) prior approval by CADE,
or other securities convertible into equity; the Brazilian antitrust regulatory agency;
(v) transfer of establishment; and (vi) (ii) prior approval/consent by certain
merger of the target company (or of part of specific governmental authorities that the
its net equity) into another company. target company is subject to in view of its
13. What are the advantages and activities; (iii) prior approval/consent of
disadvantages of a share purchase certain creditors for the change of control
as opposed to other methods? of the target company; and (iv) approval
by the acquiring company’s shareholders/
A share purchase deal has the following
quota holders or board of directors, as
advantages: (i) it is possible to acquire the
applicable.
totality of the capital stock of the target
company and, therefore, no longer have 15. What are the regulatory
any minority quota holders/shareholders; competition law requirements
(ii) in case of a foreign shareholder applicable to private acquisitions in
acquiring the shares, this may be the more your jurisdiction?

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Law No. 12,529/2011 (the “Brazilian thresholds refer to gross revenues or

Antitrust Law”) establishes that are business volume in Brazil of the groups
reportable to CADE the transactions involved in the transaction in the year
by which (i) two or more independent preceding it. It is considered an economic
companies merge; (ii) one or more group, for the purposes of verifying the
companies acquire, directly or indirectly, thresholds indicated above: (i) companies
the control or a portion of another under common control, either internal or
company (through the acquisition/ external; and (ii) companies in which any
exchange of shares, quotas, bonds or of the companies listed in item (i) hold,
securities convertible into shares, or directly or indirectly, at least 20% of the
assets, tangible or intangible); (iii) one total or voting capital.
company merges into another company; Regarding specifically investment funds,
or (iv) two or more companies establish the economic group for calculation of the
a joint venture, a consortium or other gross revenues is defined as, cumulatively:
type of association. Merger filings shall be (i) the economic group of each quota
submitted and approved by CADE prior holder with 50% or more of the quotas
to the consummation of the transaction, of the fund involved in the transaction,
subject to its respective annulment individually or through any kind of quota
and a pecuniary penalty ranging from holder’s agreement; and (ii) companies
BRL60,000.00 to BRL60,000,000.00. Until the controlled by the fund involved in the
antitrust clearance by CADE is not granted, transaction and the companies in which
firms cannot anticipate the effects of the the fund holds 20% or more of the total or
merger or lessen competition between voting capital.
them, subject to the abovementioned
penalties. Transactions involving the acquisition of
shares are subject to CADE’s Resolution
A transaction will be reportable in case No. 33/2022. Such kind of transaction is
it involves one party that meets the only subject to CADE’s review when: (i)
BRL750,000,000.00 threshold and, on they result in the acquisition of control
the other side, another party that meets (which is considered by CADE as being
the BRL75,000,000.00 threshold. Both related to the ability to influence the

Acquisition of direct or
Increases of direct or indirect
Target/Investor indirect shareholding in the
shareholding in the Target
Target
Are not competitors Each further increase of 20%
Mandatory submission when
neither operate in or more of the total or voting
acquiring or reaching 20% of
vertically related capital, acquired from a single
the total or voting capital
markets seller
Are competitors Each increase of 5% or
Mandatory submission when
and/or act in more of the total or voting
acquiring or reaching 5% of the
vertically related capital, through one or more
total or voting capital
markets transactions

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relevant competitive, commercial and Yes, there are specific rules applicable
strategic decisions of the company, for acquisition of the control of public
such as approving investment plans and companies in Brazil and for the acquisition
conducting day-to-day activities, not of the control of a company by a public
related to the mere protection of the company in Brazil. Regarding the first case,
investment), either sole or shared; and (ii) it is worth pointing out that, pursuant to
do not result in the acquisition of control, article 254-A of the Brazilian Corporations
but fulfill the de minimis rules indicated Law (as regulated by CVM Resolution
below: 85/22), the direct or indirect sale of the
control of a publicly-traded company shall
CADE’s Resolution No. 33/2022 also only be completed under the condition
establishes that further acquisitions of (suspensive or resolutive) that the buyer
shares made by sole controllers are not calls out a tender offer (a unilateral
notifiable. manifestation of will by the offeror that
proposes, through public means of
The initial analysis of any merger
communication and for a determined
filing is conducted by CADE’s General-
period of time, to acquire part or all of
Superintendence (“GS”), which may
the shares issued by a certain publicly-
approve the transaction without
held corporation, in view of previously
restrictions (which is the case in the vast
established terms) for the acquisition of the
majority of transactions) or forward the
shares owned by minority shareholders,
case to CADE’s Tribunal if it considers that in order to ensure them a minimum price
the transaction needs antitrust remedies or equivalent to 80% of the price paid per
must be blocked. GS’s decisions may also: voting share of the controlling shareholder.
(i) be challenged by third parties which The rules of certain listing segments of
are formally admitted in the process in B3 provide additional payment terms and
due time; or (ii) requested for review by a conditions (including the purchase price
member of CADE’s Tribunal. There are two per share) attributed to the shares held by
(2) types of review proceedings under the minority shareholders.
Brazil’s Competition Law: the fast-track
proceeding and the non-fast-track. Additionally, pursuant to article 256 of the
Brazilian Corporations Law, the acquisition
CADE’s total review period under the fast- of the control of companies by a publicly-
track proceeding is thirty (30) days, being held Sociedade Anônima may be subject
provided that such type of proceeding is to the approval of its shareholders in the
available to non-complex cases. CADE’s event that the purchase price being paid
total review period under the non-fast- within the scope of the transaction exceeds
track proceedings, which is the proceeding certain thresholds.
applicable to mergers that entail high
concentration or that raise competition 17. Is there a requirement to disclose
concerns, is two-hundred and forty (240) a deal, for instance to regulatory
calendar days. authorities? Is it possible to keep a
deal confidential?
Both structural and behavioral remedies are
There may be a requirement to disclose
generally accepted by CADE, although the
certain aspects of the deal to CADE if the
latter is less common.
transaction is subject to its approval, or
16. Are there any specific rules to other governmental authorities and
applicable for acquisition of public agencies that may oversight the target
companies in your jurisdiction? company’s activities. Nonetheless, it is

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worth mentioning that, if the corporate act would be considered as a material adverse
that implements the transaction needs to change.
be registered with the board of trade, such
corporate act shall become public. Also, 20. What are the typical warranties
publicly-traded companies are subject to and limitations in acquisition
additional disclosure requirements. documents? Is it common to obtain
warranty insurance?
18. Can sellers be restricted from
shopping around during a The most typical warranties in the
negotiation process? Is it possible acquisition of documents are (i) holdback;
to include break fee or other (ii) corporate guarantee; (iii) bank
penalty clauses in acquisition guarantee; (iv) escrow account; (v) fiduciary
documents to procure deal lien over certain assets or credit rights; and
exclusivity? (vi) pledge over certain assets.
Yes, sellers can be restricted from shopping The most typical limitations for the
around during a negotiation process upon acquisition of documents are (i) cap
the execution of an instrument establishing provisions; (ii) de minimis provisions
an exclusivity for the potential buyer or (with or without a deductible); (iii) basket
seller. It is possible to include penalties in provisions; and (iv) survival provisions,
view of the non-compliance with exclusivity to determine a time limitation for the
provisions. It is common to include break indemnity obligation.
fees in the definitive documents, but such
inclusion sets forth a price for not closing It is not very common to obtain warranty
the deal. insurance in Brazil, although some
insurance companies offer this product.
19. What are the conditions precedent
in a typical acquisition document? 21. Is there a requirement to set a
Is it common to have conditions to minimum pricing for shares of a
closing such as no material adverse target company in an acquisition?
change?
In general, there is no obligation to set
Typical conditions precedent are a minimum price for the acquisition of
(i) obtaining clearance with certain the target company’s shares, however,
governmental authorities, especially CADE, transactions with related parties should,
(ii) obtaining waiver/prior consent from in principle, be made at market value,
creditors; (iii) implementation of corporate being fairly accepted to adopt the net
reorganizations that may be required; worth value as basis for closed entities
(iv) bring-down of representations and which shares have no other more reliable
warranties; (v) inexistence of law or order parameter. Please note, however, that edits
that prevents of prohibits the transaction; to Provisional Measure 1,152 have made
(vi) absence of a material adverse change; relevant changes to Brazilian Transfer
(vii) renewal of certain material agreements; Pricing rules, reason why intragroup
and (viii) certain aspects regarding the transaction with foreign parties will need
company’s conduct of its business. It is (assuming the conversion of the provisional
common to have conditions to closing such measure into law) to be subject to attend its
as no material adverse change; however,
dispositions regarding price determination.
the inclusion of such condition precedent
is usually preceded by an extensive Notwithstanding the foregoing, it is
discussion on the definition of what important to point out some relevant

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tax effects that arise from the acquisition (i) built-in gains or built-in losses: the
of a relevant stake. In this sense, when surviving entity allocates the built-in
a Brazilian company acquires an equity gain or built-in losses to the related
interest in another Brazilian company, assets and liabilities, which becomes
two methods may be used to register the part of its cost of acquisition, causing
acquired investment which are: (i) the cost tax effects as the assets and liabilities
of acquisition method; and (ii) the pick-up are realized (amortization, depreciation,
method. The cost of acquisition method liquidation, sale, etc.); and
is based on historical cost and is generally
(ii) goodwill: deductible from corporate
applied for temporary investments.
income tax basis in a 60-month straight
The pick-up method is mandatory for
line period.
permanent investments and is determined
based on the company’s net worth. (iii) bargain gain: subject to taxation in a
60-month straight line period.
Under the pick-up method, at the time of
the investment’s acquisition, the acquirer It is important to mention that the tax
shall segregate the acquisition cost in the amortization of the Premium is object
following allotments: (i) net equity value of of several disputes, reason why it is
the acquired interest (proportional to the recommendable to have a deep analysis of
share of the capital acquired); (ii) built-in the matter before any acquisition. It is also
gains or built-in losses, equivalent to the the case to mention that, in order to attend
difference between the fair market value the merger requirement, foreign investors
or “FMV” (usually, the value attributed in usually acquire Brazilian target entities
an open market transaction in general through Brazilian vehicles entities, which is
market conditions) of the target’s net assets one of the reasons tax authorities challenge
and their book value (proportional to the the further premium tax amortization (tax
interest acquired); and (iii) goodwill or authorities do not recognize the vehicle
bargain gain, equivalent to the difference entity for tax purposes).
between the investment’s acquisition cost
22. What types of acquisition financing
and the sum of the amounts described in
are available for potential buyers in
items (i) and (ii).
your jurisdiction? Can a company
As a rule, the amortization of built-in gains provide financial assistance to a
and goodwill (referred to as “Premium”) potential buyer of shares in the
paid by the acquirer on the acquisition target company?
of an interest in another entity is a non-
Companies may obtain acquisition
deductible expense for income tax
financing by: (i) entering into financing
purposes, being added back to taxable
agreements with financial institutions; (ii) in
income and registered as a deferred
case of a S.A., proceeding with the public
tax asset until the sale or liquidation of
or private issuance of either debt or equity
the investment. Nonetheless, tax law
securities (in case of a Ltda., the company
established the possibility of the Premium
may only issue certain specific debt
amortization for tax purposes before those
securities or securities that are not specific
events, in case acquirer and target combine
to Sociedades Anônimas); (iii) obtaining
their net worth through a merger.
financing with companies of the same
In this case, the tax amortization of economic group; and (iv) entering a joint
Premium happens as follows: venture agreement with strategic investors.

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Yes, a company can provide financial subject to withholding tax (“WHT”) (if the
assistance to a potential buyer of shares in seller is located in a tax haven jurisdiction
the target company. the WHT would be applicable at a 15%
rate). Capital gain derived on similar
23. What are the formalities and
transaction by Brazilian individuals are
procedures for share transfers and
subject to a 15% income tax, whilst capital
how is a share transfer perfected?
gains derived by Brazilian legal entities are
For Sociedades Anônimas, share transfers subject to a combined 34% incomes taxes
usually do not required any formalities rates (and, depending on the case, revenue
or prior procedures, except in the event taxes, usually at a 4.65% combined rate)
of prior restrictions being set forth to the Foreign investors may also benefit from
transfer of shares, as mentioned above. tax exemption on capital gain derived over
The transfer of shares is perfected upon sales of closed corporation shares if they
the execution of the relevant transfer term acquire such shares through a Brazilian
drawn in the Shares Transfer Book and the Private Investment Fund (“FIP”).
relevant update of the Registered Shares
Register Book. Tax law regarding the matter has recently
changed through Provisional Measure
Regarding Sociedades Empresárias 1,137 (“PM 1,137”). PM 1,137 is effective
Limitadas, the transfer of quotas since January 1st, but to remain effective
requires the inexistence of opposition until the Congress must ratify it within a
by quotaholders representing one certain period (in this case, up to March
fourth of the company’s capital stock 1st).
or the compliance with the provisions
regarding the transfer of quotas provided As per PM 1,137, to benefit from the tax
in the articles of association, as well as the exemption, the foreign investors shall not
additional compliance with quotaholders’ be domiciled in tax haven jurisdiction nor
agreements that may have been executed. be subject to a privileged tax regime as well
The transfer of quotas is perfected upon as invest in Brazil according to the rules of
the registration of the amendment to the Bacen Resolution 4,373. In addition, the FIP
articles of association or the document portfolio should comply with the Brazilian
providing for the transfer of the quotas with Securities Commission’s requirements.
the relevant board of trade. Please note that the tax exemption will
24. Are there any incentives (such apply regardless of the sale comprising the
as tax exemptions) available for target entity owned by the FIP or the FIP
acquisitions in your jurisdiction? quotas.

Brazilian tax legislation does not provide a If by any chance PM 1,137 is not converted
range of tax incentives applicable to share into law, then the following requirements
would need to be met: (i) the foreign
acquisitions, except for foreign investors
investor should not hold more than 40% of
that comply with certain conditions.
the FIP quotas nor be entitled to more than
With regard to sales carried out at a 40% of the income to be paid by the FIP
Brazilian stock exchange by foreign either individually or together with related
investors which invest in Brazil according parties; (ii) the investor should not be
to the rules of Bacen Resolution 4,373 and domiciled in a tax have jurisdiction; (iii) the
are not located in tax haven jurisdictions, fund’s portfolio should not comprise debt
the corresponding capital gain will not be securities in an aggregate amount greater

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than 5% of the fund’s net worth, with No, there are no specific formalities for
the exception of convertible debentures, the execution of acquisition documents,
subscription bonuses, and public debt even though it is common and advisable
securities; and (iv) the FIP portfolio should to include initials in acquisition documents
be in compliance with CVM’s and the (especially those that shall be submitted
Brazilian Federal Revenue’s dispositions for registration with the board of trade).
(which are more restrictive than CVM’s It is possible to remotely/digitally sign
dispositions). documents.
Please also note that the requirements G. Trends and Projections
set forth in items (i) and (ii) above should
29. What are the main current trends in
be carefully analyzed, as there are a lot
M&A in your jurisdiction?
of doubts regarding its application and
its interpretation has already led to some The main current trends in M&A in our
challenges by tax authorities. jurisdiction are (i) investments in or
acquisitions of football clubs, as a new
F. Enforceability corporate type specific for football clubs
25. Can acquisition documents be has been recently approved; (ii) investment
executed in a foreign language? in or acquisition of startups, especially
those for financial services; and (iii)
Yes, acquisition documents can be
distressed M&As.
executed in a foreign language.
30. Are any significant development
26. Can acquisition documents be
or change expected in the near
governed by a foreign law?
future in relation to M&A in your
Yes, acquisition documents can be jurisdiction?
governed by a foreign law.
No, nothing is expected in the near future.
27. Are arbitration clauses legally
permissible or generally included in
acquisition documents?
Yes, arbitration clauses are both legally
permissible and generally included in
acquisition documents.
28. Are there any specific formalities
for the execution of acquisition
documents? Is it possible to
remotely/digitally sign documents?

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BULGARIA
KAMBOUROV & PARTNERS

A. General
1. What is the main legal framework • how different types of companies are to
applicable to companies in your be managed and administrated;
jurisdiction? • the dissolution and liquidation
The primary legal framework which governs requirements;
companies in Bulgaria is the Commercial • merger and acquisition prerequisites
Act, promulgated in the Bulgarian State and procedure;
Gazette Issue No 48/1991 (the “Commercial
Act”), as amended and supplemented. It • insolvency procedures.
regulates the majority of aspects relating to The Commercial Act does not cover any
companies, including, but not limited to: regulatory requirements for specific sectors,
• the types of companies/legal licensing regimes, taxation, and labour
entities which can be established rules.
for commercial purposes under
2. What are the most common types
Bulgarian law, such as limited liability
of corporate entities (e.g., joint
company (“OOD”), joint stock company
stock companies, limited liability
(“AD”), sole proprietorship, general
companies, etc.) used in your
partnership, limited partnership, and
jurisdiction? What are the main
as recently introduced, variable capital
differences between them (including
company;
but not limited to with regard to the
• registration requirements; shareholders’ liability)?

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The most common types of corporate the Bulgarian Commercial Register and
entities are joint stock companies and cannot be transferred to third persons
limited liability companies (AD and OOD, (non-shareholders) without the approval
respectively). of the general meeting of shareholders,
whereas the shares in an AD, as a general
One of the distinctive differences between
rule, are freely transferrable. The AD may
them is the amount of registered capital
issue materialized shares (in paper form)
required for their establishment. The OOD
and non-materialized [book-entry form,
requires a minimum registered capital of
registered at the Central Depository
BGN 2 (approx. EUR 1) and is therefore most
AD (“CDAD”)]. The shares issued by the
commonly chosen. As a general rule the
AD may only be registered, as well as
minimum amount of the registered capital
ordinary and privileged shares. Normally
of an AD is in turn BGN 50,000 (approx. EUR
privileged shares are issued with no voting
25,565). The minimum capital requirements
rights but with a right of guaranteed
for AD may vary in accordance with the
dividend attached to them. Materialized
requirements applicable to particular
ordinary registered shares are transferred
activities, where minimum capital
through endorsement, which is subject
requirements are regulated at higher
to registration in the shareholders book
thresholds.
of the relevant company. The interim
Another notable difference between the share certificates issued by a joint-stock
2 (two) types of companies is in how their company evidencing that the relevant
management is regulated. An OOD is shareholders have subscribed for a certain
managed by the registered manager(s) and number of shares in the capital of the
the general meeting of shareholders, and company and have the right to obtain
under Bulgarian law is thus theoretically them when issued, are transferred through
considered to be a hybrid between an the same instrument as the materialized
unlimited and limited liability form of ordinary shares, i.e., through their
corporation. Contrastingly, the Commercial endorsement which is to be recorded in
Act envisages that ADs may have either the shareholders’ book. Non-materialized
a one-tier or two-tier management shares are transferred through investment
system. Under the one-tier system, the intermediary to whom the buyer addresses
AD is governed by a board of directors a buy order, the seller addresses a sell
which is elected by the general meeting order, and the transaction is closed as at
of shareholders. The board of directors in the moment when the share transfer is
turn elects the executive member(s), who registered at CDAD.
have representative authority before third
persons and who effectively manage the
B. Foreign Investment
company. Under the two-tier system, the 3. Are there any restrictions on foreign
AD’s general meeting of shareholders elects investors incorporating or acquiring
the members of the supervisory board, and the shares of a company in your
the supervisory Board in turn elects the jurisdiction?
members of the management board.
There are no general restrictions on foreign
The third main difference between the investors for incorporating or acquiring the
2 (two) structures is the nature of the shares of a company within the Bulgarian
shares and how they are transferred. jurisdiction, with certain notable deviations
The share quotas in an OOD appear on that general principle regarding
only in the company’s registration with prohibitions concerning:

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• Foreign companies registered in new investments or such not exceeding

jurisdictions with preferential tax EUR 2,000,000 or their equivalent in
regime; BGN.
• Acquisition above certain percentages • The scope of the screening proceeding
in regulated sectors, for example energy includes all foreign investments
and television; and (including in activities not falling
in the scope of Art. 4, para. 1 of the
• Acquisition of shares in a company
Regulation) with a foreign investor from
which has owned agricultural land for
Russia or the Republic of Belarus, as well
less than 5 (five) years.
as investments made in establishments
All foreign direct investment, however, is engaged in petroleum activities.
subject to screening. In accordance with
• Any foreign investment if considered
recent amendments to the Bulgarian
as affecting the security and public
Investment Promotion Act, Bulgaria has the
order – upon a reasoned request of the
implemented the regime introduced with
State Intelligence Agency (SIA) or State
Regulation (EU) 2019/452 of the European
Agency for National Security (SANS).
Parliament and of the Council of 19 March
2019 establishing a framework for the • Foreign investments regardless of
screening of foreign direct investments into their amount should a non-EU country
the Union. The regime includes a National has a direct or indirect participation
Screening Mechanism for Foreign Direct in the capital of the investor, state
Investment related to security and public body financing inclusive (If the foreign
order. investor is a company and its shares
are traded on a regulated market - its
Foreign direct investment subject to
participation should exceed 5%).
screening in accordance with the newly
implemented regime include the following: The Bulgarian Parliament shall be adopting
a list of low-risk non-EU countries to which
• Investments resulting in the acquisition
the screening rules for EU Member States
of more than 10% of the capital of an
shall be applied. These screening rules also
enterprise operating in the territory
apply to the United States of America, the
of the country or investments whose
United Kingdom, Canada, Australia, New
value exceeds EUR 2,000,000 or their
Zealand, Japan, the Republic of Korea, the
equivalent in BGN.
United Arab Emirates and the Kingdom of
• Investments resulting in the acquisition Saudi Arabia.
of more than 10% of the capital of an
4. Are there any foreign exchange
enterprise operating in the territory of
restrictions or conditions applicable
the country which carries out high-tech
to companies such as restrictions to
activities.
foreign currency shareholder loans?
• New investments whose value exceeds
There are typically no specific foreign
EUR 2,000,000 or their equivalent in
exchange restrictions for companies
BGN.
regarding foreign currency shareholder
• Exceptionally, if proposed by a Council loans. Bulgaria, as part of the European
member and in coordination with the Union (“EU”), adheres to the principles
State Intelligence Agency (SIA) or State applicable under EU law. It must thus
Agency for National Security (SANS), be noted that all transactions with the

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National Central Bank of Russia related to meeting of shareholders and the elected
the management of the Russian Central manager(s). The liability of shareholders
Bank’s reserves and assets are prohibited. is limited to their capital contributions.
As opposed to the AD, the shareholders
Further, all foreign currency loans must be
of an OOD have duties to support their
reported to the Bulgarian National Bank for
company’s business activities. The
statistical purposes, regardless of whether
manager(s) of an OOD, have significant
the loan was granted by a non-resident.
responsibilities and thus liabilities. Those
5. Are there any specific considerations include:
for employment of foreign
• Liability to the company for damages
employees in companies
caused as a result of violating their
incorporated in your jurisdiction?
duties;
EU and European Economic Area (“EEA”)
• Liability in the event of non-compliance
citizens have the freedom to enter,
with insolvency requirements;
reside, and work in Bulgaria without
any restrictions, as long as they do not • Liability for engaging in competitive
hold positions that necessitate Bulgarian activities without obtaining consent;
citizenship and are not engaged in
• Liability for non-compliance with tax
professions listed as regulated. They can
law.
enter into employment agreements with
Bulgarian employers without the need for The AD’s structure depends on whether
a permit from the Bulgarian Employment it has been established as a one-tier
Agency. management system or two-tier. The
structure thus includes either the general
Foreign employees who are not citizens of
meeting of shareholders alongside a board
an EU/EEA country or Switzerland generally
of directors or alongside a supervisory
need both work and residence permits to
and management board. The liability of
legally work in Bulgaria. The specific type of
shareholders is limited to the amount
permit required depends on the individual
of shares they hold in the AD. Directors,
circumstances and the duration of their
similarly to managers, are held to a higher
employment.
standard, and the associated liabilities are
C. Corporate Governance largely similar to those of managers in the
OOD.
6. What are the standard management
structures (e.g., general assembly, 7. What are the audit requirements in
board of directors, etc.) in a corporate corporate entities?
entity governed in your jurisdiction
The Bulgarian Accountancy Act regulates
and the key liability issues relating
the audit thresholds in respect of corporate
to these (e.g., liability of the board
entities. All entities exceeding the following
members and managers)?
requirements are subject to a mandatory
As detailed under question 2, the standard annual audit:
management structures differ within the
• Balance sheet assets of BGN 2,000,000;
Bulgarian OOD [similar to the limited
liability company (“LLC”)] and the AD • Net sales revenue of BGN 4,000,000.
[similar to the joint stock company (“JSC”)].
• Average number of employees for the
The OOD is governed by the general reporting period – 50.

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All medium-sized and large entities are the protections and privileges that all
subject to mandatory audit. shareholders in a company have, including
voting rights, rights to dividends, etc.
Regardless of the requirements listed
above, all ADs and partnerships limited by Minority shareholders can request the
shares (“KDA”) are subject to mandatory convening of a general meeting of
audit, unless they are considered shareholders:
microenterprises within the meaning of the
• In the OOD, if shareholders holding 10%
law. All public companies are also subject to
of the capital in the company request
mandatory audit.
it; and
D. Shareholder Rights • In the AD, if shareholders holding at
8. What are the privileges that can least 5% of the capital of the company
be granted to shareholders? In for the last 3 (three) months request it.
particular, is it possible to grant Shareholders in the company also have the
voting privileges to shareholders for right to challenge decisions of the general
appointment of board members? meeting of shareholders in court, as well as
Generally, the law provides that 1 (one) challenge registrations in the Commercial
share equals to 1 (one) vote in the General Register, regardless of the percentage of
meeting of shareholders. Joint stock shares they hold.
companies have the option to issue 10. Is it possible to impose restrictions
privileged shares which may or may not on share transfers under the
have voting rights, may have rights to corporate documents (e.g., articles
extra dividends, etc., depending on their of association or its equivalent in
regulation in the Articles of Association your jurisdiction) of a company
(“AOA”). incorporated in your jurisdiction?
The AOA may also envisage different kinds It is possible and relatively common in
of rights for shareholders contingent upon Bulgaria to impose restrictions on share
the shareholders agreements and being transfers under the corporate documents,
based on the percentage of equity the such as pre-emption rights, lock-up
respective shareholders hold. periods, tag-along and drag-along right,
The newly adopted provisions regulating restrictions on transfer to specific parties,
the variable capital company have etc. The specific provisions governing share
transfers and restrictions would typically be
introduced to the Commercial Act the
included in the company’s AOA.
concepts of rights of first refusal, pre-
emptive rights, tag-along and drag-along 11. Are there any specific concerns or
clauses, which is the first time those have other considerations regarding the
been regulated directly in a normative composition, technical bankruptcy
act under Bulgarian law rather than and other insolvency cases in your
contractually in the AOAA. jurisdiction?
9. Are there any specific statutory rights Bankruptcy and insolvency are regulated
available to minority shareholders under the Commercial Act in Bulgaria, and
available in your jurisdiction? there are no specific concerns regarding
shareholder’s rights in that regard.
Minority shareholders do not have
explicitly mandated rights. They enjoy

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E. Acquisition Private acquisitions are generally not

regulated unless they explicitly fall
12. Which methods are commonly used within the scope of merger control or
to acquire a company, e.g., share sector specific regulatory provisions.
transfer, asset transfer, etc.?
Corporate approvals depend on the
The most common way to acquire a corporate governance requirements of the
company in Bulgaria is through a share shareholders selling/acquiring the relevant
purchase. company.
Another commonly used way to acquire The merger control procedure is regulated
a business is through the purchase of the by the Protection of Competition Act
business enterprise of the company as a (“PCA”). A transaction that results in
going concern. a lasting change of control over an
Asset purchase transactions are less undertaking or part of it must be notified
common due to respective tax burdens but to the Commission for Protection of
are permitted and occur in our jurisdiction. Competition (“CPC”) if the statutory
thresholds are met, that is, if the sum of
13. What are the advantages and the total turnovers of all undertakings
disadvantages of a share purchase
participating in the concentration on the
as opposed to other methods?
territory of the Republic of Bulgaria for
The advantages of a share purchase include the previous financial year exceeds BGN
clearer transfer of title as a result of the 25,000,000 and either the total turnover
whole company transfer being registered in of at least 2 (two) of the undertakings
the commercial register as opposed to an participating in the participating in the
asset transfer. This extends to simplification concentration on the territory of the
of continuing relationships with business Republic of Bulgaria for the previous
partners, employees, customers. Another financial year exceeds BGN 3,000,000, or the
significant benefit of a share acquisition total turnover of the undertaking, which is
is its exemption from Value Added Tax the object of acquisition on the territory of
(“VAT”). Likewise, when purchasing a going the Republic of Bulgaria for the previous
concern, VAT is not applicable. In contrast, financial year exceeds BGN 3,000,000.
the acquisition of assets typically incurs VAT,
with specific assets being exceptions. Third-party approvals usually derive from
contractual change of control provisions.
Conversely, a disadvantage of a share
purchase is the potential for the buyer to 15. What are the regulatory
assume all the target company’s liabilities. competition law requirements
Determining the extent of this liability applicable to private acquisitions in
should be carried out through thorough your jurisdiction?
legal and financial due diligence and
subsequently addressed in the transaction Depending on the size and impact of the
agreements. acquisition, it may be necessary to notify
the CPC of the proposed transaction. The
14. What are the approvals and PCA establishes thresholds for merger
consents typically required (e.g., control, as detailed under question 14, and
corporate, regulatory, sector transactions that exceed these thresholds
based and third-party approvals)
must be notified to the CPC for approval.
for private acquisitions in your
jurisdiction?

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16. Are there any specific rules ownership must nevertheless be disclosed
applicable for acquisition of public if it has occurred.
companies in your jurisdiction?
18. Can sellers be restricted from
Acquisition of shares in public companies shopping around during a
is subject to a specific regime regulated negotiation process? Is it possible
by the Public Offering of Securities Act. to include break fee or other
The specific requirements depend on penalty clauses in acquisition
the amount of shares the buyer wishes documents to procure deal
to acquire and may include a mandatory exclusivity?
public offering for purchasing shares,
Contractually, sellers can be restricted from
pricing and notification requirements.
trying to sell to other parties during the
17. Is there a requirement to disclose negotiation process. This is commonly done
a deal, for instance to regulatory through signing a term sheet or preliminary
authorities? Is it possible to keep a share-purchase Agreements which include
deal confidential? clauses prohibiting such behaviour for a
limited period. The transaction documents,
Disclosure requirements vary depending on
in turn, may include break fee provisions
whether the respective sector of the target
and other penalty clauses ensuring deal
is subject to regulation and, respectively,
exclusivity.
requires disclosure on transactions, and
whether the size of the transaction meets 19. What are the conditions precedent
the specific thresholds under competition in a typical acquisition document?
law, with deals requiring regulatory Is it common to have conditions to
approval from the CPC due to competition closing such as no material adverse
law considerations having mandatory change?
disclosures.
The conditions precedent usually reflects
For acquisition deals which are not subject the risks/liabilities identified during the
to any disclosures and approvals, a large due diligence process. It usually includes
portion of the documents concerning clauses either requiring positive action from
the deal may be kept confidential. The the seller to address identified liabilities, or
disclosure of the acquisition is then largely for the seller to refrain from undertaking
dependent on the structure of the target certain activities. Common condition
company itself. precedent clauses also include meeting
mandatory legal requirements in Bulgaria,
All share transfer agreements in an OOD
like securing corporate approvals, merger
need to be registered in the commercial
clearance, and other regulatory consents,
register, and the beneficial owners of the
as well as obtaining necessary contractual
company must also be disclosed. Therefore,
approvals.
ownership of an OOD cannot remain
confidential. The regime for commercial Material Adverse Change (“MAC”) clauses
enterprise acquisitions is also subject are specifically common when the
to registration in the public commercial transaction documents are not governed
register. by the Bulgarian law.
The transfer of shares in a joint-stock 20. What are the typical warranties
company need not be registered in the and limitations in acquisition
commercial register unless all of the documents? Is it common to obtain
shares are acquired. Change in beneficial warranty insurance?

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Title, lack of encumbrances (third-party share itself. In order for the transfer to
rights inclusive), good standing (lack be perfected, it needs to be registered in
of insolvency inclusive) and no-hidden company’s book of shareholders, and if all
liabilities (tax inclusive) are the most typical of the shares of the company have been
warranties in the acquisition documents. acquired, it needs to be registered in the
Statutory prescribed liability time limits are Commercial Register.
commonly applied.
24. Are there any incentives (such
Usually, warranty insurance is involved as tax exemptions) available for
when the Bulgarian company is part of a acquisitions in your jurisdiction?
larger target group.
There are no specific tax reliefs relating to
21. Is there a requirement to set a acquisitions in Bulgaria.
minimum pricing for shares of a
target company in an acquisition? F. Enforceability
Тhere is no specific requirement under 25. Can acquisition documents be
Bulgarian law that mandates setting a executed in a foreign language?
minimum pricing for shares of a target Generally, all documents which are to
company in an acquisition, unless the be submitted with an official Bulgarian
target is a publicly listed company. It is authority must be either in Bulgarian or
uncommon to acquire shares for less than officially translated in Bulgarian. Therefore,
their nominal value. it is possible for the acquisition documents
22. What types of acquisition financing to be drafted in a foreign language, but
are available for potential buyers in a translation complying with the legal
your jurisdiction? Can a company requirements might still be needed.
provide financial assistance to a Furthermore, certain acquisition
potential buyer of shares in the documents such as share-transfer
target company? agreements require notarization. In such
The most common type of acquisition cases, both the original foreign language
financing is third-party financing, usually document, its notary certification (if done
obtained from banks. Financial assistance is by a foreign notary) and its translation into
prohibited from being granted by AD. Bulgarian must be notarized.

23. What are the formalities and 26. Can acquisition documents be
procedures for share transfers and governed by a foreign law?
how is a share transfer perfected?
Acquisition documents may be governed
Share-transfer agreements in respect of by a foreign law, but it’s essential to ensure
OOD must be executed in front of a notary enforceability, and in the event of share
public, with signatures of the signatories acquisition, that all prerequisites under
and content of the agreement being Bulgarian law are met in order for the share
certified. The transfer is fully perfected after transfer to be registered. Bulgarian courts
it has been registered with the Commercial generally recognize and enforce foreign law
Register. provisions in contracts, but there may be
exceptions and limitations which can vary
Transfer of shares in a JSC is relieved of
on a case-by-case basis.
the notarization requirement and is done
through endorsement executed on the

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27. Are arbitration clauses legally G. Trends and Projections

permissible or generally included in
acquisition documents? 29. What are the main current trends in
M&A in your jurisdiction?
Arbitration clauses are both permissible
and often included in acquisition In contrast with the trends in Western
documents. Europe, Bulgaria saw increased M&A
activity across sectors in 2023. This includes
28. Are there any specific formalities several significant transactions for the
for the execution of acquisition region, an example of which is Tawal’s
documents? Is it possible to acquisition of United Group’s towers.
remotely/digitally sign documents?
For 2024, there have not yet been signs that
Acquisition documents which require the M&A activity will slow down.
simple written form may be signed
remotely and/or with qualified electronic 30. Are any significant development
signature. Under Bulgarian law, only the or change expected in the near
qualified electronic signature as defined future in relation to M&A in your
under the Electronic Document and jurisdiction?
Electronic Certification Services Act and No significant developments are expected
is considered as equal to the handwritten in the near future.
signature, unless the parties agree that for
the purposes of their relationship a simpler
electronic signature will suffice as well.
Certain documents require notarization,
specifically share-transfer agreements,
agreements for the sale-purchase of
the going concern and all real estate
transactions. The documents requiring
notarization cannot be digitally signed,
and if they are signed before a notary
which is not on the territory of the Republic
of Bulgaria, the document is subject to
legalization requirements.

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COSTA RICA
AGUILAR CASTILLO LOVE

John Aguilar Quesada Marco Solano Gómez Jimena Aguilar Lizano

Partner Partner Associate
jaq@ msg@ jal@
aguilarcastillolove.com aguilarcastillolove.com aguilarcastillolove.com

A. General 2. What are the most common types

of corporate entities (e.g., joint
1. What is the main legal framework
stock companies, limited liability
applicable to companies in your
companies, etc.) used in your
jurisdiction?
jurisdiction? What are the main
The main framework applicable to differences between them (including
companies in Costa Rica is the Commercial but not limited to with regard to the
Code, which contains the most important shareholders’ liability)?
norms regarding company structures,
obligations, and M&A. The most common types of corporate
entities which are used in Costa Rica are
Companies participating in specific Sociedad de Responsabilidad Limitada
industries (e.g., financial entities, (Limited Liability Partnership); and Sociedad
telecommunications, energy,) are also Anónima (“Corporation”)
subject to specific regulations and
supervision by regulatory government Both types of corporate entities provide
agencies. Regulations may contain specific limited liability to shareholders, where the
provisions relevant for M&A analysis. main differences are the following:

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Corporation Limited Liability Company

Capital Stock Shares Quotas or participations
Currency of the capital stock Colones or foreign currency Colones of Foreign Currency
Approvals No need of approval by The quota holders must
shareholders, unless indicated unanimously approve with
otherwise on the Articles of
Incorporation. express consent the transfer
of the quotas to third parties,
unless in the Articles of
Incorporation it is indicated
that the transfer can be done
with the approval of ¾ of the
quota holders.

Transfer of Ownership -Assignment of the share Requires transferee acceptance

certificate
-Registration in the
Shareholders’ Registry Book
Administration Board of directors, with a Managers
minimum of 3 (three) members
-President
-Secretary
- Treasurer
Reserve Fund 20% of the capital stock 10% of the capital stock

B. Foreign Investment 4. Are there any foreign exchange

restrictions or conditions applicable
3. Are there any restrictions on foreign to companies such as restrictions to
investors incorporating or acquiring foreign currency shareholder loans?
the shares of a company in your
jurisdiction? No, there are no restrictions for companies
regarding foreign exchange.
There is a constitutional limitation
regarding private ownership (foreign or 5. Are there any specific considerations
national) in Costa Rica’s natural resources, for employment of foreign
particularly energy, and hydrocarbons, as a employees in companies
result of which foreign entities must enter incorporated in your jurisdiction?
into limited time agreements with state-
Currently there is no limitation in the
owned companies to participate in these
number of foreign employees in Costa
industries.
Rican companies, nonetheless foreigners
Additionally, national railways, ports, and must obtain a specific purpose visa to work
airports, while they are in service, may not in the country.
be transferred, leased pledge, directly or
indirectly, nor leave the domain and control
of the Costa Rican government.

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C. Corporate Governance b) Joint Liability: In certain circumstances,

board members may be jointly liable
6. What are the standard management for company obligations, especially if
structures (e.g., general assembly, legal regulations and company statutes
board of directors, etc.) in a corporate aren’t followed.
entity governed in your jurisdiction
and the key liability issues relating c) The concept criminal liability for legal
to these (e.g., liability of the board entities is recognize in Costa Rica,
especially in cases of money laundering,
members and managers)?
bribery, or environmental offenses.
The standard management structures are Corporations must ensure robust
the following: internal controls to avoid punitive
measures.
The foundation of corporate governance
lies in the dualistic system of the General 7. What are the audit requirements in
Assembly and the Board of Directors (for corporate entities?
Corporations) and Managers (for LLC): No requirement exists except for publicly
a) Shareholders’ meeting: This is the traded companies, which must file their
supreme authority in corporate entities, financial statements annually. Some
responsible for major decisions like companies subjected to specific industry
amending bylaws, approving financial regulations (e.g., financial services) must
statements, or changing the capital go through external audits every year to
structure. They also elect board ensure transparency.
members and legal representatives D. Shareholder Rights
depending on the bylaws) and oversee
their actions. 8. What are the privileges that can
be granted to shareholders? In
b) Board of directors and managers in case particular, is it possible to grant
of an LLC: They supervise and manage voting privileges to shareholders for
the company’s affairs, implements the appointment of board members?
shareholders’ resolutions, and oversees
Besides specific statutory rights,
the executive management. The board
shareholders may contractually agree
of directors must have three members
to specific privileges (such as the right
(president, secretary and treasurer), of first refusal before transferring shares
additional members and roles can be to third parties). It is important to note
dictated by the company bylaws. that, as a standard practice, the Costa
Key Liability Issues: Rican Commercial Code indicates that
each shareholder should be considered
a) Directors’ and Managers’ Liability: when voting in proportion to the number
Both board members and managers of shares or participations they hold,
can be held liable for acts of fraud, depending on the type of company.
abuse of authority, negligence, and
violation of the law or company bylaws. 9. Are there any specific statutory rights
available to minority shareholders
If they act within the confines of their
available in your jurisdiction?
authority and in the best interests of
the company, they usually benefit from For protection of the minority shareholders,
a shield against personal liability. the Commercial Code requires the approval

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of the board of directors or equivalent COPROCOM (if thresholds for competition

body, as a prerequisite for the execution review are met); and publication of an
of those transactions that involve the extract of the merger approval in writing or
acquisition, sale, mortgage or pledge in a deed in the official newspaper.
of assets of the issuing company that The merger will be effective a month after
represent a percentage equal to or greater its publication and registration if no third
than 10% of its total assets. party opposes it. In principle, recordable
10. Is it possible to impose restrictions assets will be transferred to the resulting or
on share transfers under the surviving entity.
corporate documents (e.g., articles 13. What are the advantages and
of association or its equivalent in disadvantages of a share purchase
your jurisdiction) of a company as opposed to other methods?
incorporated in your jurisdiction?
Asset purchase deals provide the possibility
Yes, the articles of incorporation of a of ‘cherry picking’ (which requires adequate
corporation may impose a previous identification of the productive assets that
authorization from the shareholders or the are of interest) but may take more time
board of directors to transfer the shares to than a share purchase and may involve a
third parties. In the case of LLC there is a tax impact on the value of the assets being
statutory obligation to provide a right of acquired.
first refusal to shareholders.
On the other hand, share purchases are
11. Are there any specific concerns or faster. In the case of corporations, share
other considerations regarding the purchases do not require the registration of
composition, technical bankruptcy, the transfer in public records.
and other insolvency cases in your
jurisdiction? 14. What are the approvals and
consents typically required (e.g.,
No. corporate, regulatory, sector
E. Acquisition based and third-party approvals)
for private acquisitions in your
12. Which methods are commonly used jurisdiction?
to acquire a company, e.g., share
transfer, asset transfer, etc.? Mergers or acquisitions involving regulated
entities (banks, public companies, financial
Even though share transfers are more entities, pension funds, companies
common than asset transfers, companies managing funds of third parties and
may also be acquired through mergers,in insurance companies), in addition to the
which case the purchaser absorbs the previous communication to Coprocom
target company, which in turn disappears. (antitrust government agency), must obtain
In this case, the purchaser also assumes all the applicable approvals of the Securities
of the target’s assets and liabilities. Supervisory Agency (Sugeval), the Private
The requirements to complete a merger are Pension Funds Supervisory Agency (Supen),
the following: the General Insurance Supervisory Agency
(Sugese), the General Telecommunications
a pre-merger project or agreement; Supervisory Agency (Sutel) or the Financial
Entities Supervisory Agency (Sugef ), as
approval via extraordinary shareholders’
appropriate. An ultimate beneficiary filing
meetings (of all entities involved);
needs to be made yearly and 15 days after
filing with competition authority any change of ownership occurs.

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15. What are the regulatory must be disclosed to the corresponding

competition law requirements regulatory authorities.
applicable to private acquisitions in
Additionally, there is an annually
your jurisdiction?
requirement to disclose the ultimate
Preliminary merger control for transactions beneficiary owner before the Central Bank
of a certain volume (over a threshold of of Costa Rica, accordingly when there is a
USD 15 million) or of special relevance to change in control, such registry must be
the national market is mandatory. updated.
A merger or acquisition may be considered 18. Can sellers be restricted from
a concentration under Article 88 of the Law shopping around during a
for the Strengthening of the Costa Rican negotiation process? Is it possible
Competition Authorities (“CR-LSCA”) or to include break fee or other
Article 38 of the Regulations to the Law penalty clauses in acquisition
for the Promotion of Competition and documents to procure deal
Effective Consumer Protection (CR-LPC), exclusivity?
and thus even though parties are free to
Yes, specific provisions regarding the
consolidate a merger or an acquisition, they
project may be contractually agreed by
are required to file a notification or previous
the parties. Breakup fee can be built into a
communication to Coprocom if meeting
contract.
the criteria established in the CR-LSCA.
19. What are the conditions precedent
M&A control in Costa Rica uses a short
in a typical acquisition document?
authorization procedure. If the preliminary
Is it common to have conditions to
merger control notice is not sent,
closing such as no material adverse
Coprocom may challenge a merger proven
change?
to qualify as a concentration by opening a
penalizing procedure. Conditions precedent commonly include
performance of covenants, corporate
16. Are there any specific rules authorization, regulatory approvals,
applicable for acquisition of public issuance of legal opinions, and material
companies in your jurisdiction? adverse event clauses.
Acquisition of public companies would 20. What are the typical warranties
require disclosure of ownership before the and limitations in acquisition
Costa Rican Stock Exchange and follow the documents? Is it common to obtain
public offering procedure set forth in in the warranty insurance?
Stock Market Regulatory Law Number 7732
and its regulations. Typical warranties and limitations include,
no conflicts, material contracts, litigation,
17. Is there a requirement to disclose intellectual property, licenses and permits,
a deal, for instance to regulatory anti-money laundering, environmental
authorities? Is it possible to keep a matters, taxes, employees, real property,
deal confidential? among others.
Mergers and acquisitions in specific It is not common to obtain warranty
industries (financial entities, insurance, but it can be negotiated and
telecommunications, energy, and others) included.

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21. Is there a requirement to set a Share purchase agreements executed in

minimum pricing for shares of a foreign languages can be enforceable
target company in an acquisition? by Costa Rican courts, if they have been
officially translated into Spanish.
Shares cannot be priced lower than the
nominal amount declared in the share 26. Can acquisition documents be
governed by a foreign law?
certificates, for purposes of calculating the
tax on capital gains. Yes, acquisition documents may be
governed by foreign law.
22. What types of acquisition financing
are available for potential buyers in 27. Are arbitration clauses legally
your jurisdiction? Can a company permissible or generally included in
provide financial assistance to a acquisition documents?
potential buyer of shares in the
Arbitration clauses are legally permissible
target company?
and commonly included in acquisition
The most common funding structures, documents.
regardless of the acquirer, are bank
28. Are there any specific formalities
lending, corporate debt, capital increases
for the execution of acquisition
(private placement of shares of stock) and
documents? Is it possible to
securitizations or security trust agreements.
remotely/digitally sign documents?
Withholding taxes are an important issue to
Share certificates must be transferred by
consider in establishing funding structures
endorsement which has to be signed by
and schemes, as these may apply if interest
the seller in the back of the document.
is paid to a bank domiciled abroad.
Additionally, as a formality the signatures
23. What are the formalities and in the Share Purchase Agreement can be
procedures for share transfers and authenticated.
how is a share transfer perfected?
Share Purchase Agreements may be
Share certificates (in the case of Companies) remotely and digitally signed. The digital
must be endorsed on the back of the signature issued by the Central Bank of
document and signed by the seller and Costa Rica adds an additional layer of
the transfer must be recorded on the validity (treated as a notarized signature)
shareholders´ registry book. In the case but any digital signature is valid in Costa
of LLC, quota transfer requires acceptance Rica and treated as if it was a wet ink
by transferor and given the statutory right signature.
of first refusal, a quota holders approval is
required as well.
G. Trends and Projections
29. What are the main current trends in
24. Are there any incentives (such
M&A in your jurisdiction?
as tax exemptions) available for
acquisitions in your jurisdiction? The main current trends are in the services,
real estate and consumer sectors.
There is a free zone regime that may be
applicable if mandatory conditions are met. The M&A market in Costa Rica is steadily
continuing to grow, with key economic
F. Enforceability indicators reflecting a recovering
25. Can acquisition documents be economy. The country presents a winning
executed in a foreign language? combination of skills and opportunities

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that are appealing to export and sectors are the main focus of foreign direct
services-oriented foreign investment investment and should be the main focus
and continues to attract the attention of for new potential M&A dealings in Costa
foreign companies that see it as a stable Rica for 2024. Furthermore, as previously
emerging economy with quality workforce mentioned, the growth of collaborative
and potential for growth. Costa Rica’s businesses, e-commerce and technology
attractiveness for foreign investment has may force companies in these sectors
begun to shift to emerging areas such to develop a rapid strengthening in key
as semiconductors, medical devices, markets, and M&A opportunities will be key
IT, knowledge processes, finance and for such achievements.
accounting, which require sophisticated
Costa Rica expects to continue evolving
skills and technological infrastructure.
as a destination for investors with strong
Other developments include the promotion and protection programs
establishment of shared service centers and friendly policies once the economic
and manufacturing facilities outside the recovery following the effects of the
Greater Metropolitan Area, as well as the COVID-19 pandemic has strengthened.
establishment of energy, infrastructure and Even though the size of the Costa Rican
tourism projects, creating continuous M&A and Central American market is not as
opportunities for sophisticated investors, significant as other countries in Latin
venture capitalists and investment banking America, in terms of retail operations, its
firms. pursuit of growth will continue drawing
multinationals that feel comfortable with
Notwithstanding outside factors or local
the above-mentioned mixture of skills and
political and fiscal trends, which include
opportunities.
the implementation of the recently passed
tax law reform (2019), government debt 30. Are any significant developments
and social issues appearing as obstacles, or changes expected in the near
the M&A market should continue to be future in relation to M&A in your
active following Latin American trends. jurisdiction?
The consolidation of consumer goods
No.
companies (wholesale and retail), as well as
an inflow of South American groups owing
to the country’s logistic advantages, should
continue to have a favorable influence in
the M&A market. Furthermore, according
to the Inter-American Development Bank,
there is a potential attraction of USD
1,544.8 million for Costa Rica, product of
the emerging nearshoring phenomenon
in Latin America, where companies are
relocating part of their supply chains to
countries close to their target markets.
The most dynamic sectors in the country
on a pre-pandemic basis have been
life sciences, services and distribution,
hospitality, consumer, advanced
manufacturing, and industrials. These

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CROATIA
WOLF THEISS

Sasa Jovicic Marija Lalin Lucia Mocibob

Partner Senior Associate Senior Associate
sasa.jovicic@ marija.lalin@ lucia.mocibob@
wolftheiss.com wolftheiss.com wolftheiss.com

A. General
1. What is the main legal framework Joint stock companies
applicable to companies in your  Minimum share capital amounts to EUR
jurisdiction? 25,000;
Companies Act presents a main legal  Supervisory board is obligatory;
framework for companies in Croatia. Other
 Management board manages the
relevant regulations are Act on Takeover of company’s business independently and
Joint Stock Companies, Capital Market Act, at their own risk;
Court Registry Act, Competition Act, etc.
 Management board members are
2. What are the most common types appointed by the supervisory board;
of corporate entities (e.g., joint
 Incorporation process is much more
stock companies, limited liability
complex and time-consuming;
companies, etc.) used in your
jurisdiction? What are the main  The shareholders’ meeting must be
differences between them (including held (i) during the first 8 months of
but not limited to with regard to the the financial year, and (ii) always when
shareholders’ liability)? mandatory provisions of the articles of
associations or the company’s interests
The most common types of corporate require a shareholders’ resolution.
entities in Croatia are joint stock companies Every shareholders’ meeting must be
and limited liability companies. recorded by a notary public;

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 Liability of shareholders occurs only the company) the presence of a notary

under very exceptional circumstances: public at the shareholders’ meeting is
if (i) a shareholder uses the company required;
to achieve a goal that is otherwise
 Liability of shareholders occurs only
prohibited; (ii) a shareholder uses the
under very exceptional circumstances:
company to cause damage to creditors;
if (i) a shareholder uses the company
(iii) contrary to the provisions of the law,
to achieve a goal that is otherwise
a shareholder manages the company’s
prohibited; (ii) a shareholder uses the
assets as if they were his/her assets; or
company to cause damage to creditors;
(iv) a shareholder decreases the value of
(iii) contrary to the provisions of the law,
the company’s assets for his/her own or
a shareholder manages the company’s
someone else’s benefit although he/she
knew and/or should have known that assets as if they were his/her assets; or
the company would not be able to fulfil (iv) a shareholder decreases the value of
its obligations; and the company’s assets for his/her own or
someone else’s benefit although he/she
 Squeeze out of minority shareholders is knew and/or should have known that
possible. the company would not be able to fulfil
Limited liability company its obligations; and

 Minimum share capital amounts to EUR  No squeeze out of minority

2,500; shareholders.
 Supervisory board is obligatory only B. Foreign Investment
under certain statutory conditions;
3. Are there any restrictions on foreign
 Management board manages the investors incorporating or acquiring
company’s business in line with the the shares of a company in your
articles of associations, shareholder’s jurisdiction?
resolutions and mandatory instructions
of the shareholder’s meeting and No. Every individual and legal entity, either
supervisory board (if any); Croatian or foreign, may incorporate a
company in Croatia and/or acquire shares
 Management board members are
in a Croatian company.
appointed by the shareholders;
however, company’s articles of 4. Are there any foreign exchange
associations may provide that restrictions or conditions applicable
supervisory board (if any) appoints to companies such as restrictions to
management board; foreign currency shareholder loans?
 Incorporation process is more No.
simplified, especially in case of a simple
LLC; 5. Are there any specific considerations
for employment of foreign
 The shareholders’ meeting must be employees in companies
convened at least once a year or, incorporated in your jurisdiction?
except in the cases provided for in
the Companies Act or the articles of EU/EEA citizens may freely reside and work
associations, whenever required for the in Croatia, while the non-EU/EEA nationals
sake of the company’s interest. Only in shall obtain work permit and residence
certain cases, (e.g., amendments of the permit in order to legally stay and work in
articles of associations, liquidation of Croatia.

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C. Corporate Governance of a prudent manager and protect the

company’s business secrets. A violation of
6. What are the standard management this duty makes them jointly and severally
structures (e.g., general assembly, liable to the company for any damages
board of directors, etc.) in a corporate caused.
entity governed in your jurisdiction
and the key liability issues relating The management board will not be liable
to these (e.g., liability of the board to compensate for damages if the action
members and managers)? by the management board is based on
the decision of the shareholders’ meeting.
The standard structure presents general However, authorization by the supervisory
assembly, management board and board does not exclude responsibility.
supervisory board (which is obligatory for
LLC only in certain cases). Supervisory board members must exercise
the duty of care and diligence of a prudent
Joint stock company manager. Violation of this duty makes them
Management board manages the jointly and severally liable to the company
company’s business independently and at for any damages caused.
their own risk. 7. What are the audit requirements in
Members of the management board must corporate entities?
exercise the duty of care and diligence Audit of financial statements is required.
of a prudent manager and protect the Audit of financial statements implies
company’s business secrets. A violation of verification and evaluation of annual
this duty makes them jointly and severally financial statements and consolidated
liable towards the company for any reports, data and methods used when
damages caused. compiling them and on that base shaping
The management board will not be liable independent expert opinion on the matter.
to compensate for damages, if the action
Audit of financial statements of Croatian
by the management board is based on
companies is regulated by the Accounting
the decision of the shareholders’ meeting.
Law and the Audit Law. The obligors are
However, authorization by the supervisory
determined by the Accounting Law while
board does not exclude responsibility.
the conditions and regulations of the audit
Supervisory board members must exercise process are determined by the Audit Law. In
the duty of care and diligence of a prudent case of any status changes of the company,
manager. Violation of this duty makes them mergers, acquisitions and divisions, the
jointly and severally liable towards the Company Law determines the process.
company for any damages caused.
D. Shareholder Rights
Limited liability company
8. What are the privileges that can
Management board manages the be granted to shareholders? In
company’s business in line with the articles particular, is it possible to grant
of associations, shareholder’s decisions and voting privileges to shareholders for
mandatory instructions of the shareholder’s appointment of board members?
meeting and supervisory board (if any).
Yes, it is possible to grant certain voting
Members of the management board must privileges to shareholders. In addition,
exercise the duty of care and diligence shareholders may be granted with certain

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privileges relating to the distribution of 10. Is it possible to impose restrictions

profits, pre-emption rights on issuance of on share transfers under the
new shares or acquisition of the shares from corporate documents (e.g., articles
other shareholders, etc. of association or its equivalent in
your jurisdiction) of a company
9. Are there any specific statutory rights
incorporated in your jurisdiction?
available to minority shareholders
available in your jurisdiction? Yes. In practice, the most common share
transfer restrictions are pre-emption right
Please find below the list of certain
of the existing shareholders, drag-along
statutory rights available to the minority
and tag-along right.
shareholders:
11. Are there any specific concerns or
 request the company to bring a claim
other considerations regarding the
for damages against (i) founders of
composition, technical bankruptcy
the company, (ii) management board
and other insolvency cases in your
members, (iii) supervisory board
jurisdiction?
members, (iv) executive directors and
members of the board of directors, No.
(v) any person or entity who uses his/
E. Acquisition
her/its influence to cause damage
to the company and anyone who 12. Which methods are commonly used
has benefited from such use of to acquire a company, e.g., share
influence, provided that the requesting transfer, asset transfer, etc.?
shareholders have been shareholders
Share transfer is the most common method
for at least 3 months prior to the
to acquire a company in Croatia.
shareholders’ meeting;
13. What are the advantages and
 application to the court to remove
disadvantages of a share purchase
a member of the supervisory or
as opposed to other methods?
management board;
A share purchase means taking over a
 request in writing to convene a
company. The target company is a separate
shareholders’ meeting (and indicate the
legal entity which will include all of its
purpose and reasons for convocation);
assets, liabilities and obligations. One
 request that another subject matter benefit is that continuity is maintained as
is included in the agenda of the contracts with employees, suppliers and
shareholders’ meeting and published; customers remain in place subject to any
specific “change of control” provisions.
 request the court to appoint
extraordinary auditors for an audit of An asset purchase is the transfer of a
certain actions of a company, provided specific business activity and related
that the requesting shareholders assets and employees. The buyer can pick
have been shareholders for at least the assets it wants or more particularly
3 months prior to the shareholders’ identify what, if any, liabilities it will take
meeting, if the other shareholders at a on. Contracts with suppliers and customers
shareholder’s meeting refuse to appoint do not automatically transfer and will
need to be assigned. However, contracts
extraordinary auditors;
with employees and pre-completion
 and other rights. liabilities transfer by operation of law. Other

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than in respect of employees, the attraction company, the necessary documents are:
for a buyer is that the asset purchase is a declaration of intent, the prospectus,
isolated from historic risk factors. the bid, the application for publication of
the bid, the share purchase agreement,
14. What are the approvals and
the takeover report, the opinion of the
consents typically required (e.g.,
target’s management, documents on
corporate, regulatory, sector
legal transactions for the acquisition of
based and third-party approvals)
previously owned shares in the target,
for private acquisitions in your
the bidder’s declaration that no other
jurisdiction?
attempts have been made at acquiring the
The most typical approvals are: (i) corporate target shares, the depository’s certificate
approvals mostly relating to the approvals on securing the consideration for the
of the remaining shareholders (i.e. , transaction, the certificate of the market
shareholders having pre-emption rights regulator on the average price of shares,
to transfer of shares) for the transaction; the agreement with the depository for the
(ii) regulatory approvals required from deposit of shares, etc.
certain authorities regulating business 17. Is there a requirement to disclose
activity performed by the company; and a deal, for instance to regulatory
(ii) competition approvals i.e., merger authorities? Is it possible to keep a
clearance required from the Competition deal confidential?
Agency in case the relevant competition
thresholds are met. Yes, provided that certain regulatory
authority imposes such an obligation. That
15. What are the regulatory depends on the target company’s business
competition law requirements activity. Some regulatory authorities only
applicable to private acquisitions in require notification on a transaction, while
your jurisdiction? some require their prior approval on the
Merger filing to the Croatian Competition transaction.
Agency will be required provided that 18. Can sellers be restricted from
certain national thresholds are cumulatively shopping around during a
met: negotiation process? Is it possible
(i) the aggregate worldwide turnover of to include break fee or other
all the parties to the concentration, penalty clauses in acquisition
based on the last available financial documents to procure deal
statements, exceeds approximately EUR exclusivity?
130 million; Yes. Exclusivity in negotiations can be
and agreed between the parties, as well as
penalties for its violation.
(ii) the annual turnover of each of at
least two parties to the concentration 19. What are the conditions precedent
achieved in Croatia, based on the last in a typical acquisition document?
available financial statements, exceeds Is it common to have conditions to
EUR 13.3 million. closing such as no material adverse
16. Are there any specific rules change?
applicable for acquisition of public Conditions precedents typically depend on
companies in your jurisdiction? a due diligence findings. Yes, it is possible
Yes. For acquiring shares of a public to have conditions to closing such as no

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material adverse change. registration in the company’s book of

shares and submitting the updated list
20. What are the typical warranties
of shareholders to the Court Register.
and limitations in acquisition
Registration of the buyer as a new
documents? Is it common to obtain
shareholder to the Court Register has a
warranty insurance?
publicity effect only.
The warranties may be divided into: (i)
24. Are there any incentives (such
fundamental warranties which include
as tax exemptions) available for
warranties on ownership of shares, good
acquisitions in your jurisdiction?
standing of the target company, authorities
of parties to perform the transaction, No, as we are familiar with. For further
etc.; and (ii) business warranties related details, tax advisors should be consulted
to employment, litigation, real estate,
F. Enforceability
insurance, company’s business operations,
compliance, etc. 25. Can acquisition documents be
executed in a foreign language?
Typical limitations refer to the limitation
of liability. It is not common to obtain a Yes, however share transfer agreement as
warranty insurance. well as any other documentation which
should be submitted to the Croatian
21. Is there a requirement to set a
authorities must be executed in Croatian
minimum pricing for shares of a
language (at least in a bilingual form).
target company in an acquisition?
26. Can acquisition documents be
No.
governed by a foreign law?
22. What types of acquisition financing
Yes.
are available for potential buyers in
your jurisdiction? Can a company 27. Are arbitration clauses legally
provide financial assistance to a permissible or generally included in
potential buyer of shares in the acquisition documents?
target company?
Arbitration clauses are legally permissible
The most standard types of financing and, in practice, included in acquisition
are loans. In joint stock companies, it is documents.
not allowed to provide such a financial
28. Are there any specific formalities
assistance, i.e., it is forbidden by the law.
for the execution of acquisition
However, that would be possible for limited
documents? Is it possible to
liability companies.
remotely/digitally sign documents?
23. What are the formalities and
Croatian law requires wet-signature or
procedures for share transfers and
qualified e-signature. In addition, certain
how is a share transfer perfected?
acquisition documents must be included
The seller and the buyer must execute in a form of a notarial deed (such as share
the share transfer agreement in a form transfer agreement, articles of associations,
of a Croatian notarial deed. The title to etc.) while other must be only notarized
the shares passes to the buyer upon the (notarization of signature, such as

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application for registration of share transfer

to the court registry, etc.).
G. Trends and Projections
29. What are the main current trends in
M&A in your jurisdiction?
There is a lot of activity in the M&A
market, and we see a markable increase
in transaction numbers in 2022 when
compared to 2021 and 2020. Also, we see
a number of new investors moving in,
including private equity funds and venture
capital funds which is a novelty for Croatian
markets. There has been a lot of activity
in the IT sector, primarily driven by M&A
takeovers, and also a significant activity in
the media sector.
30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
Based on our experience so far, we expect
lots of M&A takeovers in IT sector.

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DENMARK
GORRISSEN FEDERSPIEL

Lasse Lyng Myrup Kasper Berg

Managing Counsel Attorney
lape@ kabe@
gorrissenfederspiel.com gorrissenfederspiel.com

A. General Undertakings) and partly by Danish legal

principles.
1. What is the main legal framework
applicable to companies in your 2. What are the most common types
jurisdiction? of corporate entities (e.g., joint
stock companies, limited liability
Foreign investors generally acquire or companies, etc.) used in your
invest in limited liability companies jurisdiction? What are the main
(kapitalselskaber) such as the public limited differences between them (including
company (aktieselskab or A/S) or the but not limited to with regard to the
private limited company (anpartsselskab or shareholders’ liability)?
ApS). Limited liability companies, limited
partnership companies (partnerselskaber The most common type of corporate entity
or P/S) and branch offices (filialer) are in the Danish market for foreign investors
governed by the Danish Companies Act is the limited liability company, which
(Consolidated Act 2025-20-03 No. 331 on may be either a private limited company
Public and Private Limited Companies with or a public limited company. As a main
later amendments). rule, a private limited company can be
used for all types of business (for certain
Other corporate entities such as general regulated businesses the establishment
partnerships (interessentskaber) and of a public limited company is required),
limited partnerships (kommanditselskaber) but are not eligible for listing on, e.g., stock
are available and governed partly by exchanges such as Nasdaq Copenhagen
the Danish Act on Certain Commercial (Main Market) or Nasdaq First North
Undertakings (Consolidating Act 2021- Growth Market Denmark (First North).
02-01 No. 249 on Certain Commercial However, as of January 2025, private

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limited companies may offer its shares to its corporate income (limited companies
the public either in accordance with the are subject to a Danish corporate income
EU Regulation on European crowdfunding tax rate, which is currently 22% and 26%
service providers for business or to a limited for companies with certain financial
number of qualified investors subject to activities) and as shareholders pay tax on
certain monetary thresholds. The primary the dividend distributed by the limited
features of the two types of companies company. This is commonly referred to as
are generally the same as they both (i) “double taxation”.
have a separate legal personality, (ii) are
However, dividends should most often not
subject to corporate taxation and (iii)
be included in the taxable income for non-
have limited shareholder liability, as the
resident companies. An attractive feature
shareholders’ liability is generally limited to
for foreign investors is the participation
the shareholders’ capital investment in the
exemption regime, which includes tax-
company, meaning that the shareholders
free receipt and distribution of dividends
are not liable for the acts and/or omissions
from and to all EU Member States, as well
of the limited liability company (as opposed
as countries with whom Denmark has
to partners in general partnerships, who
formed a tax treaty (however, with certain
are personally liable for the obligations
exceptions. See question 24).
of the partnership). Group companies are
regarded as separate legal entities and, A foreign investor may prefer to carry
as a rule, the parent company is not liable out the Danish investment through a
for the acts of subsidiaries. However, the tax transparent vehicle in which case a
corporate veil may be pierced under certain limited partnership or a limited partnership
circumstances, a shareholder with the effect company may be suitable.
that may be liable, e.g., if a shareholder
intentionally or gross negligently causes
B. Foreign Investment
damage to the company, and a shareholder 3. Are there any restrictions on foreign
may also be liable based on applicable investors incorporating or acquiring
regulations such as Danish and EU the shares of a company in your
competition law which can form the basis jurisdiction?
for parent company liability.
There are no general restrictions on foreign
Generally, the Danish Companies Act investors incorporating or acquiring
provides for a more flexible regulation of shares in a Danish company, and foreign
private limited companies compared to investments are encouraged in Denmark.
that of public limited companies. The share
However, a Danish act on screening of
capital of a public limited company must
certain foreign direct investments was
be at least DKK 400,000, while the share
introduced in 2021. The act introduced
capital of a private limited company must
a mandatory screening mechanism for
be at least DKK 20,000. Furthermore, the
foreign direct investments, if the foreign
Danish Companies Act contains several
investor intends to acquire, directly or
provisions determining the differences
indirectly, possession of or control over
between private limited companies and
at least 10 % of the ownership interest
public limited companies, e.g., in terms
or voting rights or equivalent control by
of requirements relating to the articles of
other means of managerial, financial,
association, the holding of shareholders’
development or operational matters, in
meetings, etc.
Danish companies within the following
A two-level taxation regime applies as a sectors (all considered to be sensitive
limited company pays corporation tax on in relation to national security or public

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order): (i) companies in the defence sector, As such, Danish companies are generally
(ii) companies in the field of IT security free to obtain financing on the international
functions or processing of classified market without being subject to foreign
information, (iii) companies producing exchange restrictions etc.
dual-use items (only dual-use items on
5. Are there any specific considerations
the so-called Control List), (iv) companies for employment of foreign
within the field of critical technology, and employees in companies
(v) critical infrastructure companies (this incorporated in your jurisdiction?
category also includes significant suppliers
to such companies). Furthermore, the act Generally, foreign employees employed
also introduced a mandatory screening in a Danish company are subject to the
of foreign investors from outside the EU same legislation as the Danish employees
or EFTA intending to enter into a special and they must be employed on the same
financial agreement with a company employment terms and conditions as
domiciled in Denmark operating within the Danish employees in the company in
any of the sensitive sectors set out above. question.
Certain exceptions apply, including in
Under Danish law, the company and the
respect of foreign investors from EU
individual employee are generally free
member states or EFTA countries.
to agree on the terms and conditions of
Please refer to Gorrissen Federspiel’s employment, and the employee is entitled
article in https://gorrissenfederspiel.com/ to receive an employment agreement
en/a-new-danish-act-on-screening-of- with information about all substantial
certain-foreign-direct-investments-has- terms and conditions of the employment
been-introduced-in-parliament/, about the in accordance with the Danish Act on
screening mechanism for foreign direct Employment Certificates (in Danish:
investments. “Ansættelsesbevisloven”). However, Danish
protective mandatory legislation and/
In addition, the Danish Business Authority
or collective bargaining agreements may
requires identification and contact details
limit the freedom of contract. In relation to
of shareholders and ultimate owners, etc.
employees working remotely from abroad,
Furthermore, certain additional restrictions
such employees may also be subject to
apply in sensitive sectors, including in
protective mandatory legislation in the
relation to national security.
country from where they are working
4. Are there any foreign exchange remotely (depending on the legislation in
restrictions or conditions applicable the country in question), and they may be
to companies such as restrictions to required to pay social security contributions
foreign currency shareholder loans? in such a foreign country.
As a rule, there are no foreign exchange If a company considers employing a foreign
restrictions or conditions applicable to employee in Denmark, the company must
companies such as restrictions on foreign be aware that the employee may have
currency shareholder loans, except for to apply for a residence and work permit
those restricting money laundering. depending on the individual employee’s
Payments to foreign companies citizenship. Citizens of Norway, Sweden,
incorporated in any country or state which Finland, and Iceland are free to enter, reside,
is currently subject to United Nations (UN) study and work in Denmark without a visa,
or EU sanctions may be subject to foreign residence and work permit. Citizens in the
exchange control or currency restrictions. EU/EEA and Switzerland are covered by the

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EU rules on the free movement of persons • A management structure where

and services and are thus exempt from a board of directors (with at least
the requirement of a residence and work three members for public limited
permit. Instead, citizens of the EU/EEA and companies) exercises overall and
Switzerland must within 3 months after strategic management functions as well
arrival apply for a registration certificate if as certain supervisory functions and
they intend to stay in Denmark for more appoints an executive management
than 3 months. For all other foreign citizens, responsible for the day-to-day
the company must obtain a residence and management of the company (a so-
work permit for the employee before the called one-and-a-half-tier governance
employee starts to work in Denmark in structure which is the traditional Danish
accordance with The Danish Aliens Act (in governance structure) or
Danish: “Udlændingeloven”). The company • A management structure where an
is responsible for ensuring that foreign executive management exercises
employees always have valid residence and overall and strategic management
work permit. functions. In a private limited company,
C. Corporate Governance such a governance structure can be
chosen without being supervised by a
6. What are the standard management supervisory board (one-tier governance
structures (e.g., general assembly, structure which is fairly common,
board of directors, etc.) in a corporate especially in holding companies). In a
entity governed in your jurisdiction public limited company, the executive
and the key liability issues relating management must be supervised
to these (e.g., liability of the board by a supervisory board with at least
members and managers)? three members (two-tier governance
structure which is uncommon).
Governance and governance structures
If a public limited company with a one-
A governance structure with a general tier governance structure is preferred, a
meeting (being the shareholders practical approach is to elect the executive
represented at a general meeting), a board management as members of the board
of directors and an executive management of directors as well. However, the board
are widely known and used in Denmark. of directors of a public limited company
There are no restrictions on foreigners must be composed in such a way that the
being members of boards of directors majority of the members of the board of
or executive management. However, to directors are not members of the executive
be registered with the Danish Business management of the company, and the
Authority, it is required that certain chairman and vice-chairman of the board of
information and documentation is directors should not be involved in specific
registered with the Danish Business day-to-day management (the combined
Authority, such as full name, citizenship at position of chairman/vice-chairman and
birth, date of birth, national identification CEO is therefore not possible).
number (or passport number) and a copy of Management liability
a valid national ID (e.g., passport copy).
Members of the management of a limited
Public and private limited liability liability company who, in the performance
companies may elect one of the following of their duties, have intentionally or
management structures: negligently caused damage to the limited

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liability company are liable to pay damages. • Reverse burden of proof for liability if
The same applies where the damage has the financial company suffers losses
been caused to the shareholders or any as a result of dispositions that favour
third party. Under Danish law, the basis members of management. The board
for management liability is as a starting of directors must therefore be able to
point the general rule of liability for prove that the grant or agreement in
negligence. Danish courts have generally question was justifiable.
been reluctant to impose liability unless
clear specific duties have been neglected, • Strict liability on the part of the
and members of the management enjoy management member whose interests
a wide margin of discretion, provided that are served by the grant or agreement if
the member’s actions and decisions are the board of directors has not approved
made on an informed, well-considered the disposition in accordance with the
and factual basis (the business judgement rules.
rule). If found negligent, a member of a 7. What are the audit requirements in
company’s management may face claims corporate entities?
for indemnification and/or damages
from any aggrieved party and can be As a rule, all limited liability companies
disqualified. However, it is an area under are obliged to prepare and submit annual
development, and in recent years high- reports, unless they are exempted due
profile cases in the Danish market have to circumstances such as restructuring
been litigated before ordinary courts (i.e., or winding up. The size of the company
in public). is important in terms of the scope of the
annual report. Further, large companies,
On July 1, 2023, a bill to amend the
including listed ones, must comply with
Financial Business Act, the Criminal
EU regulation (CSDR) by preparing a
Code and various other acts entered into
sustainability report provided with an
force. The bill implemented the political
auditor’s statement, in addition to the
agreement of June 16, 2022 on “Stricter
annual report. In February 2024, a bill
responsibility assessment for management
members in financial companies and was introduced to implement the CSDR
broader recruitment basis for management directive (2022/2464) in Danish law.
in the financial sector”. The annual report must be filed with the
The bill does not intend to change Danish Business Authority without undue
the liability standard for management delay after the approval of the annual
liability for damages, and “culpa” (fault) report by the annual general meeting (no
will therefore continue to be the basis of later than six months after the end of the
liability in cases of management liability. financial year for non-listed companies and
However, it is our assessment that it will be no later than four months after the end of
a stricter standard of liability, approaching the financial year for listed companies).
professional liability. The bill introduced Small companies may opt out of auditing
stricter rules on management liability for if, for two consecutive financial years, they
damages: do not exceed two of the following three
• Non-compliance with internal thresholds at the balance sheet date:
guidelines, etc. in financial companies
• a balance sheet total of DKK 4 million
must be given greater weight in the
assessment of liability. • a net turnover of DKK 8 million, and

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• an average number of full-time members are as a starting point elected

employees of 12 during the financial by the general meeting. The election of
year members to the board of directors will
be decided or the resolution passed by
For holding companies, special rules apply
a simple majority of votes. In case of a
when determining the thresholds for tied vote, the election of a person will be
opting out auditing. decided by lot unless otherwise provided
Opting out of auditing can only be done in the articles of association. However,
at an ordinary general meeting with it is possible to adopt an appointment
prospective effect. mechanism in the company’s articles of
association whereby public authorities or
D. Shareholder Rights others, including shareholders, have a right
8. What are the privileges that can to appoint one or more members to the
be granted to shareholders? In board of directors. However, the majority of
particular, is it possible to grant the members of the board of directors in a
voting privileges to shareholders for public limited company must be elected by
appointment of board members? the general meeting.
It is also possible to agree in a shareholders’
As a rule, shareholders have administrative
agreement that members to the board
rights (e.g., voting rights), economic
of directors are appointed solely by a
rights (e.g., the right to receive dividend
shareholder or a third party. As a rule, such
if distributed) and right of disposal (e.g.,
agreement entails that the shareholders
transfer or pledge of a share).
that are parties to the shareholders’
The administrative rights are primarily agreement undertake to vote in such a way
exercised at a general meeting (either that the appointed board members are
at the ordinary general meeting or at an elected by the general meeting. Therefore,
extraordinary general meeting), including such a mechanism is not a violation of the
the shareholders’ right to pass resolutions requirement that majority of the members
and elect members to the board of of the board of directors in a public limited
directors, and the right of each shareholder company must be elected by the general
depends on the shareholder’s ownership meeting. In this regard, it should be noted
stake and voting rights. that under Danish law, the shareholders’
agreement is not formally binding on
All shares carry equal rights. However, the company, and enforcement of the
the articles of association may provide for shareholders’ agreement is thus restricted
different share classes with different rights. to the contractual remedies agreed
In that case, the articles of association between the parties in the shareholders’
must specify the differences between the agreement. Professional parties are
different share classes and the size of each typically comfortable with that approach,
share class. As such, it is possible to adopt e.g., by including sufficiently strong
share classes with economic preferences, remedies (i.e., penalty or purchase rights) in
e.g., a liquidity preference, or with more the shareholders’ agreement.
administrative rights, e.g., more voting
The articles of association can be aligned
rights per share or the right to appoint
with the shareholders’ agreement
members to the board of directors.
to increase the enforceability of the
As for the election/appointment of shareholders’ agreement (as the articles of
members to the board of directors, such association are binding on the company),

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although since the articles of association may not be redeemed by the majority
are publicly available, it is customary to shareholder(s);
only include very limited elements from the
• 25%-49.99%: the minority shareholder
shareholders’ agreement in the articles of
may demand that the Danish Business
association. In practice, it is typically only
Authority appoints an additional
the overall governance structure (i.e., the
approved auditor (“auditor of the
size of the board of directors etc.) that is
minority shareholders”) to participate
reflected in the articles of association.
in the audit together with the company
9. Are there any specific statutory rights auditor(s), and the minority shareholder
available to minority shareholders may require that the company is
available in your jurisdiction? scrutinised by appointed scrutinisers;
Shareholders exercise their rights through • 50%: the shareholder can block all
the general meeting, and the right of each decisions, except for the above-
shareholder depends on each shareholder’s mentioned minority shareholder rights;
ownership stake and voting rights.
• 50.01% - 66.66%: the shareholder may
All resolutions at general meetings are decide on all matters relating to the
passed by a simple majority of votes company, unless the matter is covered
unless otherwise provided in the Danish by sections 106 (ordinary amendments
Companies Act or the company’s articles of to the articles), 107 (certain material
association. amendments to the articles) or 45
A shareholder controlling more than 50% (principle of the shares’ equality) of the
of the voting rights will be able to elect all Danish Companies Act;
members of the board of directors, and a • 66.67% - 75 %: the shareholder may
shareholder controlling at least 2/3 of the amend the articles of association and
voting rights and the share capital will be also resolve to issue new shares etc.;
able to amend the company’s articles of
association and resolve to issue new shares • 75.01% - 89.99%: the shareholder may
etc. (unless otherwise provided in the block the appointment of the auditor of
Danish Companies Act or the company’s the minority shareholders and block the
articles of association). appointment of scrutinisers;

The acceptance criterion for certain • 90% and more: the shareholder may
resolutions at general meetings according decide on section 107-matters and may
to the Danish Companies Act provides demand that the minority shareholders’
certain minority rights. In short, if the shareholdings be redeemed;
shareholder owns: A minority shareholder often deems the
Less than 10%: the minority shareholder minority rights and protection under the
has a right to demand the shares to be Danish Companies Act as insufficient, and
redeemed (right of redemption), if the it is customary to negotiate and agree on
remaining shares are owned by only one specific reserved matters on which the
shareholder; minority shareholder has a veto right.
• 10% - 24.99%: the minority shareholder The veto rights granted to a minority
may block for section 107-decisions shareholder depend on multiple factors.
(i.e., certain material amendments Certain veto rights may – in addition to
to the articles), and the shareholder obviously giving the minority shareholder

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a veto right – entail that the majority to investigate, whether any member of
shareholder will not be able to consolidate the board of directors or the executive
the company from an accounting management is liable.
perspective and/or that the minority
Furthermore, when a company is wound
shareholder and the majority shareholder
up, the administrator/official receiver takes
will have “joint control” from a merger
over the management of the company, and
control perspective.
the shareholders lose their rights under the
10. Is it possible to impose restrictions Danish Companies Act.
on share transfers under the
corporate documents (e.g., articles
E. Acquisition
of association or its equivalent in 12. Which methods are commonly used
your jurisdiction) of a company to acquire a company, e.g., share
incorporated in your jurisdiction? transfer, asset transfer, etc.?
Shares in a limited company are from a Acquisitions are typically carried out as
Danish corporate law perspective freely a share transfer or an asset transfer, but
transferable, unless otherwise provided for other transaction models are available,
in the articles of association. such as statutory merger (e.g., a dissolution
The shares may be subject to transfer of a company without liquidation by
restrictions in a shareholders’ agreement, transferring all its assets and liabilities to
and in principle the transfer restrictions the acquiring company against the issue
in the shareholders’ agreement can – with of new shares in the acquiring entity, i.e., a
certain exceptions – be reflected 1:1 in merger by absorption), de-merger etc. We
the articles of association (to ensure that often see statutory mergers between group
the company has to consent before a companies, which are usually straight
transfer can be legally consummated). forward transactions.
However, the articles of association are It depends on a variety of factors how a
publicly available and it is therefore transaction is to be structured, but the most
customary only to include a provision in common types of transactions are share
the articles of association for the company transactions and asset transactions.
stating that transfers require consent
from the general meeting or the board of 13. What are the advantages and
directors (and the shareholders will in the disadvantages of a share purchase
shareholders’ agreement explicitly agree as opposed to other methods?
that such consent is only to be given if the It depends on a variety of factors how
contemplated share sale is in accordance a deal is to be structured. Some of the
with the shareholders’ agreement). general considerations are listed below.
11. Are there any specific concerns or
The transaction perimeter is important. If
other considerations regarding the
the target is not a separate legal entity, e.g.,
composition, technical bankruptcy
if the target is split across multiple legal
and other insolvency cases in your
entities or if the target is a business unit in
jurisdiction?
a separate legal entity, an asset deal may
Initially, the issuance of a winding up order be the most straight forward way to go.
does not result in liability on the part of the The target business units would be carved
members of the board of directors or the out from the relevant legal entity/entities.
executive management per se. However, Furthermore, asset deals may be suitable
an administrator/official receiver is obliged in restructuring cases where the buyer only

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wishes to take over the healthy operating loan obligations, etc. However, the buyer
business or certain assets of value, but not cannot freely cherry-pick. The buyer
(all) liabilities of the company. may for example be required to take
over the employees of the target (with
The tax implications of the transaction
the employees’ existing contracts) or
structure must also be considered and
may have difficulties obtaining consent
depend on the involved parties’ place of
from customers or suppliers, which the
jurisdiction and the legal entities involved
buyer wishes to take over as part of the
in the transaction. As a main rule, the
transaction. However, in a share transfer,
seller usually prefers a share deal as it may
all the company’s contracts automatically
lead to a lower taxation of the seller, as
transfer together with the company (unless
capital gains on shares are tax-exempt
subject to a change of control-provision),
for non-Danish investors, and domestic
and there will be no change of employer in
corporate investors on unlisted shares,
relation to the employees.
whereas the buyer may prefer an asset
deal if the acquired assets will be revalued The different transaction structures have
to fair market value with a higher future various pros and cons, and the most
depreciation (and hence lower tax burden). suitable transaction structure depends
The tax implications should be considered on the individual situation, as the above
carefully, and other elements such as considerations are far from exhaustive.
significant tax loss carryforwards of the
target, which the buyer otherwise could 14. What are the approvals and
have used in the future, could affect the consents typically required (e.g.,
choice of transaction structure. Conversely, corporate, regulatory, sector
such tax loss carryforwards may be used based and third-party approvals)
by the seller to offset any capital gains on for private acquisitions in your
assets. jurisdiction?

The risk associated with the target and the A share or asset transfer may be subject
buyer’s risk profile must also be considered. to the approval by certain regulators
In a share deal, the target company, of compliance with certain regulatory
including all assets and liabilities (on- or off- regimes, depending on the target and the
balance sheet), are within the transaction parties. It may also require clearance from
perimeter. The risks are typically mitigated competition authorities under the merger
by way of a proper due diligence and control rules or FDI authorities under the
appropriate warranties and indemnities, rules on foreign direct investments.
but unexpected costs or liabilities emerging Contracts to which the company is a
after closing of the transaction is a buy- party may include a change-of-control
side issue if the issue is not covered clause requiring that the contractual party
contractually, e.g., by the agreed warranties approves any change of control in the
and indemnities in the share purchase target company. In asset transfers, the
agreement. transfer of a contract will generally require
On the other hand, an asset transfer has the consent from the contracting party, and
advantage that the buyer as a general rule if a creditor has security in the assets to
can define the specific assets and liabilities be transferred, it is necessary to inform
within the transaction perimeter. Therefore, the secured creditor of the sale and to
to a certain degree, the buyer can opt out obtain a release and confirmation of non-
of liabilities otherwise associated with the enforcement of the security before the
target such as contracts, undertakings, transfer of the asset.

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15. What are the regulatory and Consumer Authority is a very active
competition law requirements enforcer of the merger control rules and
applicable to private acquisitions in tends to spend longer time reviewing
your jurisdiction? transactions than many other EU
competition authorities.
Denmark has had mandatory merger
control rules since 2000. There are three 16. Are there any specific rules
alternative filing thresholds: (1) The parties applicable for acquisition of public
realised an aggregate Danish turnover companies in your jurisdiction?
of at least DKK 900 million (approx. EUR
Denmark is a part of the EU and accordingly
121.01 million) and at least two of the
both Danish and EU legislation apply to the
parties each realised a Danish turnover of
Danish equity capital market as well as the
at least DKK 100 million (approx. EUR 13.44
rules established by the stock exchange
million), (2) one of the parties realised
(the main stock exchange in Denmark is
a Danish turnover of at least DKK 3.8
Nasdaq Copenhagen A/S which is a part of
billion (approx. EUR 510.95 million); and
the Nasdaq Nordic Group).
one of the other parties realised a world-
wide turnover of at least DKK 3.8 billion In addition to EU legislation and guidelines
(approx. EUR 510.95 million), or (3) the and opinions issued by the European
transaction involves two or more providers Securities and Market Authority (ESMA),
of electronic communications networks, a Denmark also has various national laws,
public electronic communications network, both implementing the EU directives and
and the parties realised an aggregate regulating other matters not regulated by
Danish turnover of at least DKK 900 million the EU.
(approx. EUR 121.01 million).
17. Is there a requirement to disclose
Furthermore, it is expected that a bill will a deal, for instance to regulatory
be introduced in 2024 which, if passed, authorities? Is it possible to keep a
will entitle the Danish Competition and deal confidential?
Consumer Authority to require filing of a
As a starting point, there is no general
merger if the parties involved in the merger
obligation to disclose a deal involving
realised an aggregate Danish turnover
a Danish target. However, a transaction
of at least DKK 50 million (approx. EUR
involving a Danish target may be subject
6.71 million) and the Competition and
to disclosure requirements in a variety of
Consumer Authority finds that there is a
ways, examples of which are described
risk for the merger to significantly impede
below.
competition.
Firstly, if the transaction is subject to
There is a prohibition against implementing
approval by a regulatory authority, e.g., if
the transaction before obtaining approval.
approval of the transaction by the Danish
The Danish Competition and Consumer
Competition and Consumer Authority is
Authority has 25 working days in phase
required, the parties will have to disclose
1 and 90 working days in phase 2. It
the transaction.
is possible to extend these time limits
and there is stop-the-clock in case of Secondly, if the deal is structured as a
failure to respond to questions within share deal, the new owner of the target
deadline. There is a filing fee of up to company must be registered with the
DKK 1.5 million (approx. EUR 0.2 million). Danish Business Authority (as Danish
Although not legally required, pre- companies have to register their legal and
notification consultations are encouraged beneficial owners with the Danish Business
and expected. The Danish Competition Authority).

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Thirdly, if the transaction is structured The warranties catalogue should be

as an asset deal, the employees must be adapted to the specific transaction, but
notified of the transfer, and assets subject generally the warranties are fairly broad
to registration such as real estate must be and comprise fundamental warranties,
registered in the land register. business warranties and tax warranties.
18. Can sellers be restricted from The warranties are typically monetary
shopping around during a limited, and the acquisition documents
negotiation process? Is it possible will define the de minimis amount,
to include break fee or other the basket and the cap. Furthermore,
penalty clauses in acquisition the warranties will be limited in time
documents to procure deal depending on the nature of the warranties
exclusivity? (claims for breach of tax warranties and
Danish law generally respects the principle fundamental warranties will only become
of freedom of contract. As a rule, Danish limited after a longer period of time).
contracts do not require a specific form or Finally, the warranties will in a Danish
content, and the contracting parties are transaction be qualified by information
free to agree on the terms and conditions reasonably disclosed in the due diligence
of the contract. documentation. A disclosure letter
mechanism may be agreed between the
Therefore, it is possible to contractually parties, but it is rarely accepted by the
restrict the seller(s) from shopping around seller.
during a negotiation process by entering
into an exclusivity agreement. Furthermore, The use of W&I-insurance has been widely
it is possible to agree on appropriate used in the Danish market for several
remedies in case of breach of the exclusivity years, and it is also seen used in smaller
obligation, including break fees, adequate transactions.
damages (including external costs to 22. Is there a requirement to set a
advisors etc.). minimum pricing for shares of a
19. What are the conditions precedent target company in an acquisition?
in a typical acquisition document? There is no minimum pricing for shares of
Is it common to have conditions to a target company. However, acquisitions
closing such as no material adverse between groups and related parties have
change? to be at arm’s length terms, and if a price
The parties are generally free to agree on is deemed to be fictional, the Danish Tax
the conditions precedent applicable for Agency will take this into consideration in
the transaction. Many transactions are only determining whether the price represents
conditional upon mandatory regulatory a benefit.
approval, but other conditions such as
23. What types of acquisition financing
no material adverse change, financing,
are available for potential buyers in
shareholder approval, third party consents your jurisdiction? Can a company
etc. may be agreed upon. provide financial assistance to a
20. What are the typical warranties potential buyer of shares in the
and limitations in acquisition target company?
documents? Is it common to obtain
The types of financing may vary depending
warranty insurance?
on the nature of the acquisition and the
21. companies involved.

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The most common types of financing provided towards the lender of the
include: acquisition financing (or subsequent third-
party financing used to refinance this) may
1) Financing through financial institutes or
be unlawful under the prohibition, if:
mortgage institutes.
1. the negative pledge limits the freedom
2) Financing through other professional
of the target company to such an extent
investors, e.g., pension funds, employee
that it results in losses for the company
funds, and/or funds.
and its creditors; and/or
3) Self-financing by issuing new shares or
2. the negative pledge may be used by
increasing the capital of a non-listed
the lender to force the target company,
company through chapter drawing.
directly or indirectly, to redeem the
4) Seller-financing through a loan or by acquisition financing.
transferring the company in stages, e.g.,
The Danish Business Authority generally
by agreeing on call and/or put options
approves the traditional debt-push-
on the part of the company not yet
down approach in target companies (i.e.,
transferred.
involving the target obtaining third-party
As a rule, a Danish limited company cannot financing to pay out dividends used to
provide financial assistance to a potential repay the acquisition debt), and this
buyer of shares in the target company. approach is commonly used in Danish
It follows explicitly from the Danish transactions. Depending on how the
Companies Act that the company must acquisition is financed, appropriate
not, directly or indirectly, advance funds, workarounds are usually available.
grant loans or provide security for a third
24. What are the formalities and
party’s acquisition of shares in the company
procedures for share transfers and
or (its parent). Certain exemptions apply,
how is a share transfer perfected?
including if the financing is approved by
the general meeting and certain criteria From a corporate law perspective, shares
are met (only funds that could otherwise are freely transferable unless otherwise
have been distributed as dividends must be provided by statute. The formalities and
used, the assistance must be provided on procedures for share transfers and how a
market terms etc.). share transfer is completed depend on (i)
whether proof of ownership of the shares
While it is certain that it falls within the
has been issued, (ii) whether the shares are
prohibition of financial assistance if the
negotiable, and (iii) whether the shares are
target company provides security for the
registered in a central securities depository.
acquisition financing, it is more debatable
whether there would be any issues in Shares transferred in non-public M&A
relation to a Danish entity providing a are deals normally registered in the
negative pledge to a lender to support name of the holder and registered in the
the financing that will be raised post- shareholders’ register (which is often a
acquisition. In general, the Danish financial word-document or an excel-spreadsheet),
assistance prohibition does not extend to and in such cases (i.e., a transfer of a
restrictive covenants, including negative share that has not been issued through a
pledges, undertaken by the target company securities depository or for which no share
in connection with the acquisition certificate has been issued) the transfer will
financing. In some circumstances, however, be perfected once the target company (or
the Danish Business Authority has noted the keeper of the register of shareholders,
(in an old case) that a negative pledge if such a keeper has been designated

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received notice of the share transfer from also applies in case of an acquisition
the buyer or the seller. of a company. Hence, the parties to an
agreement regarding the acquisition of
It should be noted that a buyer of a
a company are free to choose whatever
registered share may not exercise the rights
language they find suitable for the
conferred on the buyer as a shareholder
acquisition documents. For the sake of a
unless the buyer has been registered in
possible future transfer of the company
the register of shareholders or the buyer
to a foreign transferee, the acquisition
has applied for registration and provided
documents are often drafted in English
sufficient documentation for the buyer’s even if both parties are Danish.
acquisition. However, this does not apply
to the right to receive dividends and other Generally, corporate documents to be filed
distributions and the right to subscribe for with the Danish Business Authority may
new shares in connection with a capital be drafted in Danish, English, Norwegian
increase. and Swedish. However, certain corporate
documents must be in Danish, Norwegian
25. Are there any incentives (such or Swedish language, and specific parts
as tax exemptions) available for of the corporate documents must be in
acquisitions in your jurisdiction? Danish (e.g., the objects of a company).
In Denmark, it is not required to pay any Corporate documents may be (and is
stamp duty or share transfer tax, when frequently) prepared in a dual language
acquiring shares. Similar, the sale of shares Danish/English-version with the Danish
would as a main rule not trigger any capital text as the prevailing test in case of
gains taxation for foreign investors. discrepancies.

Further, an attractive incentive for 27. Can acquisition documents be

foreign investors is the participation governed by a foreign law?
exemption regime. Most often dividends Danish contract law contains a basic
are irrespective of ownership percentage principle of freedom of contract, which
tax exempt and not subject to Danish entails that the contracting parties may
withholding tax. agree on whatever they want in whatever
F. Enforceability way they wish unless there are mandatory
rules or requirements governing otherwise
26. Can acquisition documents be (the parties may for example not opt-out
executed in a foreign language? of the Danish Act on Employees’ Rights in
the event of Transfers of Undertakings).
Danish law generally respects the principle
The parties to a transfer of a company
of freedom of contract. As a rule, Danish
are free to insert a choice of law clause in
contracts do not require a specific form or
the acquisition documents. Hereby, it is
content, and the contracting parties are possible for the acquisition documents to
free to agree on the terms and conditions be governed by the law of a state other
of the contract. than Denmark.
As such, there are by default no formal 28. Are arbitration clauses legally
requirements for a contract to be binding permissible or generally included in
upon the parties. In this sense, an oral acquisition documents?
agreement is just as binding upon the
parties as a written agreement (but it Arbitration clauses are legally permissible
can obviously be more difficult to prove and are generally included in acquisition
the terms of an oral agreement). This documents.

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The parties generally agree on arbitration, that meet these requirements are
and if Danish arbitration is chosen then the considered “qualified electronic signatures”.
arbitration will normally be administered When submitting certain digitally signed
by the Danish Institute of Arbitration in corporate documents to the Danish
accordance with the Rules of Arbitration Business Authority, the certificate that
adopted by the Board of the Danish verifies the identification of the signatory
Institute of Arbitration. and the time of the signature, etc., must be
The rules of arbitration are available on included.
the website of the Danish Institute of G. Trends and Projections
Arbitration (https://voldgiftsinstituttet.
dk/en/). The rules are available in Danish 30. What are the main current trends in
and English. The website also contains a M&A in your jurisdiction?
calculator of arbitrator and mediator fees General M&A transaction deal flow seems
and a list of the administrative costs to be to have picked up in 2024 (although some
paid to the Danish Institute of Arbitration. deals did not materialise due to lack of
A reason to choose arbitration is that alignment on valuation of target, e.g.,
the parties can agree that the arbitration due to poor current trading updates and
proceedings and the award are to be reluctancy to accept target projections).
kept confidential, as opposed to legal Likewise, the beginning of 2025 has already
proceedings before the Danish courts, seen several notable deals being executed.
which are generally public. Furthermore,
However, we are generally seeing a
Denmark is a party to the Convention
decrease in transaction activity within the
on the Recognition and Enforcement of
otherwise flourishing renewable energy
Foreign Arbitral Awards, also known as
sector in Denmark, which is mainly driven
the “New York Arbitration Convention”
by certain sub-industries, e.g. PV projects
or the ”New York Convention” regarding
(solar energy) or offshore wind, due to lack
recognition and enforcement of foreign
arbitral awards and the referral by a court to of viable business cases caused by a general
arbitration. increases in costs. On the other hand,
other sub-industries are making significant
29. Are there any specific formalities progress and experiencing traction, in
for the execution of acquisition particular with respect to Carbon Capture
documents? Is it possible to and Storage (CCS) and Battery Energy
remotely/digitally sign documents? Storage Systems (BESS).
There are no formal requirements for
a contract between the parties to an
acquisition of a company to be valid. Hence, 31. Are any significant development
there are no formal requirements for digital or change expected in the near
signatures of such contracts. However, a future in relation to M&A in your
digital signature should ensure a sufficient jurisdiction?
level of credibility and authenticity Exciting times lie ahead in 2025 with signs
considering its importance as proof of the of upwards trajectory and PE firms coming
agreement. under pressure (by limited partners) to sell
In terms of corporate documents regulated their aging portfolio investments before
by the Danish Companies Act, such raising new funds, albeit uncertainties to
documents must meet certain technical current momentum remains, especially
requirements, which are described in more due to geopolitical tensions and the
detail in the eIDAS regulation. Signatures development in interest rates.

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ECUADOR
AGUILAR CASTILLO LOVE

Alfredo Larrea-Falcony Juan David Polit Francisco Játiva Yánez Diego Dueñas Rosales
Partner Partner Associate Associate
alf@ jdp@ fjy@ ddr@
aguilarcastillolove.com aguilarcastillolove.com aguilarcastillolove.com aguilarcastillolove.com

A. General The most common types of corporate

entities in Ecuador are (i) the stock
1. What is the main legal framework company or corporation, known as
applicable to companies in your “Sociedad Anónima” (which uses the S.A.
jurisdiction? initials), (ii) the limited liability company,
In Ecuador, the corporate regime is referred to as “Sociedad de Responsabilidad
primarily regulated by the Companies Limitada” or “Compañía Limitada” (Cía.
Law. However, as supplementary statutes, Ltda.), and (iii) recently the Simplified
we need to consider the Civil Code which Shares Company (“Sociedad por Acciones
generally incorporates private law rules, the Simplificada”, with the initials “S.A.S.”). The
Organic Law of the Internal Tax Regime and key distinctions among them are as follows:
its regulations, and, when applicable, the
Sociedad Anónima (“Corporation”): In
Organic Law for the Regulation and Control
a corporation, shareholders’ liability is
of Market Power.
limited to the capital they have contributed
2. What are the most common types to acquire shares. Shareholders are not
of corporate entities (e.g., joint personally liable for the company’s debts or
stock companies, limited liability obligations beyond their investment (with
companies, etc.) used in your limited exceptions in which is possible
jurisdiction? What are the main to pierce the corporate veil). Shares in a
differences between them (including joint stock company are easily transferable
but not limited to with regard to the with the endorsement of the title and the
shareholders’ liability)? corresponding registration in the book of

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shares and shareholders of the company. B. Foreign Investment

Shares may be traded in the stock market
in compliance with the relevant legal 3. Are there any restrictions on foreign
requirements. Corporations are typically investors incorporating or acquiring
governed by the general shareholders the shares of a company in your
meeting, and may have a more complex jurisdiction?
governance structure, including a board of
Generally, Ecuador displays an open and
directors. A corporation must retain 10%
inclusive attitude towards foreign investors
of its yearly profits to create a reserve fund
until it reaches an amount equivalent to incorporating or acquiring shares of a
half of its social capital. local company. Laws regulating foreign
investments provide equal conditions
Sociedad de Responsabilidad Limitada regarding the management, operation,
(Limited Liability Company): In a limited expansion, and transfer of foreign
liability company, partners have also limited investments, fair and equitable treatment,
liability, similar to that of a corporation.
ensuring nondiscrimination on a level
However, transfer of ownership interests in
playing field for both domestic and
a limited liability company requires certain
international investors.
formalities, including the unanimous
consent from all partners when the transfer However, regulated, or strategic
is in favor of a person not already a partner sectors – such as energy in all its forms,
of the company (and until recently, a public telecommunications, non-renewable
deed before a notary public was also natural resources, transportation and
mandatory). A limited liability company refining of hydrocarbons, biodiversity and
shall keep 5% of its yearly profits to create genetic heritage, radioelectric spectrum,
a reserve fund until it reaches 20% of its
water – do contain certain restrictions to
capital.
foreign investments (e.g., transactions
Sociedad por Acciones Simplificada may require prior notice or approval from
(Simplified Shares Company): Additionally, relevant regulatory bodies.) This layered
a new type of company known as a approach, commonly seen across Latin
“Sociedad por Acciones Simplificada” has American nations, balances national
been made available and regulated in interests with the goal of global integration
Ecuador. The S.A.S. is designed to simplify and requires that investors keep-up with
business creation and reduce the costs of sector-specific guidelines.
incorporation and management. Notably,
S.A.S. entities are highly flexible regarding 4. Are there any foreign exchange
the number of shareholders (they may restrictions or conditions applicable
be incorporated by a sole shareholder), to companies such as restrictions to
bylaws provisions, amount of capital, foreign currency shareholder loans?
and formalities for corporate actions
that may be achieved through private Adopting the USD has simplified foreign
documents. In a S.A.S., shareholders can exchange considerations in Ecuador. While
determine the company’s management registering foreign investments with the
and administration through the social Central Bank is optional, it is recommended
contract or a shareholders’ agreement. for facilitating profit repatriation and
Unlike corporations and limited liability adhering to documentation and reporting
companies, a Sociedad por Acciones standards. Foreign currency shareholder
Simplificada (“S.A.S”.) is not obligated to loans are generally permissible, subject to
establish a legal reserve fund. customary reporting and documentation

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requirements. In addition, individuals and also elect legal representatives (or

corporations in Ecuador are obligated to board members depending on the
declare and pay the capital outflow tax bylaws) and oversee their actions.
(known as Impuesto a la Salida de Divisas or
b) Board of Directors: Common in larger
ISD), recently reduced from 5% to 2.5%, for
corporations (Sociedades Anónimas),
certain imported capital goods and to 0%
the board supervises and manages
for imports of pharmaceutical products. All
the company’s affairs, implements the
other taxpayers sending currency abroad shareholders’ resolutions, and oversees
are subject to the 5% rate. the executive management. The
5. Are there any specific considerations number and roles of board members
for employment of foreign are dictated by the company bylaws.
employees in companies c) Managers or Administrators: Ecuadorian
incorporated in your jurisdiction? law requires that any legal entity,
Generally, employment of foreign including companies, must have 1
employees is permissible in Ecuadorian (one) or more legal representatives.
companies provided proper work visas The common titles for the office of
and work permits are obtained. There are, legal representatives are president
however, specific considerations for foreign and general manager, depending on
employees in Ecuador, such as the provision the bylaws. The legal representatives
generally have the power to bind
set forth in the Labor Code which mandates
the company when they act on their
foreign staff in transport sector should
behalf. The appointment letter of a
not exceed 20% of the total workforce.
legal representative of a company is to
Exceptions exist for technical or specialized
be registered before a public registry,
roles where local expertise might not be
such as the Mercantile Registry or the
readily available.
Superintendence of Companies.
C. Corporate Governance Key Liability Issues:
6. What are the standard management a) Directors’ and Managers’ Liability:
structures (e.g., general assembly, Both board members and managers
board of directors, etc.) in a corporate can be held liable for acts of fraud,
entity governed in your jurisdiction abuse of authority, negligence, and
and the key liability issues relating violation of the law or company bylaws.
to these (e.g., liability of the board If they act within the confines of their
members and managers)? authority and in the best interests of
In Ecuador, the foundation of corporate the company, they usually benefit from
governance lies in the dualistic system of a shield against personal liability.
the general assembly and the board of b) Joint Liability: In certain circumstances,
directors: board members may be jointly liable
a) General Assembly or Shareholders’ for company obligations, especially if
legal regulations and company statutes
Meeting: This is the supreme authority
aren’t followed.
in corporate entities, responsible for
major decisions like amending bylaws, c) Ecuadorian Criminal Code recognizes
approving financial statements, or the concept of criminal liability for legal
changing the capital structure. They entities, especially in cases of money

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laundering, bribery, or environmental are desired for specific shareholders,

offenses. Corporations must ensure these must be expressly stipulated in the
robust internal controls to avoid corporate documents and comply with the
punitive measures. relevant legal requirements. In summary,
while it is possible to establish agreements
7. What are the audit requirements in
for differentiated voting as agreed upon
corporate entities?
within the company, Ecuadorian law
Entities may perform optional internal adheres to the principle that voting is
audits to ensure compliance and oversight. based on the ownership of shares or
External audit, however, is governed by the participations by each shareholder or
Superintendence of Companies, Securities, partner unless valid provisions to the
and Insurance, and it is mandatory for those contrary are established.
companies that exceed US$100,000 in total
assets for the previous fiscal year. These 9. Are there any specific statutory rights
audits are to be conducted by accredited available to minority shareholders
firms registered by the Superintendence available in your jurisdiction?
and, upon completion, audit reports, paired In Ecuador, minority shareholders enjoy
with the company’s financial statements, certain statutory and legal rights aimed at
are submitted for further revision. safeguarding their interests. These rights,
D. Shareholder Rights as established in the Companies Law,
encompass various prerogatives. Firstly,
8. What are the privileges that can there is the right to negotiate shares, with
be granted to shareholders? In the premise of ensuring the validity of
particular, is it possible to grant agreements between shareholders that
voting privileges to shareholders for establish conditions for share transactions.
appointment of board members? It is relevant to note that such agreements
In accordance with the Ecuadorian will not have opposable effects against
Companies Law, privileges can be third parties, although this does not
granted to shareholders, including the exempt the possibility of incurring civil
possibility of granting voting privileges liabilities, without detracting from the
in the appointment of board members. preservation of the inherent rights of
These privileges may be outlined in the minority shareholders.
company’s bylaws or in shareholder Additionally, the right to convene
agreements duly registered with the shareholder meetings is conferred, as
Superintendence of Companies, Securities, well as the right to challenge decisions
and Insurance. perceived as detrimental to the company
However, it is important to note that, as a or individual interests. Likewise, the
standard practice, Ecuadorian law stipulates right to access relevant financial and
that each shareholder or partner should be accounting information is recognized,
considered when voting in proportion to along with the right to receive dividends
the number of shares or participations they in proportion to the ownership stake in
hold, depending on the type of company. In the company. Together, these rights form
other words, voting is generally distributed a legal framework aimed at protecting
based on the shareholder’s or partner’s and safeguarding the position of minority
ownership of shares or participations. shareholders in companies.
Therefore, if differentiated voting privileges

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Furthermore, to enhance the protection of Nevertheless, the concept of diligence in

minority shareholders, the law stipulates the fulfillment of obligations is recognized
that the company’s bylaws serve as a in the Civil Code, primarily in the context of
supplementary norm to guarantee the legal relationships between private parties.
enjoyment of rights and limit abusive
In addition to the aforementioned, with
or fraudulent practices. This provision
regards to bankruptcy matters, Ecuadorian
constitutes an additional element in
legislation contemplates the possibility
the defense of minority shareholders’
of initiating 5 (five) types of bankruptcy
rights, providing them with a solid and procedures, namely preventive, which
comprehensive legal framework to can be applied to individuals, commercial
safeguard their interests in the corporate companies, and exceptional cases, as well
context. as voluntary and necessary categories.
10. Is it possible to impose restrictions These instances are duly regulated in the
on share transfers under the Organic General Code of Processes.
corporate documents (e.g., articles E. Acquisition
of association or its equivalent in
your jurisdiction) of a company 12. Which methods are commonly used
incorporated in your jurisdiction? to acquire a company, e.g., share
transfer, asset transfer, etc.?
Yes, it is possible to impose restrictions on
the transfer of shares under the corporate The most commonly used method to
documents of a company incorporated in acquire a company is the transfer of shares.
Ecuador, such as the bylaws or shareholders’ Nevertheless, depending on the financial
agreements. These restrictions may include or legal situation of the target, it is also
preemption rights in the event of a sale of usual to purchase only assets, tangible and
shares, limitations on the transfer of shares intangible, to avoid any hidden liabilities,
to third parties, or specific requirements such as labor or tax debts.
that must be met before allowing the Companies may also be acquired through
transfer. However, these restrictions must mergers, in which case the purchaser
be reasonable and in compliance with absorbs the target company, which in turn
applicable Ecuadorian laws. disappears. In this case, the purchaser
11. Are there any specific concerns or also assumes all of the target’s assets and
other considerations regarding the liabilities.
composition, technical bankruptcy Recently, the Ecuadorian Commerce Code
and other insolvency cases in your introduced the sales of a business as a
jurisdiction? going concern whereby all or part of a
business, assets and liabilities, may be sold.
In the context of mergers and acquisitions
in Ecuador, it is crucial to consider aspects 13. What are the advantages and
related to shareholder composition and disadvantages of a share purchase
the potential implications in cases of as opposed to other methods?
insolvency. In Ecuador, it is important to
A share purchase is the fastest method
note that there is no specific legislation
to acquire a company and the one that
exclusively dedicated to the regulation of
requires minimum formalities, thus
bankruptcy processes.
reducing closing times and sometimes
costs associated with the purchase of assets

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(which in most cases require to be made • The shares of national media companies
through public deeds which have to be may not be transferred to foreign
registered in the land registrar and pay organizations or companies domiciled
the corresponding asset transfer taxes). outside of Ecuador, or to non-resident
This can be a lengthy and costly process; foreign individuals.
nevertheless, it reduces any risks from • Companies operating in the
hidden liabilities. Ecuadorian electric sector (generation,
The main disadvantage of a share purchase transmission, and distribution) may
is that all assets and liabilities of the target not transfer their shares without the
are transferred to the purchaser, particularly approval of the Ministry of Energy and
labor, tax, and environmental liabilities. Mines.

14. What are the approvals and 15. What are the regulatory
consents typically required (e.g., competition law requirements
corporate, regulatory, sector applicable to private acquisitions in
based and third-party approvals) your jurisdiction?
for private acquisitions in your All private acquisitions that exceed the
jurisdiction? thresholds set by the Ecuadorian antitrust
Except in the case of limited liability authority are required to obtain an
authorization prior to the acquisition, in the
companies, which require unanimous
following cases:
consent of the partners to authorize the
transfer of shares to non-partners, there are (a) When, as a consequence of the
no corporate approvals required for this purchase, the purchaser acquires
purpose, unless a shareholder agreement or its participation increases to an
has been executed, whereby the other amount equal to or higher than 30%
shareholders have a first right of purchase, of the relevant market for the product
or consent form other shareholders is or service, at a national level or in a
required to transfer the shares to third defined market within the national
parties. territory.

Entities engaged in certain economic (b) When the total joint volume of the
sectors, such as the following, require the business of the participants exceeds
approval of the corresponding authority to USD 90,000,000 in the previous fiscal
transfer their shares: year. The threshold increases for
financial and insurance companies.
• Hydrocarbons: companies for
downstream and upstream activities 16. Are there any specific rules
require the approval from Ministry of applicable for acquisition of public
Energy and Mines. companies in your jurisdiction?

• Insurance companies may transfer the Purchases of shares of companies listed

totality of their business with prior in a stock exchange in Ecuador, that allow
approval from the Superintendence of the purchaser to take control of a company
in one or successive purchases, and when
Companies, Securities and Insurance.
a person or a group of persons acquires a
• The assignment of the totality of assets significant number of shares with voting
and liabilities made by a financial rights in a company, must be undertaken
entity requires approval from the through the public offering procedure set
Superintendence of Banks. forth in the Stock Market Law.

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17. Is there a requirement to disclose under the purchase agreement or

a deal, for instance to regulatory (ii) the performance by any of the
authorities? Is it possible to keep a parties’ obligations under the purchase
deal confidential? agreement or that encumbers,
impedes or delays consummation of
Yes, all share transfer deals must be
the transactions contemplated in the
reported to the Superintendence of
purchase agreement, or that makes
Companies and the Internal Revenue
consummation of the transaction
Service within 30 days of the transfer;
unviable.
consequently, it is not possible to keep
a deal confidential. The report includes (c) The representations and warranties of
disclosing the new property structure the seller/purchaser in the purchase
until the ultimate beneficiary owner, as agreement are true and correct in all
well as the management at each level of respects as of the date of the purchase
ownership. agreement and must be true and
correct in all respects as of the closing
18. Can sellers be restricted from
date.
shopping around during a
negotiation process? Is it possible (d) Purchaser/seller shall have fully
to include break fee or other performed all of their obligations
penalty clauses in acquisition and covenants under the purchase
documents to procure deal agreement.
exclusivity?
(e) Since the date of the purchase
Sellers may be restricted from shopping agreement, no material adverse effect
around during a negotiation process if the has occurred.
parties agree. Otherwise, sellers may shop
(f) All corporate authorizations have
around during a negotiation process. It
been obtained for the transactions
is possible to include break free or other
contemplated in the agreement.
penalty clauses in acquisition documents to
procure deal exclusivity. (g) The consummation of the transactions
contemplated in the purchase
19. What are the conditions precedent
agreement shall not have been
in a typical acquisition document?
enjoined or prohibited by applicable
Is it common to have conditions to
law or any judgment, injunction, order
closing such as no material adverse
or decree.
change?
20. What are the typical warranties
Conditions precedents are widely used. The
and limitations in acquisition
most common include:
documents? Is it common to obtain
(a) No governmental authority shall warranty insurance?
have issued any judgement, order or
The typical warranties and limitations
decision that is in force and has the
include:
effect of rendering the closing illegal or
otherwise restricting or preventing its (a) Solvency
consummation.
(b) No conflicts
(b) No proceeding or litigation shall exist or
(c) Government approvals
be pending or threatened with respect
to (i) the transactions contemplated (d) Litigation

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(e) Authorization, Binding Effect company’s legal representative. The legal

representative shall register the transfer
(f) Organization and goodstanding
in the book of shares and shareholders of
(g) Compliance with anti-corruption laws the company, and will in turn inform on
the transfer to the Superintendence of
(h) Brokers of finders
Companies, through an online application
(i) No undisclosed liabilities available at the Superintendence’s website.
If the target is a limited liability company,
(j) Tax matters
the share transfer must be registered with
(k) Employment and labor matters the Mercantile Registrar.
(l) Environmental, health and safety If the purchaser is a foreign legal entity,
matters in addition to the share transfer letter,
the purchaser must also provide a
21. Is there a requirement to set a
good standing certificate issued by the
minimum pricing for shares of a
target company in an acquisition? competent authority of its home country,
and appoint a special representative in
The parties may freely set the price for Ecuador, empowered to represent the
the purchase of the shares of the target foreign shareholder before Ecuadorian
company; nevertheless, for purposes authorities and to report its ownership
of calculating the tax on capital gains, structure until the ultimate beneficiary
Ecuadorian tax law provides that the price owner. The share transfer will not
cannot be less than the average patrimonial be approved if these documents are
value of the shares. The patrimonial value not presented and approved by the
is calculated by the target company’s net Superintendence.
worth on December 31st of the year prior
to the transfer, divided by the number of 24. Are there any incentives (such
outstanding shares issued by the target as tax exemptions) available for
company. acquisitions in your jurisdiction?

22. What types of acquisition financing No, there are no tax incentives or
are available for potential buyers in exemptions for the acquisition of shares
your jurisdiction? Can a company or assets in Ecuador. Sales of businesses as
provide financial assistance to a ongoing concerns are exempt from value
potential buyer of shares in the added tax (VAT).
target company? F. Enforceability
Potential buyers may obtain any type of 25. Can acquisition documents be
financing, domestically or from abroad, executed in a foreign language?
from financial or non-financial entities, by
way of loans, capital contributions, etc. Yes. Acquisition documents may be
executed in a foreign language.
23. What are the formalities and
procedures for share transfers and 26. Can acquisition documents be
how is a share transfer perfected? governed by a foreign law?
For corporations, seller and purchaser Submission to foreign law is not expressly
must deliver the endorsed share prohibited. Furthermore, regarding
title, or a share transfer letter (either international arbitration, the Arbitration
physically or electronically), to the target and Mediation Law establishes that the

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parties are free to agree to substantive However, the transfer of a business as

law without any restrictions. Therefore, if a going concern under the Ecuadorian
there is a need for acquisition documents Commerce Code must be made through
to be governed by a foreign law, it would a public deed issued before a notary. The
be advisable to include an international transfer of rights on real estate property
arbitration clause, when it is available (i.e., also requires a public deed, to be registered
when the parties are domiciled in different before the property registrar of the relevant
countries, when a significant part of the county. The transfer of fiduciary rights in a
obligations or the place of the dispute is mercantile trust, which is also a vehicle for
related to a country different to that of an acquisition, also requires this formality.
one of the parties, or when dealing with
international transactions). Finally, as noted, the transfer of shares
of a corporation shall be perfected with
27. Are arbitration clauses legally its registration in the book of shares and
permissible or generally included in shareholders of the company by its legal
acquisition documents? representative. Other types of companies or
Arbitration clauses are legally permissible, entities may need different formalities.
and they are generally included in G. Trends and Projections
acquisition documents. In those cases
where international arbitration is available, 29. What are the main current trends in
the parties are free to choose not only the M&A in your jurisdiction?
substantive law, but also the arbitration The Companies Law has been recently
procedural rules, the language, and updated to reflect the need for expedited
the site of the tribunal (and hence the corporate transactions, including the use
law governing the arbitration itself ). of electronic means, and the reduction of
Ecuador is a signatory to the New York formalities (as it is the case in the use of
Convention (the 1958 Convention on the simplified corporate forms such as the S.A.S.
Recognition and Enforcement of Foreign corporation). We can expect that this trend
Arbitral Awards), and an award issued will continue.
at a foreign jurisdiction may be directly
enforced in Ecuador. Moreover, under Environmental concerns, corporate
the Arbitration and Mediation Law, an governance, diversity, and social
international arbitration award may be responsibility, are becoming increasingly
summarily executed, without an exequatur relevant in any type of business transaction,
procedure, following the same enforcement including M&A. We have also witnessed
procedures as a last instance judgement the development of regulations aimed
from a local court. at reporting corporate structures in
order to avoid money laundering and tax
28. Are there any specific formalities evasion. Antitrust laws and data protection
for the execution of acquisition
regulations are relatively recent and are
documents? Is it possible to
being implemented and enforced.
remotely/digitally sign documents?
30. Are any significant development
In principle, there are no specific formalities
or change expected in the near
for the execution of acquisition contract
future in relation to M&A in your
documents. They may also be signed
jurisdiction?
electronically with the same legal effects of
a handwritten signature, following the Law In Ecuador, there is an ongoing political
on Electronic Trade. discussion on the economic role of the

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government, and on the importance

to be assigned to private investments
for the development of the country.
This has been particularly relevant
regarding public services and what has
been labeled as strategic sectors of the
economy (such as oil and gas, mining,
energy, telecommunications, roads,
and ports infrastructure, where Public
Private Partnerships regulations are being
updated). However, despite such debate, it
has become clear that private investment
through M&A transactions are welcome
and promoted. Investment contracts,
including international arbitration and
legal stabilization clauses, are available in
accordance with certain legal requirements.

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FRANCE
WILLKIE FARR & GALLAGHER LLP

Gabriel Flandin Ji-Soo Kim Hugo Kerbib

Partner Associate Associate
[email protected] [email protected] [email protected]

A. General (Autorité de Contrôle Prudentiel et de

Résolution) (“ACPR”) in the banking and
1. What is the main legal framework insurance sector or the Commission
applicable to companies in your for Energy Regulation (Commission de
jurisdiction? Régulation de l’Energie) (“CRE”) for the
Companies’ acquisitions, mergers and energy sector. Additionally, certain types
divestments are mainly governed by of assets also require specific formalities to
contract law as provided by the French make the transfer enforceable against third
Civil Code and the French Commercial parties. This is the case for transfers of real
Code. A major reform of contract law estate assets which need to be completed
occurred in 2016 aiming at simplifying before a notary public.
and modernizing the applicable rules of
Public mergers and acquisitions and capital
French civil and commercial contractual
market transactions must also comply with
laws. This reform amends, creates and
the French Monetary and Financial Code
deletes numerous articles of the French
and the regulations of the Financial Markets
Civil Code and enshrines several concepts
Authority (Autorité des Marchés Financiers)
in the legislation, such as the duty of pre-
(“AMF”), in particular its “General
contractual information or the generalized
Regulation” (Règlement Général de l’AMF).
concept of hardship in the context of both
The AMF regulates transactions carried out
civil and commercial contracts.
by listed companies as well as documents
Mergers and acquisitions are also issued by listed companies in the context
supervised by a number of regulators in of certain transactions, such as initial public
specific sectors, such as the Prudential offerings, capital increases, mergers or
Supervision and Resolution Authority demergers.

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Corporate law and financial regulation are limited companies) and which enables
based on a set of rules that are harmonized its shareholders to tailor the company to
at the European Union level with variable their own needs in terms of management
level of national specificities. structure and shareholder relationships.
The only required body is the chairman
2. What are the most common types
(président) who can be either a natural
of corporate entities (e.g., joint
person or a legal entity. The by-laws may
stock companies, limited liability
also provide for the appointment of one
companies, etc.) used in your
or several general managers, who may be
jurisdiction? What are the main
entrusted with the same authority and
differences between them (including
but not limited to with regard to the powers as that of the chairman. Additional
shareholders’ liability)? governance bodies may be created to
address any particular needs. An SAS can
The choice of corporate entity mainly be set up with a single shareholder (being
depends on the scale of the business a natural person or a legal entity). There
venture which will be undertaken. The is no minimum capital requirement to
three main types of corporate entities, all incorporate an SAS. An SAS cannot be listed
of which are limited liability companies, are on public markets but it is authorized to
the following: offer securities to qualified investors or to a
The private limited liability company restricted circle of investors.
(société à responsabilité limitée) (“SARL”), The public limited company (société
which is commonly used for small and mid- anonyme) (“SA”) is a type of corporate
size businesses. The management structure entity used by large businesses and listed
of an SARL, its share capital composition companies. SAs are heavily regulated by
and the transfer of its shares (parts sociales) the Commercial Code (on the contrary to
are prescribed by law. SARLs are run by one the SAS) and their structure is prescribed
or several managers, the number of which by law. SAs are managed either by a board
is set out in the by-laws of the company. of directors (conseil d’administration) and
Transfers of shares are generally possible a general manager (directeur général) or
but will require the approval of a simple by a management committee (directoire)
majority of the shareholders (unless the overseen by a supervisory board (conseil
by-laws of the company require a more de surveillance). It is not possible to set
stringent majority) in the event of a transfer up an SA with a single shareholder as the
to a third party. SARLs can be set up with a minimum number of shareholders is 2 (7
single shareholder (being a natural person if the SA is listed). The minimum capital
or a legal entity) but there is a legal cap of requirement is EUR 37,000. SAs can be
100 shareholders. There is no minimum listed on stock exchange markets and they
capital requirement to incorporate an SARL.
can offer their securities to the public.
SARLs cannot be listed on public markets.
Several other corporate structures exist
The simplified joint stock company (société
and may be used to meet specific legal or
par actions simplifiée) (“SAS”) is more
tax needs, including partnership (société en
commonly used for larger businesses.
commandite simple), partnership by share
The SAS is a flexible type of corporate
(société en commandite par action), non-
entity which is loosely regulated by the
commercial company (société civile).
Commercial Code (mainly via references
to certain articles applicable to public

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B. Foreign Investment - the crossing (upward), directly

or indirectly, alone or as part of a
3. Are there any restrictions on foreign concerted action, of the threshold of
investors incorporating or acquiring 25% of the voting rights of a legal entity
the shares of a company in your governed by French law (the latter
jurisdiction? applying only for investors outside the
As a general principle, foreign investments EEA or the EU); and
are not restricted in France. - since a decree dated December 28,
However, French regulation provides for an 2023, the crossing (upward), directly
obligation to obtain the prior authorization or indirectly, alone or as part of a
of the French Minister of Economy concerted action, of the threshold of
10% of the voting rights of a legal entity
(MINEFI) for investments considered to
governed by French law (the latter
be strategic in France. Specifically, the
applying only for investors outside the
MINEFI authorization must be sought when
EEA or the EU).
an investment meets three cumulative
conditions relating to (i) the investor, (ii) The list of activities deemed to be strategic
the transaction itself and (iii) the strategic is wide and subject to interpretation. It
activity carried out by the French target is set out in article R. 151-3 of the French
company of the transaction. Monetary and Financial Code and include
for instance the defense, aerospace,
For purposes of foreign investment
telecommunications and public health
regulations, an investor may be a non-
sectors.
French individual, a French individual
who is not a resident of France within As a condition for granting its authorization,
the meaning of tax regulations, a legal the MINEFI may require that the investor
entity governed by foreign laws or a legal agrees to certain undertakings meant to
entity, governed by French law, that is protect national interests, notably in order
controlled by one or more person(s) or to ensure the continuity of the target
entity(ies) mentioned above. In addition, company’s business activities and assets.
any person or legal entity belonging to a Should a transaction subject to the
chain of control (from the direct investor French foreign investment regulation
to the ultimate controller) is deemed to be be completed without the MINEFI
an investor within the meaning of French authorization, the transaction could be
foreign investment regulations. declared null and void and the investor
The investments that require the MINEFI could be prosecuted. The MINEFI also has
authorization are those made by an specific powers in case of breach of an
investor that result in: undertaking granted by an investor.

- the acquisition of control of a legal In cases where a transaction requires the

MINEFI authorization, such authorization
entity governed by French law within
shall be required as a condition precedent
the meaning of article L.233-3 of the
and the filing may be done as soon as the
French Commercial Code;
parties have agreed on the main terms
- the acquisition of all or part of a line of the transaction. The process for the
of business of an entity governed by granting of the MINEFI authorization is
French law; subject to stringent deadlines and, in

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cases of undertakings, may last around 4 foreign employees must be enrolled with
months after the submission of a complete the French social security system and
application. pay French taxes (as applicable) on their
income. They are also subject to French
Finally, note that the MINEFI may reject an
employment regulations, such as minimum
application for authorization by a reasoned
wage or working time.
decision on various grounds. However, such
rejections are rare in practice. C. Corporate Governance
4. Are there any foreign exchange 6. What are the standard management
restrictions or conditions applicable structures (e.g., general assembly,
to companies such as restrictions to board of directors, etc.) in a corporate
foreign currency shareholder loans? entity governed in your jurisdiction
and the key liability issues relating
There are no general restrictions under
to these (e.g., liability of the board
French law regarding the use of foreign
members and managers)?
currency as there are few controls in
France over foreign exchange transactions. The standard management structure of the
Payment of consideration is generally made main corporate entities in France, including
in euros but payments in other currencies the SA, typically includes the following
(or payment in kind) are possible. However, bodies:
the euro equivalent of the purchase
- The general assembly (assemblée
price would need to be determined (or
générale): This is the highest decision-
determinable) as it will be required by making body of the company,
the tax authorities for purposes of tax comprising all the shareholders.
registration. It meets at least once a year and
5. Are there any specific considerations is responsible for approving the
for employment of foreign company’s annual financial statements,
employees in companies appointing or dismissing members
incorporated in your jurisdiction? of the board of directors, voting on
their compensation as well as on
Employing foreign employees in France the compensation of the CEO of the
involves various legal and administrative company, and setting the company’s
considerations that need to be addressed strategic direction. The general
to comply with French labor laws and assembly is the corporate body entitled
regulations. Foreign employees (i.e., to modify the by-laws of the company.
employees whose citizenship is outside the
EU or the EEA) must have the legal right - The board of directors (conseil
to work in France. In practice, this means d’administration): The board of
that they need to obtain a residence permit directors is responsible for the overall
(carte de séjour) and/or a work permit management of the company,
including setting the company’s
(autorisation de travail) depending on
objectives and policies, overseeing the
their situation, especially (i) the length of
performance of the management team,
their stay, (ii) their nationality and their (ii)
and making key decisions relating to
functions and qualifications.
the company’s operations. The board of
Employers must ensure that their directors is typically composed of non-
employees have a valid work permit before executive members, and at least half of
they start their employment. In principle, the members must be independent.

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- A chief executive officer (directeur is entrusted with almost all the power or
général) or “CEO” who is responsible very sophisticated with boards and specific
for the day-to-day management of the committees.
company and the implementation of Managers (i.e., either the CEO or the
the strategic objectives set by the board management committee members) and
of directors. The CEO is accountable members of the board of directors or the
to the board of directors. The CEO is supervisory board have a duty to act in
appointed by the board of directors and the best interests of the company and its
represents the company vis-vis third shareholders. They may be held liable,
parties. individually or jointly, if they breach such
duty or act negligently, resulting in harm to
In some SAs, in addition to the general
the company or its shareholders. They may
assembly, the management body is
also be held liable in the event of breach of
composed of the following bodies (which the applicable laws and regulations or of
therefore replace the board of directors and the by-laws of the company. For example,
the chief executive director): a manager who misuses company funds or
- The management committee (directoire) engages in fraudulent activities can be held
which is a group of senior executives liable for damages and may be subject to
chaired by a president responsible criminal charges. As for shareholders, they
generally have no personal liability, which
for implementing the company’s
means that they are not liable for the debts
strategy and managing its day-to-
or obligations of the company apart from
day operations. The management
their initial financial contribution to the
committee members and president are share capital. In rare circumstances, French
appointed by the supervisory board. courts have held shareholders liable when
The chairman of the management they considered that they were acting as de
committee represents the company vis- facto directors (dirigeants de fait), i.e., that
vis third parties. they were taking management decisions
- The supervisory board (conseil de on behalf of the company. However,
these cases are limited in number and the
surveillance): Similar to the board of
courts generally impose a strict standard
directors, the supervisory board’s
in determining that a shareholder acts as
role is to monitor the actions of the
a de facto director. Shareholders may also
management committee and to ensure be held liable if they are de jure directors
that they are acting in the best interests (dirigeants de droit), i.e., if they have been
of the company and its shareholders. appointed as such.
SARLs, on the other hand, have a simpler 7. What are the audit requirements in
management structure. They are managed corporate entities?
by one or more managers (gérant(s))
who are responsible for the day-to- A company must elect a statutory auditor
day management of the company and whenever it is (i) listed on stock markets or
represent the company vis-vis third parties. it (ii) reaches cumulatively two of the three
following thresholds (the 5/10/50 rule):
Managers are appointed directly by the
applicable since 2024
shareholders.
- a total balance sheet exceeding EUR
SAS governance can be tailored to the
5,000,000;
particular needs of its shareholders and
governance structure range from basic - a total turnover excluding taxes
structure where the Chairman (president) exceeding EUR 10,000,000; and

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- an average headcount exceeding 50 percentage of share capital held by each of

employees. them.
In addition, companies controlling other French law however allows for the
companies must elect a statutory auditor possibility to deviate from such
whenever the group that it forms with the proportionality principles either by creating
controlled companies exceeds two of the specific class of shares and/or by granting
three thresholds of the 5/10/50 rule. specific rights to certain designated
Finally, controlled companies that (i) exceed persons. In a SAS, which is the corporate
two of the three following thresholds, form providing for the highest flexibility,
i.e., a total balance sheet exceeding EUR the sole limits regarding disproportionate
2,500,000, a total turnover excluding taxes allocation of rights seem to be (i) the
exceeding EUR 5,000,000 and an average prohibition to fully deprive a shareholder
headcount exceeding 25 employees, and (ii) from financial rights (clause léonine) and (ii)
belong in a group which exceeds two of the the prohibition to forbid the attendance
three thresholds of the 5/10/50 rule must (not voting) to shareholders meeting. Other
also elect a statutory auditor. Companies corporate structures provide for additional
controlled by a parent company which limitations.
have already elected statutory auditors do
not need to appoint supplementary ones, 9. Are there any specific statutory rights
provided that in certain circumstances it available to minority shareholders
may be required to appoint two separate available in your jurisdiction?
and independent auditors.
As indicated above, absent specific
The auditor can be any person (i.e., a natural provisions, the principle is that each share
person or a legal entity), but where the entitles to one vote. In French SAS, the
auditor is a legal entity, an individual must bylaws define the minority rights and there
be appointed to sign reports and bear the are almost no minimum requirements
responsibility.
other than (i) right to attend shareholders’
D. Shareholder Rights meetings and (ii) right to receive minimum
accounting information.
8. What are the privileges that can
be granted to shareholders? In In French SA, most of the decisions
particular, is it possible to grant (including appointment of all the board
voting privileges to shareholders for members) are taken by a majority vote
appointment of board members? (50%+1 share), resulting in minority
Shareholders rights include financial rights shareholders not being able to block a
(in particular, right to receive their share decision. However, decisions resulting in a
of dividends) and political or governance change to the by-laws require a two-third
rights (in particular, the right to vote in majority vote, which can therefore be
shareholders’ meeting, information rights blocked by minority shareholders holding
and the right to bring a legal against to one third (+1 share). In addition, and
defend their or the company’s interests). depending on ownership level, minority
Except in specific structure such as shareholders may request access to
partnership and absent specific provisions certain information, ask questions to the
in the by-laws, all the rights referred management, and, in certain situations,
to above are allocated between the request an audit or bring legal actions
shareholders proportionally to the against management.

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10. Is it possible to impose restrictions In the event of the opening of judicial

on share transfers under the insolvency proceedings, shareholders
corporate documents (e.g., articles may be required to comply with certain
of association or its equivalent in obligations such as paying any balance
your jurisdiction) of a company of the share capital not fully paid-up
incorporated in your jurisdiction? yet. Within the specific framework of
In SAS and SAs, shares are freely reorganization proceedings (the debtor is
transferable unless the by-laws provide deemed cash-flow insolvent) and under
for any restrictions. In SARLs, the transfer certain conditions:
of shares to a third party is subject to
- Shareholders may be required to
the prior approval of the majority of the
shareholders representing at least half of consent to share capital increases to
the shares comprising the share capital, redress the distressed business in favor
unless a stronger majority is provided by of a third party.
the by-laws. - Shares held by de jure managers
(dirigeants de droit) or de facto
By-laws of the company or shareholders’
agreement may provide for other managers (dirigeants de fait) are
restrictions on share transfers, such non-transferable as of the opening
as, for instance, a prior approval of the judgment of the proceeding and may
shareholders, a right of first offer or first only be transferred in accordance with
refusal, a lock-up, or a standstill. Minority the Court’s instructions;
investors also commonly benefit from a - Shareholders may be forced to sell their
tag-along right and are commonly subject shares under very restrictive conditions
to a drag-along right exercisable by the and under the Court’s supervision.
majority investor in case of an exit. A pre-
emption right may also be granted to the In accelerated safeguard and, in other
majority investor in the event of transfer of judicial proceedings concerning companies
the minority investors’ securities. with (i) 250 employees and over EUR
20,000,000 turnover or (ii) EUR 40,000,000
11. Are there any specific concerns or
turnover, it is compulsory to regroup
other considerations regarding the
composition, technical bankruptcy affected parties (i.e., parties impaired by
and other insolvency cases in your the draft restructuring plan) within classes
jurisdiction? of affected parties, each representative
of a sufficient commonalty of economic
Under French insolvency law, six types of interest, to vote on the restructuring draft
proceedings are available: two amicable plan. Within this framework, shareholders
out-of-court proceedings (mandat ad hoc
are regrouped within one or several
and conciliation proceedings) and four
class(es) of “equity holders” (détenteurs
main judicial proceedings (accelerated
de capital) to vote on the draft plan and
safeguard, safeguard, reorganization and
liquidation proceedings). Each of these could see, under certain conditions, a plan
proceedings apply accordingly to the imposed on them through a “cross-class
gravity of the difficulties encountered cram-down” (application forcée interclasse).
by the debtor from minor operational It must be noted that such restructuring
or financial difficulties to cash-flow plan adopted by classes of affected parties
insolvency (cessation des paiements) and cannot impose to shareholders that voted
provide for different level of constraints on against to sell their shares, but it can
shareholder’s rights. impose dilution.

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Negotiations with existing shareholders E. Acquisition

are taking place in light of the so-called
“Absolute Priority Rule” which requires 12. Which methods are commonly used
affected equity classes to be completely to acquire a company, e.g., share
disenfranchised (equity value c. €0) when transfer, asset transfer, etc.?
more senior classes are not fully repaid There are three main methods to acquire
under the plan unless (i) all creditors classes a business in France: (i) a share transfer,
(being by essence more senior than equity (ii) an asset transfer and (iii) a merger or
classes) approve a plan providing for a contribution of assets or shares.
remaining interest for existing shareholders
The most common method of acquisition
(ii) approved by the Court.
of a company is through the purchase of
Shareholders may also face liability risks all or part of the target company’s shares.
within insolvency proceedings either under Share purchases are the generally preferred
insolvency law or tort law: way of acquisition for large businesses.
Transfers of assets are usually preferred
- It should be noted that shareholders of for the sale of smaller businesses and/or
a limited liability company are not liable when there is a willingness to carve-out
in case of insolvency of the company liabilities. As for mergers and contributions,
which they own simply because of the they are more commonly used for internal
fact that they are shareholders. They reorganization purposes or in the context
could however become liable in case of strategic combinations of companies
of liquidation of their company if they or joint ventures and are therefore less
are considered as de jure managers or frequently seen in practice.
de facto managers of such company,
provided that it can be shown that their Public M&A transactions may occur in
mismanagement has contributed to the form of share transfers, via voluntary
an asset shortfall. Should this be the takeovers or acquisitions of a controlling
case, shareholders may typically be interest leading to a mandatory offer.
facing a claim under insolvency law for French listed companies may also be
asset shortfalls (action en responsabilité acquired by a merger or contribution, or by
pour insuffisance d’actifs) in liquidation an asset transfer. However, share transfers
proceedings; are more commonly seen, one reason being
that shares of a listed company are more
- French courts also consider that liquid than shares of a private company.
employees could seek to recover
damages for the loss of their 13. What are the advantages and
employment from a group company or disadvantages of a share purchase
third party based on tort liability. For as opposed to other methods?
instance, in the Lee Cooper case, a U.S. A share purchase is a simple, relatively
investment fund, Sun Capital Partners, fast and cost-effective operation. Such
the main shareholder of the Lee Cooper transaction implies the acquisition of all
group, was found liable for the dismissal the underlying assets and liabilities of the
of the employees of Lee Cooper target company. Therefore, it is crucial that
France because it had taken decisions appropriate representations, warranties
detrimental to Lee Cooper France, in and indemnities are included in the share
its sole interest as a shareholder, which purchase agreement. In the absence of a
had led to the liquidation of Lee Cooper change of control provision, there are no
France. consents to be obtained from third parties

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in order to assign the underlying contracts and costs than share purchases. A draft
of the business to the buyer. In addition, it merger agreement must be approved by
is not necessary to precisely identify each the companies participating in the merger,
asset to be acquired, which constitutes filed with the Registry of Commerce and
therefore a lower risk for the buyer to published to give advance notice of the
not acquire a key asset. Finally, from a tax proposed merger to creditors. Generally,
perspective, the share purchase agreement auditors must also be designated by the
benefits from a tax rate of 0.1% of the commercial court on the request of the
purchase price (except for the transfer of merging companies to prepare a report on
SARL shares for which the applicable tax the merger terms and to certify that the
rate is 3%). valuations of the companies or the assets
An asset transfer is usually a more contributed under the merger are valid. On
complex operation to document, as the other side, a merger is an efficient way
well as to implement, than a share for a parent company to reorganize the
purchase agreement. Besides the precise structure of its group.
identification of the assets to be acquired
14. What are the approvals and
that need to be performed through
consents typically required (e.g.,
thorough due diligence, each third party
corporate, regulatory, sector
operating with the asset must consent
based and third-party approvals)
to the change of control of the asset. In
for private acquisitions in your
addition, an asset transfer must comply
jurisdiction?
with certain formalities. In particular, a
notice of the transfer must be published In share transfers and asset transfers, the
in a local legal gazette within 15 days from selling entity must obtain the necessary
the date of transfer and in the national corporate authorizations to transfer the
official bulletin for civil and commercial shares or assets, i.e., the consent of the
announcements (BODACC) within 3 days shareholders and/or the approval from the
from the date of the publication in the board of directors, as the case may be.
local gazette. Creditors have an opposition
period of 10 days from the notice to object The company’s work council must be
to the payment of the transfer price to the consulted and informed prior to any
seller. On the other side, an asset purchase modification in the economic or legal
allows for the buyer to only acquire the structure of the company, including any
precise assets which might interest its disposal that would result in a change
business without acquiring any other of control of the company. The works
liabilities that the target company might councils must be provided with detailed
have on any other lines of business. From written information on the contemplated
a tax perspective, an asset purchase has an transaction and its consequences for
applicable tax rate of 3% with respect to the the employees. Such information must
portion of the price between EUR 23,000 be sufficiently detailed to enable the
and EUR 200,000 and then 5% with respect works councils to render their opinion
to the portion exceeding EUR 200,000. on the proposed transaction, although
their opinion will not be binding on the
As for mergers, they entail the automatic
company.
transfer of all assets and liabilities, by
operation of law, of the absorbed company Third party consents are also typically
to the absorbing company. Mergers are required so that the purchasing entity can
more burdensome in terms of formalities benefit from the contracts entered by the

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selling entity without any consequences revenues and (b) EUR 15,000,000 of French
on such contracts due to the change of revenues).
control.
Filings to the FCA are subject to a standstill
Regulatory approvals may also be obligation, which means that the merger
required, mainly from governmental control procedure before the FCA is
authorities competent in competition law suspensive. Consequently, the parties
and/or for foreign investments. Sector- cannot implement the transaction prior to
based approvals may also be required the approval of the FCA and must include
depending on the sector concerned by in their purchase agreement the clearance
the acquisition, for instance from the decision under French merger control
Prudential Supervision and Resolution as a condition for the completion of the
Authority (Autorité de Contrôle Prudentiel contemplated transaction.
et de Résolution) (ACPR) in the banking
Failure to notify or implement an operation
and insurance sector or the Commission
prior to clearance is qualified as gun-
for Energy Regulation (Commission de
jumping and is therefore deemed illegal.
Régulation de l’Energie) (CRE) for the energy
The applicable penalties include a fine of
sector.
up to a maximum of 5% of the notifying
15. What are the regulatory party’s revenues in France during the last
competition law requirements closed and audited financial year, an order
applicable to private acquisitions in to file with penalties, and/or an order to
your jurisdiction? unwind the transaction.
Under French merger control regulations The typical review period before the FCA
(in particular art. L430-1 to L430-10 of for a non-complex deal, which does not
the French Commercial Code and Merger raise any antitrust issue (no overlap and no
Control Guidelines dated July 2020), any vertical issues) would last between 3 and
private acquisition which results in a 6 weeks (including a short pre-notification
change of control is subject to mandatory period). For more complex deals, the review
notification to the French Competition period could last from 10 weeks (full phase
Authority (Autorité de la Concurrence) (FCA) 1) until more than one year for a Phase 2
if the following conditions are met: depending on the complexity of the issues
raised by the transaction, which will have
- the total worldwide revenues of all the
necessarily an impact on the duration of
undertakings concerned exceeds EUR
the pre-notification period.
150,000,000;
16. Are there any specific rules
- the aggregate French revenues of each
applicable for acquisition of public
of at least two parties exceeds EUR
companies in your jurisdiction?
50,000,000; and
The AMF provides for a set of rules which
- the transaction does not fall within the
complete the rules imposed by the French
European Commission’s jurisdiction.
Commercial Code and the French Financial
It should be noted that the French Code. In the context of a public takeover,
Commercial Code provides for lower the AMF must review the takeover offer
alternative revenues thresholds for the and declare it in conformity with applicable
retail sector and activities located in the regulatory and legal provisions. Key
French overseas territories (respectively principles governing public offers are
(a) EUR 75,000,000 for total worldwide equal treatment of all shareholders, market

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transparency, market integrity and fairness and no condition precedent is allowed

of transactions among bidders. (except for a legal minimum acceptance
level of 50%). With respect to price
There are two main types of takeover bids:
requirements, the same rules apply as
a voluntary takeover bid where the bidder
in the case of a voluntary takeover bid.
voluntarily makes an offer to acquire all the
In addition, the offer price must equal at
shares issued by the target company and a
least the highest price paid by the bidder
mandatory takeover bid where the bidder
(or any person acting in concert with it)
is required to launch such bid.
during a period of 12 months preceding the
In the case of a voluntary public offer, triggering event of the takeover bid. Absent
the bidder must file with the AMF the such previous transaction in the preceding
draft offer prospectus through a financial 12 months, the minimum price will be set
service provider (prestataire de services according to a multicriteria valuation.
d’investissement) which will act on behalf
17. Is there a requirement to disclose
of the bidder. The offer will set out detailed
a deal, for instance to regulatory
information regarding the identity of the
authorities? Is it possible to keep a
bidder, the number of shares held as well
deal confidential?
as the percentage of the voting rights held,
the identity of the target company and Deals involving public companies must be
the price and terms of the offer. The offer disclosed to the AMF in a timely manner
must be unconditional and irrevocable in order to preserve market transparency
but it may be subject to a limited number and integrity. However, the AMF allows
of conditions precedent, namely merger the deferring of such disclosure where
control clearance and minimum acceptance confidentiality (i) is temporarily necessary
level. The offer must be made to all to carry out the transaction and (ii) can be
shareholders of the target company and maintained. Thus, it is generally possible
the same offer terms must be offered to for a deal to remain secret until a binding
all shareholders. There is generally no agreement is signed. Yet, if confidentiality
requirement for a minimum price but can no longer be ensured, the bidder and/
the AMF will ensure that the information or the target must disclose the proposed
relating to the offered price is complete and transaction immediately.
coherent. The bidder must also disclose its
Private M&As are generally not regulated
shareholdings and intentions with respect
by any disclosure requirements. However,
to the remaining shares in the target
they are usually disclosed to the competent
company (whether to buy out or not the
authorities (in particular, regulatory
remaining minority shareholders, it being
authorities) in order to obtain the
specified that such buy-out is mandatory if
appropriate clearances.
the 90% threshold is crossed by the bidder).
18. Can sellers be restricted from
A mandatory public offer is required under
shopping around during a
French law where a shareholder crosses,
negotiation process? Is it possible
alone or in concert, a threshold of 30% of
to include break fee or other
the share capital or the voting rights of the
penalty clauses in acquisition
target company or if it increases, within 12
documents to procure deal
consecutive months, its shareholding by
exclusivity?
more than 1% in shares or voting rights
while holding a shareholding between Parties commonly negotiate deal exclusivity
30% and 50% in shares or voting rights. in the form of an exclusivity provision in the
Mandatory takeover bids are unconditional, letter of intent. Such exclusivity prohibits

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the parties from negotiating an agreement Typical representations and warranties

of the same nature with a third party cover both fundamental warranties (with
during a certain period (usually the period respect to title, capacity and authority
necessary for the buyer to conduct its due of the seller) and business warranties
diligence). (which cover a broad range of topics,
such as financial accounts, contracts,
Deal protection may be granted via break-
up fees or penalty clauses. The purpose of employment and social security, real
such provisions is to deter the buyer (and estate, tax, litigation, IP and environment).
the seller in some cases) from deciding not Sellers might also give additional and more
to proceed with the transaction. Break-up specific warranties regarding topics raised
fees and penalties usually cover all costs from the buyer’s due diligence and which
incurred in the context of the diligence the buyers would like to have covered,
process but they may be reduced by the depending on the architecture of the deal.
courts if they are deemed excessive. In Business warranties are typically subject
public transaction, the target must not to a number of limitations, including
agree to break-up fees whose amount deductibles, a minimum aggregate claim
could result in unfair competition amongst threshold, a maximum aggregate cap and
potential acquirers. claim time limits.

19. What are the conditions precedent Warranties and limitations are either
in a typical acquisition document? incorporated directly in the share purchase
Is it common to have conditions to agreement or negotiated through a
closing such as no material adverse separate warranty document. The parties
change? commonly agree on either holding in
escrow the total amount of the warranties
Acquisitions may be subject to a number of
granted by the seller (usually with a
conditions precedent. Common conditions
decreasing percentage over time until
precedents include the obtaining of
the completion of the time period of the
corporate approvals (from shareholders
warranty) or a bank guarantee granted by
and/or from the board of directors, as the
case may be) and regulatory approvals the seller.
(in particular, competition or foreign Warranty insurance is also developing at a
investment), the obtaining of third-party fast pace in France and is becoming more
consents (notably in the event of change common, mainly due to the influence
of control provisions in material contracts of the private equity market. Warranty
relevant to the business of the target insurance is usually subscribed by and paid
company). by the buyer. It has many advantages: in
Acquisitions may also be subject to the particular in uncertain macroeconomic
obtaining of the relevant financing required circumstances, it may reassure the buyer
to complete the acquisition of the target who has concerns over the seller’s solvency.
company. Market practice regarding In addition, especially in private equity
condition precedent (and therefore deal deals, the selling fund may be able to
certainty) is highly dependent on appetite allocate the transaction proceeds faster to
for the target. its limited partners or other ventures if the
buyer directs its claims against the insurer.
20. What are the typical warranties
and limitations in acquisition 21. Is there a requirement to set a
documents? Is it common to obtain minimum pricing for shares of a
warranty insurance? target company in an acquisition?

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There is no requirement to set a minimum financing via one or several banks or debt
price for shares of a company in a private financing via debt funds. Bank financing is
acquisition. In restructuring situation, the the common way to finance an acquisition
price may even be negative. in France with banks typically aggregating
in a syndicate or a pool of banks in order to
In public acquisitions, voluntary takeovers
do not have a minimum price for shares lower the individual risk of the operation.
but they must respect the fundamental Usually, the buyers rely on banks with
principles of public takeovers, in particular which they already have established
equal treatment of shareholders, market relationships. Banks commonly require
transparency fairness of transactions guarantees over the underlying assets and
amongst bidders. Mandatory takeover negotiate an interest rate over the loan
bids on the other hand must provide granted. Generally, multiple layers of junior
for a price per share which must at least or senior debt are provided, depending on
equal either (i) to the highest price paid the structure of the deal.
by the bidder during a period of 12 In recent years, large cap financing has
months preceding the triggering event been restricted due to the macroeconomic
of the takeover (threshold crossing) or climate and companies have increasingly
absent such previous transaction in the turned towards debt funds, often with
preceding 12 months, the minimum price higher rates. . It is expected that the year
set according to a multicriteria valuation.
2024 will still follow this trend, despite the
The multicriteria valuation method involves
slight improvement in financial markets
a quantitative and qualitative analysis
and expected reductions in interest rates.
of the target company, including both
Uni-tranche financing is commonly used
financial and (ii) non-financial criteria. The
and operates like a one-stop shop for
financial criteria may include metrics such
the borrower with only one loan and
as revenue, EBITDA and cash flow, while the
one final term. This solution presents the
non-financial criteria may include factors
benefit of simplicity and is usually faster
such as market share and quality of the
management team. The analysis may also than bank financing. However, it is also
consider the industry and the competitive more costly due to higher interest rates
landscape in which the target company in compensation for the risk taken by the
operates, as well as any regulatory or legal lenders.
factors that may impact the company’s Certain companies, usually industrial
value. The AMF requires that the bidder companies, may also finance their
provides a detailed valuation report, acquisitions directly with their own cash
including the criteria used, the weights reserves. However, this scenario is not
assigned to each criterion, and the resulting very common. It is also worth noting that
valuation of the target company. companies are prohibited from entering
22. What types of acquisition financing into loan agreement with other companies
are available for potential buyers in in the context of acquisition financing due
your jurisdiction? Can a company to the banking monopoly rules in place in
provide financial assistance to a France (with the exception of intra-group
potential buyer of shares in the loans entered into at arm’s length).
target company?
23. What are the formalities and
Acquisition financing is mainly provided procedures for share transfers and
through two main channels in France: bank how is a share transfer perfected?

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Shares are transferred through share and mortgages (which must be perfected
transfer forms (ordres de mouvement) by a notary public) or documents entered
for shares of an SAS or an SA and share into by certain governmental bodies.
transfer deeds for shares of an SARL.
26. Can acquisition documents be
Such documents must be registered
governed by a foreign law?
both with the tax administration and,
in respect of SARL, with the clerk of the Acquisitions documents can be governed
relevant commercial court (greffe du by foreign law. However, enforceability of
tribunal de commerce/tribunal des activités such documents governed by foreign law
économiques) within one month of the will be more difficult before French courts.
closing.
27. Are arbitration clauses legally
The transfer must also be recorded in the permissible or generally included in
statutory books of the company (share acquisition documents?
transfer register and shareholders’ register
Arbitration clauses (clauses
for an SA and SAS and minutes register and
compromissoires) are legal and valid under
articles of association for an SARL).
French law and are usually common in
24. Are there any incentives (such contracts involving multiple parties from
as tax exemptions) available for various jurisdictions. Such clauses are more
acquisitions in your jurisdiction? commonly found in mid- and large-cap
transaction. The reasons are that arbitration
No particular tax exemptions are available
trials are usually cost intensive and lengthy.
for acquisitions in France. However, France
offers a comprehensive range of tax Paris is a major place of arbitration.
incentives and development subsidies to It hosts the international chamber of
encourage investments in certain areas, commerce and benefits from a wide
notably for innovative businesses or array of expertise as well as a vast pool of
underdeveloped areas (zones franches). It professionals. French courts are used to
is also usual to structure transaction with a grant the execution of arbitration sentences
view to offset target revenues against cost (exequatur) in order to give them the full
of financing via the creation of a French effect of a court judgment.
acquisition vehicle.
28. Are there any specific formalities
F. Enforceability for the execution of acquisition
documents? Is it possible to
25. Can acquisition documents be
remotely/digitally sign documents?
executed in a foreign language?
French law provides for the possibility to
Generally, documents can be signed and
use electronic signatures but they must
executed in any foreign language. However,
comply with certain European standards for
in order for the documents to be registered
identification purposes. Usually, the parties
with the clerk of the relevant commercial
include a special clause in their contractual
court, a translation into French would need
documentation pertaining to the service
to be provided. The same might be relevant
provider of the electronic signature process
for certain regulatory bodies, which will
agreeing to grant the same force and effect
only review the provided documentation if
to the signature as if it has been provided in
it is drafted in French.
wet ink. Electronic signatures are accepted
Certain transactions, however, need to be by tax administrations as well as by clerks
executed and written in French. This is the when carrying out formalities for the
case in respect of real estate transactions execution of such documents.

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G. Trends and Projections Following the trends of 2024, the due

diligence will still be a high point of
29. What are the main current trends in interest for buyers, with an increase of
M&A in your jurisdiction? more advanced requests to anticipate risk
Volumes of M&A transactions have declined and uncertainties. In the same vein, the
further in 2024 compared to 2023 but incorporation of warranty insurance should
M&A deal values have increased with the remain steady.
return of large-cap transactions in France. 30. Are any significant development
However, the combined effect of inflation, or change expected in the near
high interest rates, energy prices and future in relation to M&A in your
the occurrence of various political and jurisdiction?
geopolitical challenges keeps the overall
market in decline compared to 2021 and The French market legal framework for
pre-pandemic era numbers. Nonetheless, M&A transactions, whether PE or industrial,
the French market has been showing remains stable and flexible, allowing
some resilience, despite the national and investors to conduct transactions with
macroeconomic context. Consequently, a high amount of security and certainty.
and after a third and fourth 2024 quarters Corporate taxes have also been lowered
stalled by the political turmoil in France, the from 33% to 25%.
year 2025 is expected to confirm further The legal and regulatory environment
the vivid early 2024 M&A activity, due in is not expected to change greatly in the
particular to the recent drop in interest near future in the main areas of business
rates as well as the trend of alternative law in France. The areas of technology,
financing sources. defense, innovation and life-science are
In particular, the private equity sector is expected to be the main industries with
showing signs of recovery and is expected improved activity in 2025. Distressed M&A
to pick-up. Indeed, as the increase of should also pursue its steady pace due
interest rates in the recent years influenced to debt restructuring within a number
the private equity market to slow down of companies in France. ESG criteria
drastically in 2023 and 2024, many exits (especially environmental matters and
are expected in 2025 as a result of the gender equality) are still expected to
aforementioned recent drop in interest influence the corporate environment in the
rates and better valuations are to be upcoming year even though the European
witnessed compared to those seen in 2024. Commission is expected to simplify and
soften the current regulation regarding
corporate social responsibility. Finally, the
rise of artificial intelligence is also likely to
impact activity across all industries.

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GERMANY
HEUKING

Dr. H. Erdem Şişmangil Dr. Ali Şahin Beatrice Stange Christian Staps Sebastian Eibich
LL.M. Partner LL.M. Partner Senior Associate
Partner a.sahin@ Partner c.staps@ s.eibich@
e.sismangil@ heuking.de b.stange@ heuking.de heuking.de
heuking.de heuking.de

A. General 2. What are the most common types

of corporate entities (e.g., joint
1. What is the main legal framework stock companies, limited liability
applicable to companies in your companies, etc.) used in your
jurisdiction? jurisdiction? What are the main
There are 2 (two) general types of differences between them (including
companies under German law; namely but not limited to with regard to the
partnerships (Personengesellschaften) and shareholders’ liability)?
corporate entities with limited shareholders’ The 2 (two) major corporate
liability (Kapitalgesellschaften). Whereas entities are joint stock companies
the Germany Civil Code (Bürgerliches (Aktiengesellschaften) and limited liability
Gesetzbuch) and the German Commercial companies (Gesellschaft mit beschränkter
Code (Handelsgesetzbuch) contain rules Haftung). Compared to limited liability
general rules on companies as well as companies, the joint stock companies
special rules on partnerships, the Stock are subject to a higher minimum
Corporations Act (Aktiengesetz) and statutory share capital and stricter capital
the Limited Liability Companies Act maintenance as well as statutory capital
(GmbH-Gesetz) regulate the 2 (two) major reserve requirements. Generally, stock
corporate entity types with shareholders’ corporations are the preferred corporation
limited liability. type for businesses aiming to go public.

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Therefore, the explanations provided investor aims to acquire ownership of at

here focus on privately held joint stock least 25% of the voting rights of a company
companies and private M&A in Germany. resident in Germany (foreign direct
investment – FDI). If the domestic target
One of the most important differences
company operates critical infrastructure
between the 2 (two) company types is the
anonymous nature of the shareholding within the meaning of the Act on the
structure in privately held joint stock Federal Office for Information Security, or
companies, whereas the shareholders’ if it provides other services of particular
list of limited liability companies must be relevance to security within the meaning of
published in the commercial register and the Foreign Trade and Payments Ordinance,
therefore is accessible by everyone. the threshold applicable for screening is
only 10%. If the direct buyer is resident in
The shareholder liability in both corporate the territory of the EU, such review may
entity types is generally limited to only be performed if there are indications
the subscribed share capital amount of an abusive approach or a circumvention
of individual shareholders. In certain transaction.
exceptional cases, such as in insolvency
proceedings, shareholders can be held Additional special rules for investment
liable for actions detrimental to creditors reviews apply to the acquisition of
of the company and compensate certain companies that operate in sensitive
damages to the company. security areas. This includes manufacturers
and developers of war weapons and
There can also be limited partnerships
other key military technologies, specially
with corporate entity general partners (or
designed engines and gearboxes for
also as limited partners) (such as GmbH
military tracked armoured vehicles, and
& Co. KG), which can be preferred due to
certain tax advantages. These corporate products with IT security features that are
structures are also widely used, although used for processing classified government
they are not corporate entities, but (limited) information. Similar special rules also
partnerships. For the purposes of this apply to the acquisition of a company
questionnaire, we have only focused on that operates a high-grade earth remote
corporate entities. sensing system.

B. Foreign Investment Any acquisition of a company by foreign

investors whereby these acquire ownership
3. Are there any restrictions on foreign of at least 10% of the voting rights of
investors incorporating or acquiring a target company resident in Germany
the shares of a company in your can be subject to such review. The
jurisdiction? review considers whether the respective
The incorporation of a company is usually acquisition poses a threat to essential
not subject to any restriction, whereas security interests of the Federal Republic of
there may be additional license or permit Germany.
requirements applicable to certain
With the implementation of the NIS-2-
businesses.
Directive of the EU, which still finds itself
Acquiring of shares in a German company in the legislative process, further sectors
may be subject to screening under the are expected to be subject to investment
investment screening procedure where an screening process.

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4. Are there any foreign exchange regimes. They must apply the business
restrictions or conditions applicable judgment rule and act with the diligence
to companies such as restrictions to of a prudent businessman. In insolvency
foreign currency shareholder loans? proceedings, board members and
managing directors may be held liable for
There are no specific foreign exchange rules public debts of the company, such as tax
imposing restrictions or conditions. and social security debts.
5. Are there any specific considerations 7. What are the audit requirements in
for employment of foreign corporate entities?
employees in companies
incorporated in your jurisdiction? The audit requirements for corporate
entities differ according to the size of
Generally, employing EU member
business as follows:
state nationals is possible without any
restrictions or conditions. Non-EU nationals - Small corporate entities are not subject
must obtain first a valid residence and work to mandatory audit for their annual
permit in Germany. financial statements and annual report.
Small corporate entities are those which
C. Corporate Governance do not exceed at least 2 (two) of the
6. What are the standard management following 3 (three) conditions:
structures (e.g., general assembly,
• do not have a balance sheet exceeding
management board, etc.) in a
EUR 6,000,000,
corporate entity governed in your
jurisdiction and the key liability • have not generated revenues exceeding
issues relating to these (e.g., EUR 12,000,000 in the last 12 months
liability of the board members and prior to the balance sheet date; or
managers)?
• have not employed in average 50
The joint stock companies are subject employees annually.
to comparably more detailed corporate
governance rules and have to set up a Mid-size and large corporate entities as well
supervisory board regardless of their size, in as public companies (+ partnerships and
addition to a management board and the general partnerships with general partners
shareholders’ meeting. consisting of only corporate entities) are
subject to mandatory audit by an auditor.
Limited liability companies on the
other hand must have generally only - Mid-size corporate entities are those
at least 1 (one) managing director exceeding at least 2 (two) of the
and a shareholders’ meeting, unless thresholds for small corporate entities
their employee number exceeds but not exceeding at least 2 (two) of the
certain statutory defined thresholds following 3 (three) conditions:
(codetermination). Setting up supervisory • do not have a balance sheet exceeding
board is from a certain employee number EUR 20,000,000
threshold mandatory. Setting up an
advisory board is voluntary. • have not generated revenues exceeding
EUR 40,000,000 in the last 12 months
Both board members of a joint stock
prior to the balance sheet date; or
company as well as managing directors
of a limited liability company are subject • have not employed in average 250
to certain statutory and case law liability employees annually.

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Large corporate entities are those shareholders having an aggregate

exceeding at least two out of three shareholding of at least 5% of the
thresholds listed for mid-size companies registered share capital or a nominal value
above. of EUR 500,000 may request that items are
announced as agenda items for a resolution
Also, certain companies depending on their of a general meeting. Shareholders having
activity are subject to mandatory audit, an aggregate shareholding of at least 1%
such as: of the registered share capital or a nominal
• Credit and finance institutions; value of EUR 100,000 may apply to court
to assets certain claims of the company
• Insurance companies; and
for damages (such as against the board
• Cooperatives. members).
D. Shareholder Rights In limited liability companies, all
8. What are the privileges that can shareholders have a right to inspect books
be granted to shareholders? In and records of the company. Additionally,
particular, is it possible to grant shareholders holding at least 10% of the
voting privileges to shareholders for share capital may request the shareholders’
appointment of board members? meeting to convene or certain items are
added to the meeting agenda. Unlike
In addition to general membership in joint stock companies, individual
rights, the articles of association of a joint shareholders have more minority rights as
stock company may grant special rights a result of the personal nature of limited
for individual or group of shareholders, liability companies.
commonly such as shares without voting
rights but a preference in profits, a right to 10. Is it possible to impose restrictions
delegate members to the advisory board on share transfers under the
(which in return elects the management corporate documents (e.g., articles
board) and rights to use company facilities. of association or its equivalent in
your jurisdiction) of a company
In limited liability companies, examples incorporated in your jurisdiction?
of special rights for certain shares/
It is possible for a joint stock company
shareholders to be established in the
articles of association to make the transfer
articles of association include: entitlement
of registered shares subject to the consent
to preferred dividends, purchase of
of the company, which may be exercised
company’s goods and services at discount,
by the management board in its own
consent rights regarding transfer of shares,
discretion. However, the articles may
right to appoint managing directors or give
provide that the shareholders’ meeting
instructions to managing directors.
or the supervisory board must adopt
9. Are there any specific statutory rights a resolution granting consent to share
available to minority shareholders transfer. Furthermore, the articles can also
available in your jurisdiction? contain reasons to withhold such consent.
In joint stock companies, in addition The articles of a limited liability company
to statutory rights available to general may make the assignment of shares
shareholders, the minority shareholders contingent upon the approval of the
having an aggregate shareholding of at company, the shareholders’ meeting or
least 5% of the registered share capital individual shareholders, the supervisory
may request the management board to board (if existing), the advisory board or
convene a general meeting. Furthermore, even third parties. The articles may also

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contain details about consent requirement increase the chances of a reorganization of

such as further specifying approval the company. No filing obligation exists in
requirement, limiting it to specific cases, this case.
stipulate new criteria for selection of new
shareholders or exempt certain cases from Since January 1, 2021, a new German law
the approval requirement. known by its abbreviation StaRUG (which
implemented EU Directive 2019/1023
11. Are there any specific concerns or on preventive restructuring frameworks)
other considerations regarding the affords debtors with a statutory regime for
composition, technical bankruptcy a non-consensual pre-insolvency balance
and other insolvency cases in your sheet restructuring. The key instrument of
jurisdiction? the StaRUG is the restructuring plan which
Insolvency proceedings pursuant to the largely resembles the insolvency plan in
Insolvency Code (Insolvenzordnung, abbr. formal insolvency proceedings. Access
InsO) are the only judicial proceedings to a restructuring plan requires that no
available in Germany in cases of companies’ insolvency, but merely imminent illiquidity
bankruptcy. These proceedings may be exists and that the debtor is able to restore
directed either at a sale of the debtor’s its viability (Bestandsfähigkeit) by means
assets (liquidation) or at an insolvency plan of the restructuring plan. Thus, in case
by which the insolvent company’s business of imminent illiquidity, the debtor has 2
can be restructured. A liquidation may (two) options, proceedings under the InsO
occur by selling the individual assets of (which, other than the StaRUG, provides
the debtor or by an asset deal, i.e., a sale of for the possibility to terminate executory
the debtor’s business as a going concern contracts and encompasses all creditors)
in whole or in part to an investor. It is up to or the StaRUG (which may be limited to
the creditors to decide on which course the certain creditors, i.e. finance creditors).
proceedings shall take.
E. Acquisition
German insolvency law provides for a strict
obligation of a company’s management 12. Which methods are commonly used
to file for the opening of insolvency to acquire a company, e.g., share
proceedings if the company becomes transfer, asset transfer, etc.?
illiquid (zahlungsunfähig) or overindebted Share transfers are the dominant
(überschuldet). The filing has to be acquisition method in Germany,
made without undue delay, but within a whereas asset transfers are also possible.
maximum period of 3 (three) weeks from Furthermore, similar to share transfers,
the occurrence of illiquidity and 6 (six) the company reorganization methods
weeks in the case of overindebtedness. A such as spin-offs, mergers, hive-down
violation of such duty results in personal or splits under the Transformation Act
liability and constitutes a criminal offence. (Umwandlungsgesetz) may also be useful
A third ground for the opening of in structuring M&A transactions.
insolvency proceedings is imminent 13. What are the advantages and
illiquidity (drohende Zahlungsunfähigkeit).
disadvantages of a share purchase
In this case, only the company itself,
as opposed to other methods?
not a creditor, may file for the opening
of proceedings. The possibility to file if By acquiring all of the shares or partnership
illiquidity is only imminent is meant to interests in a legal entity, a purchaser
contribute to an early filing and thus to acquires all rights associated with the

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ownership of the shares or partnership corporate approvals (like shareholders’

interests. In an asset deal, only those assets meeting approval) can be necessary
of the seller entity will be transferred that depending on corporate documents or
have been individually determined in the individual circumstances of the deal.
asset sale agreement. In a share deal, the
Third party approvals to transactions as a
purchaser indirectly (as the new owner of
whole are generally unusual, but transfer
the legal entity) acquires all liabilities and
of certain assets or change-of-control can
risks associated with the legal entity. Except
be subject to approval of third parties,
for any third-party consent requirements
which may affect a major aspect of the
such as in change-of-control clauses, even transaction.
the contractual relationships continue with
the same parties in share deal transactions, Regulatory approval is required in
and thus the continuity of business is to transactions which are subject to foreign
a larger extent secured in comparison to investment screening mechanism
asset deal transactions, where individual explained in section B above. Furthermore,
contract partners must consent to the merger control approval may be necessary
change of contract party. In share-deal if certain thresholds are exceeded (see
transactions, since the change in ownership question 15 below).
of the shares or partnership interests occurs Furthermore, the acquisition of banking
only on the shareholder level, the legal or financial institutions or insurance
entity and its business will not change as a companies are generally subject to
result of the acquisition. regulatory approval.
Share transactions are generally also more Finally, following the entry into force of the
preferred due to tax reasons, whereas the EU Foreign Subsidies Regulation (“FSR”)
particular circumstances of each deal must in 2023, certain transactions are subject
be taken into consideration. Furthermore, to a further notification requirement to
there is usually no issue with the transfer the European Commission. In addition,
of employees in share-deal transactions, the European Commission may initiate ex
the employee consent must generally officio investigations into (and require ad
be obtained in asset transactions, which hoc notifications for) matters not meeting
may make it less favorable in certain the thresholds below where there is a
circumstances due to deal uncertainty. suspicion of foreign subsidies distorting
One of the major disadvantages of share competition in the EU. As in merger control
deals is that they are not suitable for the proceedings (see question 15 below),
purchaser to do a cherry-picking in terms companies may not close a notifiable
of assets purchased, so that the target transaction until the European Commission
has granted its approval under the FSR
company is transferred as a whole business
with all liabilities and risks. The obligation to notify applies to
transactions, where
14. What are the approvals and
consents typically required (e.g., 1. 2 (two) or more previously independent
corporate, regulatory, sector undertakings or parts of undertakings
based and third-party approvals) merge, or
for private acquisitions in your
2. 1 (one) or more undertakings acquire
jurisdiction?
direct or indirect control of the whole
In both share and asset deal transactions, or parts of 1 (one) or more other

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undertakings (including the creation of • The acquisition of shares if the shares

a joint venture), reach (i) 50% or (ii) 25% of the capital or
the voting rights concerning another
and where the following thresholds are
undertaking
met:
• Any other combination of undertakings
• at least one of the merging
enabling 1 (one) or several
undertakings, the acquired
undertakings to exercise directly
undertaking or the joint venture is
or indirectly a material competitive
established in the EU and
influence on another undertaking
• generates an aggregate turnover in
A concentration has to be notified
the EU of at least EUR 500.000.000.
to the German Federal Cartel Office
• The undertakings (groups, i.e. (Bundeskartellamt) if in the last business
including affiliated companies) year preceding the concentration all of the
involved in the transaction have below conditions were met:
received financial contributions of
• The combined aggregate worldwide
more than EUR 50.000.000 from third
turnover of all the undertakings
countries in the last 3 (three) years.
concerned was more than EUR
The concept of a financial contribution is 500,000,000.
extremely broad. It includes
• The domestic turnover of at least 1
• The transfer of funds or liabilities (one) undertaking concerned was more
(e.g., loans, loan guarantees or debt than EUR 50,000,000; and
forgiveness),
• The domestic turnover of another
• the foregoing of revenue that is undertaking concerned was more than
otherwise due (e.g., tax exemptions) EUR 17,500,000
and
The alternative thresholds based on the
• even the provision as well as the transaction are fulfilled if all of the following
purchase of goods and services. Even conditions are satisfied:
small purchases or sales to authorities
• The combined aggregate worldwide
or the like are covered. turnover of all the undertakings
15. What are the regulatory concerned was more than EUR
competition law requirements 500,000,000
applicable to private acquisitions in • The domestic turnover of at least 1
your jurisdiction? (one) undertaking concerned was more
The following transactions are considered than EUR 50,000,000
to be a concentration and may hence be • The domestic turnover of no other
subject to German merger control law, if undertaking concerned was more than
they also fulfill the turnover thresholds EUR 17.500.000
mentioned further below:
• The value of consideration paid in
• The acquisition of all or a substantial return for the concentration is more
part of assets of another undertaking than EUR 400,000,000
• The acquisition of sole or joint control • The target company is significantly
with regard to another undertaking active in Germany

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It should be noted that sector-specific rules place. Under European law, a concentration
may apply, i.e., for the media sector, where needs to be notified to the European
the turnover by 4 (four) or 8 (eight), as the Commission if it meets turnover-based
case may be. thresholds set out in the EU Regulation.
Under certain conditions and after 16. Are there any specific rules
having conducted a second inquiry, the applicable for acquisition of public
Bundeskartellamt may, by order, require an companies in your jurisdiction?
undertaking to notify any merger in one or
The transfer and of shares in public
more specific sectors of the economy even
companies are mainly subject to the
if the turnover thresholds mentioned above
detailed special rules in the Securities
are not met.
Acquisition and Takeover Act (WpÜG) and
During the review of the concentration by Securities Trading Act (WpHG), besides the
the Bundeskartellamt, the relevant market general rules in the Stock Corporations Act
and the market shares and market power (AktG) and the Civil Code (BGB), among
of the undertakings involved need to be others.
analyzed.
17. Is there a requirement to disclose
If the undertakings concerned have a deal, for instance to regulatory
high market shares and as a result authorities? Is it possible to keep a
the concentration raises competition deal confidential?
concerns, to satisfy the concerns of the
In addition to the regulatory approval
Bundeskartellamt, the undertakings
requirements explained in question 15
can offer certain remedies (conditions
above, tax authorities may request the
or obligations), e.g., divest a business
deal documentation for assessing the tax
to a suitable buyer, to secure effective
situation applicable to a deal.
competition.
Furthermore, in public company share
The undertakings concerned may not acquisitions or transactions, the relevant
implement a concentration unless (i) it regulatory disclosures must be made.
has been cleared by the Bundeskartellamt
or (ii) the time limits for the In limited liability companies (GmbH),
Bundeskartellamt’s review have expired. the change in share ownership must be
The Bundeskartellamt can issue a fine of registered in the commercial register by
up to 10% of the worldwide aggregate submitting a new shareholders’ list, as a
turnover of the undertaking concerned result of which anyone can learn about the
for early implementation prior to the share transfer (but not the deal details, as
Bundeskartellamt’s clearance or for failure the transaction documents must not be
to notify. submitted to the commercial register).

Note that the German provisions do not 18. Can sellers be restricted from
apply if the European Commission has shopping around during a
jurisdiction (“one stop shop” principle). negotiation process? Is it possible
Under European merger control law, a to include break fee or other
penalty clauses in acquisition
concentration only includes transactions
documents to procure deal
that imply a lasting change of control, i.e.,
exclusivity?
the mere acquisition of a minority share, for
instance, does not trigger merger control In most transactions other than bidding/
requirements if no change of control takes auction transactions, it is customary to

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prepare a letter of intent or term sheet Other conditions precedents are generally
setting out the main parameters of the deal-specific requirements parties wish
future transaction. These documents are to have completed prior to closing. If the
generally only binding to a limited extent transaction is structured as an asset deal,
such as for confidentiality, exclusivity, there may be also some fundamental
choice of law and jurisdiction clauses. conditions precedents such as employee or
customer approvals to the asset transfer.
The start of negotiations and execution of
preliminary documents usually trigger pre- 20. What are the typical warranties
contractual obligations of the parties under and limitations in acquisition
German law. Pre-contractual obligations documents? Is it common to obtain
may be relevant in the case of breaches warranty insurance?
of exclusivity or the abandonment of Typical warranties in acquisition documents
negotiations without reasonable grounds. under German law are:
For example, a seller that breaches its
exclusivity undertaking may become • title guarantee;
liable for that purchaser’s transaction • good standing of the target;
expenses incurred up until that point (due
diligence, etc.). This may even apply if • no insolvency;
even if the preliminary documents signed • financial statements;
have been designed as non-binding. Due
• IP rights (if applicable to the target
to the inherent difficulty of proof for the
business);
purchaser, purchasers generally have an
interest in requesting a breakup fee or • material contracts;
liquidated damages in the preliminary
• employment matters;
documents like in the letter of intent, in
• assets;
particular if it provides for exclusivity.
• subsidies;
19. What are the conditions precedent • sanctions;
in a typical acquisition document? • absence of litigation;
Is it common to have conditions to
• compliance with statutory rules
closing such as no material adverse
(including competition and anti-bribery
change?
rules);
It is in general not very common to have • tax warranties
material adverse change closing conditions • compliance with data protection rules;
in German transactions. Also, in seller- and
friendly environments, it can be rather • IT-related guarantees.
difficult for purchaser to negotiate a MAC
closing condition. The common liability cap is typically
between 10% and 25% of the purchase
Merger control clearance is one of the price. Title to shares is often capped at
most important closing conditions, to 100% of the purchase price. Deductibles,
the extent the relevant thresholds are baskets and de minimis are common.
exceeded. Furthermore, where relevant, The warranty liability usually lasts for
foreign investment screening and approval 18-24 months for non-fundamental
may be one of the deal-breaker condition warranties and 3 (three)-7 (seven) years for
precedents. fundamental warranties.

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It is not uncommon to obtain W&I second-lien credit lines are also common
insurances, especially in seller markets like in the market. Also syndicated loans
in the last few years, where sellers usually may be used depending on the deal
do not agree to accept liability for more size and structure. In addition to those,
than 1 Euro for their warranty liability. subordinated debt financing tools such
as second-lien loans, mezzanine loans
21. Is there a requirement to set a
or PIK-loans also play roles in acquisition
minimum pricing for shares of a
financings.
target company in an acquisition?
23. What are the formalities and
The purchase price can be freely
procedures for share transfers and
determined within the limits of capital how is a share transfer perfected?
maintenance and disguised distribution
rules. In acquisition transactions between The sale of shares in a German limited
independent parties, this will generally be liability company as the most common
fulfilled, whereas transactions between acquisition structure requires the share
related parties should be generally purchase agreement, including all exhibits
made on arm’s length; otherwise tax and annexes, to be notarized by a German
consequences may occur. notary. Share purchase agreements relating
to shares in other types of companies (such
22. What types of acquisition financing as joint stock companies or partnerships)
are available for potential buyers in generally do not require notarization and
your jurisdiction? Can a company may be entered into by simply signing the
provide financial assistance to a agreement by the parties, if the transfer
potential buyer of shares in the agreement does not concern the transfer
target company? of real property. The statutory notary fees
There is a financial assistance ban triggered by the notarization depend on
applicable to joint stock companies the value of the transaction and can be
(Aktiengesellschaft) which prohibits the quite significant.
target from providing financial assistance Notarization is also required for certain
to the purchaser of its own shares. German corporate acts (i.e., change of articles,
law has one of the most complex financial capital measures) for a limited liability
assistance bans and should be carefully company or joint stock company and
structured. in relation to certain reorganization
Limited liability companies on the other measures under the Transformation Act.
hand are not subject to the financial If the notarization requirement is not duly
assistance bank in the Stock Corporations satisfied, the legal act will typically be void
Act (AktG). However, the statutory and case and cannot be implemented in public
registers as the commercial register or the
law capital maintenance and the related
land register.
corporate rules must be observed when
structuring a financial assistance system as An asset sale does not typically require any
part of the acquisition. notarization unless the sold assets include
owned real estate, shares in a GmbH or the
Most globally recognized acquisition
seller is selling all or almost all of its assets.
financing models are available in the
German market. The classical loan financing For joint stock companies, the share
(senior loans) plays usually the fundamental transfer is performed privately between
role in acquisition financings. Mezzanine or the parties and the target company and

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perfected without involving notaries and F. Enforceability

commercial register (unless in connection
with a capital increase). The different types 25. Can acquisition documents be
of stock company shares, namely bearer executed in a foreign language?
shares and registered shares, may be Acquisition documents in private M&A
transferred in different methods depending transactions can be executed in foreign
on the particular case. In any case, in order
language. However, due to the notarization
to be able to exercise the shareholders
requirement of certain transaction
rights against the company, the acquirer of
structures (share deal with limited liability
registered shares has to be registered in the
companies or certain asset deals), such
share ledger of the company.
foreign language will usually be only
24. Are there any incentives (such English, as the notary notarizing the
as tax exemptions) available for transaction documentations should be able
acquisitions in your jurisdiction? to fully understand and validly notarize
There are some incentives for small venture them.
capital investments or general investment This, however, does not exclude the
incentives (in form of loans) of the German potential requirement to have German
government via the state-owned bank KfW.
language translations in the event of tax
Section 7g of the German Income Tax Act related reviews or submissions to public
(EStG) provides tax incentives to small authorities such as commercial registers
and medium-sized enterprises (SMEs) (such as for corporate resolutions or steps
in Germany to promote investments by as part of the transaction), land registers or
allowing them to use investment deduction courts in the event of future disputes.
amounts (IDA) and special depreciation
to reduce their tax burden and support 26. Can acquisition documents be
investments. governed by a foreign law?

The IDA permits companies to deduct Under German law, the parties to an
up to 40% of the expected acquisition or M&A transaction are free to choose the
production costs of an eligible asset from law governing the sale and purchase
their taxable income before the actual agreement, but have no choice regarding
investment. This reduces the tax burden the law applicable to the transfer of
immediately in the year the IDA is formed. shares or assets, since these legal acts
are mandatorily governed by the law of
In addition, eligible SMEs can claim special
the country where the assets are located
depreciation of up to 20% of the acquisition
or, as to shares, where the company
or production costs in the year of
acquisition and the following four years, on is incorporated. Thus, a share or asset
top of regular depreciation under § 7 EStG. purchase agreement in relation to German
assets or shares subject to a foreign law
These rules apply to depreciable movable would be difficult to navigate. Therefore,
assets used mainly for business purposes the parties almost always agree on German
and to SMEs whose profits do not exceed law as governing law where the transaction
EUR 200,000. In order to benefit from has a strong connection to Germany.
the IDA and the special depreciation, the
investment can also be made through an 27. Are arbitration clauses legally
SME set up specifically for this purpose, permissible or generally included in
subject to certain conditions acquisition documents?

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Arbitration clauses are permissible G. Trends and Projections

and generally included in acquisition
documents, especially if the deal size 29. What are the main current trends in
is larger. Arbitration is more common M&A in your jurisdiction?
with German arbitration rules (DIS) After the rather quite 2023 for the German
being applicable, the place of arbitration M&A market due to increased interest
is typically Germany or sometimes rates and difficulty to find funding for
Switzerland. German parties may also transactions, 2024 has witnessed some
agree to foreign arbitration rules and increased M&A activity, but more in the
organizations such as the ICC. venture capital market. W&I insurance
German parties to transactions may also market has been developing for the last few
prefer the dispute resolution via German years and it has become part of many M&A
courts, which are generally capable of transactions, which is expected to continue,
seeing complex M&A related disputes. This at least in the short term.
is usually the case for rather smaller deals. 30. Are any significant development
28. Are there any specific formalities or change expected in the near
for the execution of acquisition future in relation to M&A in your
documents? Is it possible to jurisdiction?
remotely/digitally sign documents? The deal numbers increased in 2024
For form requirements, please refer to compared to 2023, but remained rather
questions 23 above. low compared to previous years. With the
more decreasing interest rates and more
In transactions where notarization is not available funding, especially in the VC
mandatory, it is generally possible to sector, more increase in deal numbers is
remotely/digitally sign documents and expected.
exchange digital copies and signature
pages.

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GIBRALTAR
HASSANS

Tim Garcia Matthew Torres

Partner Partner
[email protected] [email protected]

A. General the Companies Act 2014 (“Companies

Act”). However, to the extent that any
1. What is the main legal framework transaction is being pursued in relation to
applicable to companies in your a Gibraltar company which is publicly listed
jurisdiction? on a regulated market, the corresponding
Gibraltar is a common law jurisdiction rules and regulations governing such
based on the British legal system but regulated market will also need to be
unlike Great Britain, however, Gibraltar adhered to (e.g., an M&A transaction
has a constitution. In the absence of any involving a Gibraltar target company which
Gibraltar authority on any particular matter, is listed on the London Stock Exchange
English and Commonwealth case law is will need to comply with the City Code
highly persuasive in Gibraltar and is usually on Takeovers and Mergers). Further, the
followed, however, as they may concern Financial Services Act 2019 (together with
the interpretation of different statutory such applicable subsidiary legislation in
provisions, any such English common the form of industry specific regulations)
law decisions cannot be expressed to be will apply in relation to transactions where
binding. the target company and/or group is
carrying out a form of licensable activity as
The key rules and laws relevant to
regulated by the Gibraltar Financial Services
companies in Gibraltar are largely
Commission.
dependent on firstly identifying whether
the nature of the relevant transaction is: The key regulatory authority in Gibraltar
(i) private; (ii) public; and/or (iii) involves is the Gibraltar Financial Services
a Gibraltar regulated activity. Generally Commission, although depending on
speaking, all matters will be subject to the nature and process of the applicable

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transaction, each of the Supreme Court of Partnerships

Gibraltar, the Gibraltar Companies Registry
Gibraltar partnership law is outlined in
and Gibraltar Income Tax authorities may
the Partnership Act where a partnership
also feature.
may be created simply by execution of
2. What are the most common types a deed by all the partners concerned or
of corporate entities (e.g., joint even by mutual verbal agreement. If the
stock companies, limited liability partnership has a place of business within
companies, etc.) used in your Gibraltar, it must register the name under
jurisdiction? What are the main which it carries on business with the local
differences between them (including authorities. Partnerships are viewed as
but not limited to with regard to the transparent entities for tax purposes and
shareholders’ liability)? therefore the profits or gains from the
partnership are attributed to the partners
Companies for tax purposes. A partner is not liable for
The Companies Act allows for the the unpaid tax of another partner.
incorporation of both private companies Limited Partnerships
and public companies.
The Limited Partnerships Act 2021 permits
A private company under Gibraltar law is a the free association of partners, upon the
company that restricts the right to transfer terms that the liability of partners is limited
its shares and does not offer its shares to to the amount contributed by them in cash
the public. Four types of private companies or property at the establishment of the
may be incorporated under the Companies partnership. It allows limited partnerships
Act s 4(2), namely: to make a one-time election whether or
(a) a company limited by shares; not to have legal personality and it also
affords limited partners a statutory footing
(b) a company limited by guarantee and
on which to play an active role in the
having a share capital;
affairs of the limited partnership in certain
(c) a company limited by guarantee and permissible ways, including giving them
not having a share capital; and the ability to vote on permissible actions
(d) an unlimited company with or without pro-rata to their interests without vitiating
a share capital. their limited liability.

A public company under Gibraltar law is a Each limited partnership should have
company whose certificate of incorporation at least one general partner who is
responsible for the management of the
states that it is a public company, has
business of the partnership and whose
a share capital and meets the 2014
liability is unlimited, and at least one limited
Companies Act’s requirement in terms of
partner who does have limited liability
share capital and net assets.
but is prevented from taking part in the
Two types of public companies may be management of the partnership business
incorporated under the Companies Act s and has no power to bind the firm.
4(1), namely:
Limited Liability Partnerships
(a) a company limited by shares; and
Limited liability partnerships (“LLPs”)
(b) a company limited by guarantee and may be incorporated under Gibraltar
having a share capital. law pursuant to the Limited Liability

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Partnerships Act 2009. Unlike partnerships employment requirements of general

or limited partnerships, LLPs are bodies application as well as any typical conditions
corporate with unlimited capacity, with of the Gibraltar Financial Services
their respective members’ liability being to Commission for pursuing a prescribed
contribute to the LLPs’ assets in the event of regulated activity (which could require e.g.,
the LLP being wound up. physical presence or other requirements).
Foundations 4. Are there any foreign exchange
A foundation is an entity with separate restrictions or conditions applicable
legal personality that is able to hold and to companies such as restrictions to
deal with property in its own name as foreign currency shareholder loans?
absolute legal and beneficial owner, for There are no exchange control restrictions,
the specific purposes that are detailed in as there is complete freedom to remit funds
its Foundation Charter. The purposes can
into and out of Gibraltar and to convert
be very wide, with no obligation to be
funds into other currencies. Gibraltar
charitable. The purposes can be “anything
companies and individuals may purchase
capable of fulfilment”, but must not be
real and personal property in the world
illegal, immoral, or contrary to public policy.
without restriction.
A foundation is initially established by its
“founder”, the person who contributes 5. Are there any specific considerations
the initial endowment or assets to the for employment of foreign
foundation. The foundation is governed by employees in companies
its foundation charter and corresponding incorporated in your jurisdiction?
foundation rules, which detail the
purposes, beneficiaries, and guardian of Subject to the wider agreement between
the foundation, as well as the rules on its the UK and the EU over Gibraltar in
administration. relation to Brexit, for the time being,
nationals of EU Member States have the
Trusts right to enter, live and work in Gibraltar
As a common-law jurisdiction, Gibraltar provided that they can demonstrate that
fully recognizes the concept of a trust, a they have independent means or have
legal construct by means of which high an offer of employment or are actively
net worth individuals and their families seeking employment. Persons who are not
can structure their tax and succession entitled to work in Gibraltar (i.e., non-EU
plans and these include corporate vehicles nationals) need to apply or have their
such as discretionary trusts, private trust prospective employer apply for the issue
companies, asset protection trust and of a work permit before commencement of
purpose trusts. employment.
B. Foreign Investment C. Corporate Governance
3. Are there any restrictions on foreign 6. What are the standard management
investors incorporating or acquiring structures (e.g., general assembly,
the shares of a company in your board of directors, etc.) in a corporate
jurisdiction? entity governed in your jurisdiction
There are generally no Gibraltar law and the key liability issues relating
restrictions on foreign investments in to these (e.g., liability of the board
Gibraltar, subject to compliance with any members and managers)?

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In both public and private companies, the prescribed criteria which is determinative
company’s board of directors are the key of the form of accounts each company is
decision-making body. The directors must required to file, which may range from, inter
have regard to their fiduciary duties, and alia, an abridged balance sheet to audited
act in the best interests of the company as a financial statements. The accounts are to
whole (essentially considering all interested be approved by the company’s board of
persons, including the company in itself, its directors and/or at a general meeting of
shareholders and third-party creditors). shareholders, and subsequently filed at the
Companies Registry.
More generally, directors’ duties are not
generally codified in Gibraltar statute but D. Shareholder Rights
by virtue of the common law’s application
in Gibraltar, directors are subject to certain 8. What are the privileges that can
fiduciary duties, and which include: (i) be granted to shareholders? In
a duty to act in the best interests of the particular, is it possible to grant
company as a whole; (ii) a duty to exercise voting privileges to shareholders for
a degree of skill and care that may be appointment of board members?
reasonably expected from them; and Shareholders do not owe fiduciary duties
(iii) a duty to act for a proper purpose to other shareholders, whether majority
(typically as more particularly set out in the or controlling shareholders, or otherwise.
company’s articles of association, which Whilst minority shareholders do not, per se,
ordinarily impose certain specific duties to have any right to challenge the majority,
secure proper use of the powers bestowed there are limited exceptions to this general
upon directors). rule. These exceptions include a claim for
The articles of association of a Gibraltar unfair prejudice, whereby a shareholder of
company dictate how the company is to a company may apply to the court where
be managed and administered. Unless the such member feels that the company’s
articles of association specifically restrict affairs are being, have been or are proposed
the objects of the company, its objects are to be conducted in a manner that is unfairly
unrestricted. Articles of association usually prejudicial to the interests of members.
provide for procedures regarding director If the court finds the application to be
and shareholder meetings and resolutions, successful, it can order the company to
for any restrictions on the ability of refrain from doing any act complained
shareholders to transfer shares and set out of, authorise civil proceedings, or make a
the powers of the directors of the company. compulsory share purchase order.
The articles of association are often made 9. Are there any specific statutory rights
to measure to suit particular requirements available to minority shareholders
of a company’s shareholders.
available in your jurisdiction?
7. What are the audit requirements in
Statute and common law provide, and
corporate entities?
provisions of the articles of association
All Gibraltar companies must file accounts of a company may provide, a number of
each year in accordance with the relevant protections to minority shareholders, and
accounting principles prescribed under the minority shareholders may petition the
Gibraltar law. The size of the company Gibraltar courts for relief if they believe they
is the decisive factor, together with the have been unfairly prejudiced.

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10. Is it possible to impose restrictions • Fixed charge holders have the option
on share transfers under the of appointing a receiver. Receivership
corporate documents (e.g., articles is a procedure whereby a receiver is
of association or its equivalent in appointed by the court or under a
your jurisdiction) of a company debenture or other debt instrument in
incorporated in your jurisdiction? respect to a particular asset with the
A transfer of shares shall require to be aim of selling that asset to satisfy the
approved by board resolution of the target debt owed to the secured creditor.
entity and the making of corresponding • Administrative Receivership is a
private and public updates to its register procedure whereby an administrative
of members. The transfer may also require receiver is appointed by the holder of
advance regulatory approval of the a debenture or other instrument of the
Gibraltar Financial Services Commission company secured by a floating charge.
where a Gibraltar entity subject to its Similar to a receiver, the administrative
regulation is directly or indirectly involved receiver takes control of the specific
or affected by the transfer. assets charged under the floating
Further terms, conditions and restrictions charge with the aim of selling these and
can be stipulated with the articles of paying the secured creditor.
association of the target entity.
• Liquidation is a procedure whereby
11. Are there any specific concerns or a liquidator has custody and control
other considerations regarding the of the company’s assets. The purpose
composition, technical bankruptcy of liquidation differs depending on
and other insolvency cases in your whether the liquidator has been
jurisdiction? appointed by the members or by the
court as the purpose of a liquidator
The law on insolvency is governed by the
appointed by the court is to recover
Insolvency Act 2011 and it affords the
following possible options: and realise a company’s assets and
where possible, distribute these or their
• With a Company Voluntary proceeds, amongst the creditors of the
Arrangement (CVA), a company is company.
able to approach its creditors in an
attempt to try to reach a compromise More generally, the Insolvency Act
arrangement. The arrangement may penalises directors for engaging in
be (for example) to repay them from fraudulent trading and any act resulting in
future profits, to repay the creditors a fraudulent preference of its creditors is
less interest or the directors may be liable to be set aside together with unfair
prepared to sell assets to repay the preferences, undervalue transactions,
creditors within a period of time. voidable floating charges, and extortionate
credit transactions all being void.
• Administration is an insolvency process
that is designed to encourage the The Insolvency Act also introduced
restructuring and refinancing of a insolvent trading. A director is guilty of
company in order to avoid liquidation. insolvent trading even if the director
The administration procedure involves honestly had no idea that the company
the appointment of an administrator could not avoid going into insolvent
who displaces the directors of the liquidation, A director guilty of such an
company. offence can face a disqualification order for

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up to ten years (as well as personal liability) 14. What are the approvals and
if he/she should have realised that the consents typically required (e.g.,
company was going to become insolvent, corporate, regulatory, sector
or if any other person in a similar position based and third-party approvals)
would have realised that the company was for private acquisitions in your
going to become insolvent. jurisdiction?
E. Acquisition Generally, transfers of shares require that an
12. Which methods are commonly used instrument of transfer (e.g., stock transfer
to acquire a company, e.g., share form) is executed and delivered by the
transfer, asset transfer, etc.? relevant sellers and buyers to the directors
of the target company, that the directors
The primary technique/legal means for
are not only satisfied with the same but
acquiring a company in Gibraltar is through
that they provide express approval to the
the purchase of a company’s issued share
transfer and related updates, and with
capital, and which will ordinarily include
the company secretary updating the
entry into a form of share purchase
agreement (with tailored representations, Register of Members and making certain
warranties and undertakings), together filings at Companies House, Gibraltar for
with a related instrument of transfer. a prescribed filing fee in order to reflect
Less commonly used methods are asset the transfer as a matter of public record.
transfers and mergers. The articles of association of the company
usually specify additional requirements,
13. What are the advantages and which usually include (where the shares are
disadvantages of a share purchase certificated) the delivery and cancellation
as opposed to other methods?
of relevant share certificates.
Some advantages are as follows:
To the extent, the target entity is licensed
• No need for re-valuations and retitles of under the Gibraltar Financial Services
individual assets. Commission, depending on the licensable
• Buyers can typically assume non- activity, relevant approvals, consents and/
assignable licenses and permits without or notifications are to be provided.
having to obtain specific consent.
15. What are the regulatory
• Simpler and more commonly used competition law requirements
than asset transfers that can be applicable to private acquisitions in
covered under a single share purchase your jurisdiction?
agreement.
The Competition Act 2020 was introduced
Some disadvantages are as follows: into Gibraltar law effective 1 January 2021
• All assets and liabilities are transferred and is the primary legislation governing
and at their carrying value with the Gibraltar merger control. This Act
unwanted liabilities having to be dealt establishes the Gibraltar Competition and
with via separate agreements. Markets Authority (the “GCMA”) for the
• For target entities that have employees, purposes of certain mergers and affords it
the purchaser will inherit all employees various functions and powers – additionally,
with particular consideration to be it makes provision about competition
given to the employees’ statutory rights law and the abuse of dominant market
under applicable legislation. positions in Gibraltar.

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Summarily, save in the cases of mergers and Commission, the general provisions of
other general exclusions, this Act prohibits the Financial Services Act 2019 will also
agreements or conduct of undertakings, need to be adhered to (together with
decisions by associations of undertakings such applicable subsidiary legislation in
or concerted practices which may affect the form of industry specific regulations),
trade within Gibraltar, and which aim or including but not limited to the obligation
have the effect of preventing, restricting of notifying the Gibraltar Finances Services
or distorting competition within Gibraltar, Commission of any acquisition of control, or
or such that may amount to the abuse of increased control, over a Gibraltar regulated
a dominant position if deemed to affect public company.
trade within Gibraltar. Under the terms
17. Is there a requirement to disclose
of this Act, the GCMA has wide powers of
a deal, for instance to regulatory
investigation, monitoring and enforcement
authorities? Is it possible to keep a
over aspects including transactional
deal confidential?
arrangements, conduct, and mergers
which can raise competition law concerns Other than in the case of transactions
(and which include initial enforcement directly or indirectly involving a Gibraltar
orders on completed and/or anticipated regulated entity (for which the Gibraltar
mergers, which are capable of preventing Financial Services Commission requires that
parties from pursuing transactions and/or any bid be made public without delay and
mergers which integrate their businesses the bidder is so required to inform them of
pending prior resolution and approval by said bid at the first reasonable opportunity),
the GCMA). This Act also provides authority and absent any regulated market rules and
for GCMA investigation when there may be regulations (in the context of a public M&A
cases of public interest. transaction directly or indirectly involving
a Gibraltar entity that is publicly listed
16. Are there any specific rules
on a recognized stock exchange), or any
applicable for acquisition of public
private contractual agreement (whether
companies in your jurisdiction?
pursuant to a Gibraltar entity’s articles of
The acquisition of shares in a publicly association, under a shareholder agreement
traded company would firstly require or otherwise) there are generally no
consideration and adherence to the Gibraltar law provisions stipulating at which
applicable rules and regulations of the stage a target company is required to
relevant regulated market on which disclose a deal. Ultimately, this is likely to be
the shares of said public company are negotiated and agreed upon by the parties
being traded on. Furthermore, the and will likely be driven by commercial
Gibraltar Companies Act 2014 permits the factors and the parties’ requirements.
acquisition of a publicly traded company by
Further, although there is no requirement
undertaking a scheme or arrangement by
to do so at any stage of negotiation if
way of a merger. Alternatively, a share for
said arrangement requires court sanction
share exchange may also be pursued, or an
where a court hearing will be required, the
outright contractual sale and purchase of
relevant disclosure is made to the court
shares may be pursued.
of the intended arrangement and shall
Further, and to the extent that the publicly become public at that stage. Similarly, the
traded company carries out a form of directors of each of the public merging
licensable activity in Gibraltar which is companies must deliver a copy of the
regulated by the Gibraltar Financial Services draft terms to the Registrar which is then

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published in the Gazette at least 1 month • Purchase price funds flow documents/
before the date of any meeting of that structure;
company summoned for the purpose of • Latest filed accounts and tax
approving the scheme. returns together with current dated
18. Can sellers be restricted from management accounts; and
shopping around during a • Itemized list of current assets and
negotiation process? Is it possible liabilities.
to include break fee or other
Yes, it would be common to have
penalty clauses in acquisition
documents to procure deal conditions to closing such as no material
exclusivity? adverse change in the body of the
acquisition documents together with
Absent any regulated market rules and relevant representations and warranties.
regulations (in the context of a public
M&A transaction where the target entity 20. What are the typical warranties
is a publicly listed Gibraltar company), or and limitations in acquisition
restrictions or conditions stipulated by the documents? Is it common to obtain
Gibraltar Financial Services Commission warranty insurance?
(in the context of an M&A transaction Although the representations and
concerning a Gibraltar regulated entity), warranties may differ on a case-by-case
there are generally no provisions inhibiting basis given the relevant terms of each deal,
a seller of a target company from seeking the standard ones are as follows:
to secure deal exclusivity. In the context
of private transactions, parties are broadly • The seller is the legal and beneficial
free to negotiate and agree on whatever owner of the relevant shares and has
exclusivity arrangements they may wish, the right to sell said shares free from
including but not limited to entering into Encumbrances and have the capacity
such applicable exclusivity agreements to perform their obligations under the
and/or break fee arrangements. acquisition documents;

19. What are the conditions precedent • The relevant parties to the acquisition
in a typical acquisition document? documents are validly organized and
Is it common to have conditions to existing and in relation to corporate
closing such as no material adverse entities, they have the power and
change? authority to enter into the acquisition
documents and perform the obligations
Although the conditions precedent may thereunder; and
differ on a case-by-case basis given the
relevant terms of each deal, the standard • The execution and the performance
ones are as follows: of the acquisition document by the
relevant corporate entities have been
• Corporate authorizations (board
duly authorized by the company and
resolutions, formalities certificate etc.);
no further corporate action on the part
• Share transfer forms; of the relevant corporate entities is
• Legal opinions; necessary to authorize the acquisition
• Due diligence reports; documents and/or its performance.
• Finance documentation (if the purchase Obtaining warranty insurance is not
includes 3rd party financing); generally common, particularly in

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acquisition where the value may be course of its business; (b) the provision by
considered to be ‘low’. However, the buyer a company, in accordance with any scheme
may insist on the seller taking out such an for the time being in force, of money for
insurance especially where the seller puts the purchase by trustees of fully-paid
forth assurances of inadequate value, or shares in the company to be held by or for
where no third-party guarantor is available the benefit of employees of the company,
to back the seller’s obligations in the case of including any director holding a salaried
inaccuracy of the seller’s statements. employment or office in the company; and
(c) the making by a company of loans to
21. Is there a requirement to set a
persons, other than directors, bona fide in
minimum pricing for shares of a
the employment of the company with a
target company in an acquisition?
view to enabling those persons to purchase
In a private transaction, the consideration fully-paid shares in the company to be
payable is a commercial matter for the held by themselves by way of beneficial
parties and in a public transactions, there ownership.
could be certain conditions as set by the
In relation to private companies (and
relevant stock exchange. When it comes
if regulated, may have additional
to regulated entities, depending on
requirements), the Companies Act does
specific percentages of voting rights being not generally prohibit a private company
acquired by a buyer or a buyer together from giving financial assistance in a case
with any person acting in concert with a where the acquisition of the shares in
buyer and as a means for protecting the question was an acquisition of shares
minority shareholders, an “equitable price” in the company or, if it is a subsidiary of
is typically set. another private company, in that other
22. What types of acquisition financing company. The relevant legislation provides
are available for potential buyers in further conditions and procedural aspects
your jurisdiction? Can a company which must be adhered to in order for a
provide financial assistance to a private company to avail itself of the same.
potential buyer of shares in the Directors must also consider the company’s
target company? articles of association, their fiduciary duties
and corporate benefit when weighing up
All standard types of financing (i.e., this option.
loans etc.) are generally available for
potential buyers, however, pursuant to the 23. What are the formalities and
Companies Act, it shall not be lawful for a procedures for share transfers and
public company or any of its subsidiaries how is a share transfer perfected?
to give, whether directly or indirectly, and Generally, transfers of shares require
whether by means of a loan, guarantee, that an instrument of transfer (e.g., stock
the provision of security or otherwise, any transfer form) is executed and delivered to
financial assistance for the purpose of or in the directors of the target company, that
connection with a purchase made or to be the directors are not only satisfied with
made by any person of any shares in the the same but that they provide express
company. Nothing in the relevant section approval to the transfer and related
shall be taken to prohibit (a) where the updates, and with the company secretary
lending of money is part of the ordinary updating the Register of Members and
business of a company, the lending of making certain filings at Companies House,
money by the company in the ordinary Gibraltar for a prescribed filing fee in

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order to reflect the transfer as a matter of (c) interest paid by a bank, building society
public record. The articles of association or other financial services institution
of the company usually specify additional licensed to take deposits under the
requirements, which usually include (where Financial Services (Banking) Act or
the shares are certificated) the delivery and equivalent legislation in any other
cancellation of relevant share certificates. jurisdiction;
There are no registration, stamp, (d) income derived from a friendly
documentary or any similar taxes or society, sporting club, or ecclesiastical,
duties of any kind payable in Gibraltar in charitable, or educational institution or
connection with the transfers of shares trust of a public character;
(unless the shares in question relate to real
(e) the gains or profits derived by a non-
property situated in Gibraltar). Stamp duty
resident owner, charterer or operator
is however payable on an increase of share
of ships or aircraft for the carriage of
capital in the fixed nominal amount of
GBP10.00. passengers or cargo to or from Gibraltar
in any ship or aircraft owned, chartered,
24. Are there any incentives (such or operated by them;
as tax exemptions) available for
(f ) medical insurance premiums paid by
acquisitions in your jurisdiction?
an employer to an approved scheme on
Although no specific incentives are behalf of employees up to an amount
available for acquisitions in Gibraltar, of £3,000 for individuals taxed under
companies are taxed on profits accrued in the Gross Income Based system, and
or derived from Gibraltar (i.e., a territorial £5,395 for individuals taxed under the
basis of taxation). In case of companies Allowance Based system;
licensed and regulated in Gibraltar, the
profits are deemed to accrue in and derive (g) benefits in kind to an annual value of
from Gibraltar, except for activities carried £250 per employee;
on or outside Gibraltar by a branch or (h) income from debentures issued
permanent establishment. by a company the shares of which
Companies are taxed at a rate of 15% in are quoted on a Recognised Stock
regard to accounting periods commencing Exchange, including debenture stock,
after 20 July 2021. However, energy and loan stock, bonds, certificates of deposit
utility providers have to pay tax at a rate of and any other instruments creating or
20%. acknowledging indebtedness including
bills of exchange accepted by a banker
Gibraltar does not levy any tax on VAT, other than instruments included in (j)
capital gains, accumulated profits, gifts,
below;
wealth and/or estate duty. A company
registered in Gibraltar that receives royalties (i) income from loan stock, bonds,
to it from another company is chargeable and other instruments creating or
to Gibraltar tax at a rate of 12.5%. acknowledging indebtedness issued by
or on behalf of a government, a local or
The following are exempt from tax:
public authority;
(a) dividends paid by a company ordinarily (j) income from units in a collective
resident in Gibraltar to a company; investment scheme which is marketed
(b) dividends paid by a company the shares and available to the general public,
of which are quoted on a Recognised including shares in or securities of an
Stock Exchange; open-ended investment company;

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(k) income from rights to and interests in to the identity of an Arbitrator then
anything falling within (a) to (k) above; the arbitrator can be appointed by
and the Chairperson of the Gibraltar Bar
Association.
(l) a dividend paid out of the profits or
gains of a company which has profits 28. Are there any specific formalities
or gains on which the company is not for the execution of acquisition
liable to pay tax by virtue of (a) to (l) documents? Is it possible to
above to the extent of the amount remotely/digitally sign documents?
of the dividend represented by the
Gibraltar law provides for documents
proportion which the amount of the
and/or deeds to be signed by a Gibraltar
income not liable to tax by virtue of company either by a director in the
(a) to (l) above bears to the entire presence of a witness, two authorized
income of the company for the year of signatories or a director and the company
assessment. secretary. For parties to the agreement
F. Enforceability which are not Gibraltar corporate entities,
then applicable binding jurisdictional
25. Can acquisition documents be provisions are to apply. Further, Gibraltar
executed in a foreign language? law does generally provide for documents
Yes, it is common and standard market to be signed remotely/digitally but specific
practice for these to be in the English attention is to be given on a case by case
language. Further, any documents that basis to ensure conformity with relevant
require to be submitted to any authority practices.
(i.e., the Gibraltar Financial Services G. Trends and Projections
Commission, the Companies Registry etc.)
must be in English (or append a certified 29. What are the main current trends in
English translation). M&A in your jurisdiction?
26. Can acquisition documents be Other than in limited areas where Gibraltar
governed by a foreign law? has prominent activity, such as online
gaming (where it is a market leader),
Notwithstanding that any governing law
insurance (primarily UK-facing, with one
may be used, typically Gibraltar law is used
in five cars in the UK presently covered
on Gibraltar situs acquisitions. Further,
by Gibraltar insurers) and more recently
with Gibraltar law being a common law
fintech (where it has pioneered the
jurisdiction and as such English law being
provision and continuing development
persuasive, it is common to see English law
of a regulatory framework), Gibraltar has
agreements being used.
not traditionally been a primary M&A
27. Are arbitration clauses legally jurisdiction, with most activity involving
permissible or generally included in mergers or acquisitions of large multi-
acquisition documents? national groups of which a Gibco forms
part (sometimes as the target entity but
Arbitration clauses are legally permissible
typically as an indirect subsidiary).
and are generally included in acquisition
documents with an independent arbitrator However, (i) the continuing negotiations
to be appointed as mutually agreed by the by way of agreeing on the precise form
relevant parties but where the disputing of treaty intended to seek to provide
parties cannot reach an agreement as for an arc of shared prosperity between

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Gibraltar and the nearby Spanish hinterland with respect to wider financial services (as
following an in principle agreement Gibraltar continues to work on getting its
revealed on 31 December 2020 by way of message across regarding its viability as a
a proposed framework for said UK-EU legal gateway to the UK, including for EU firms
instrument setting out Gibraltar’s future facing the loss of automatic passporting
relationship with the EU, allowing steps to rights into the UK previously available, as
be taken to eradicate the physical border well as of the attractiveness of its general
between Gibraltar and Spain through offering as a compliant yet business-
the application of certain aspects of the friendly, quick to market, common law,
Schengen acquis in Gibraltar (including ‘right touch’ regulated jurisdiction levying
but not limited, to those extending tax on a primarily territorial basis), and
to the enhanced movement of goods which is contributing to various relocations
and people), (ii) Gibraltar and the UK’s of individuals and firms to Gibraltar, and
agreeing of a temporary (expected to some of whom are finding themselves
become permanent in 2024) permissions included as targets in the wider increase
framework affording to continue post- of M&A activity that has ensued by way
Brexit market access to a wide range of of emergence from recentCovid-19
licensed financial services firms to passport transactional stagnation.
their services to – and from – each other
30. Are any significant development
(and which is already beginning to bear
or change expected in the near
fruit in terms of influx of UK-facing financial
future in relation to M&A in your
services operations to Gibraltar), (iii) latent
jurisdiction?
effects of the Covid-19 pandemic on the
market in terms of consolidation of larger The most significant development or
players (including by way of acquisition changes expected in the near future will
of smaller groups), and (iv) Gibraltar’s be: (i) the precise form of the Schengen-
recent re-vamping of its funds and limited style treaty governing Gibraltar’s future
partnership legislation to make this more relationship with the EU and the mutual
practical and attractive, each of the above benefits this may afford in terms of
against the wider backdrop of a new- fluidity of particular goods and people in
found relative freedom from some of the Gibraltar, the nearby Spanish hinterland
restrictions and ‘red-tape’ that its hitherto and wider Schengen area beyond that;
fully-blown EU membership required, (ii) the continuing UK-Gibraltar post-
including allowing for a more bespoke and Brexit financial services mutual market
adaptive regulatory approach (with our access regime; and (iii) global trends and
regulator attuned to the developing and developments in both the corporate and
often different needs by way of protection tax space (including by way of latent effect
of customers and operators alike in each of the Covid-19 pandemic, how and by
of the key areas where Gibraltar’s market whom OECD Pillar 1 and 2 tax aspects are
standing exceeds its size), is leading to ultimately implemented and enforced, as
substantial growth in the Gibraltar M&A well as consolidation of the crypto market
market. In particular, the established into fewer, larger more comprehensively
gaming, insurance and fintech sectors governed and regulated including by our
have been very active, with a number of Gibraltar Financial Services Commission
high profile mergers and acquisitions of in Gibraltar players given recent market
groups with prominent Gibraltar operating challenges and difficulties encountered
companies within their structures – we by existing limited levels of regulation
are also seeing this growth of activity globally).

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GREECE
ZEPOS & YANNOPOULOS

Paris Tzoumas Diana Tsourapa Nadia Axioti Alexandros Lamprou

Head of Finance Partner Senior Associate Senior Associate
[email protected] [email protected] [email protected] [email protected]

A. General Specifically, regarding the M&A field,

Greece does not have a dedicated M&A
1. What is the main legal framework legal framework. Any private M&A activity
applicable to companies in your is subject to the general corporate law
jurisdiction? provisions regulating the form of the
The key corporate law provisions applicable relevant legal entity, as laid down above,
to companies in Greece are the following: as well as applicable civil, commercial and
criminal law provisions and the respective
 Law 4548/2018 on Sociétés Anonymes, tax rules. In this respect, the key pieces of
i.e., the Greek Stock Corporations legislation are:
(Anonymi Eteria or AE);
 Law 4548/2018 on Sociétés Anonymes,
 Law 3190/1955 on Limited Liability
Law 4072/2012 on Private Companies
Companies (Eteria Periorismenis Efthinis
and Law 3190/1955 on Limited Liability
or EPE);
Companies regarding corporate
 Law 4072/2012 on Private Companies matters;
(Idiotiki Kefaleouchiki Eteria or IKE),
 The Greek Competition Act (Law
General Partnerships (Omorrythmi
3959/2011) and Council Regulation (EC)
Eteria or OE), and Limited Partnerships
No 139/2004 regarding merger control
(Eterorrythmi Eteria or EE).
aspects;
 Law 4601/2019 on Corporate
Transformations;

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 The relevant provisions of the Geek which may only be registered shares, while
Civil Code as regards contractual the AE is the only corporate vehicle that can
matters, provided the parties opt for issue bond loans. Incorporation requires
Greek law as the governing law of the at least one of the shareholders – either a
transactional agreements; and natural or a legal person – to obtain a Greek
tax registration number (“AFM”).
 Law 3777/2009 on Cross-Border
Mergers of Capital Companies, which The lawful formation of an AE is subject
will be shortly replaced by the newly to a minimum capital requirement of
passed Bill on Cross-Border Corporate EUR 25,000 which must be fully paid-up
Transformations transposing Directive within 2 (two) months as of the effective
(EU) 2019/2121 as regards cross-border date of AE’s incorporation, unless partial
conversions, mergers and divisions into repayment is permitted. Contributions in
Greek law. the AE are of a capital nature, although
2. What are the most common types payment may take place either in cash or
of corporate entities (e.g., joint in kind, i.e., by contribution of other assets
stock companies, limited liability (including intangibles). To be noted that
companies, etc.) used in your the option of payment in assets triggers a
jurisdiction? What are the main valuation procedure, completion of which
differences between them (including requires the conditions of Article 17 of Law
but not limited to with regard to the 4548/2018 to be met. In particular, there
shareholders’ liability)? are requirements for evaluation reports that
shall certify the value of the contributions
As mentioned under Question 1 above, the in kind, which shall be composed by 2
most common types of corporate entities in (two) chartered auditors-accountants or an
Greece are: audit firm or, as the case may be, by 2 (two)
 the stock corporation (“AE”); independent certified valuators, and which
must include all information expressly
 the limited liability company (“EPE”); provided under Law 4548/2018. However,
 the private company (“IKE”); without prejudice to the aforementioned,
in the event of share capital carried out by
 the general partnership (“OE”); and means of contribution in kind, the valuation
 the limited partnership (“EE”). procedure may be shortened or even
waived in certain circumstances, when the
The following brief description of the key provisions of Article 18 of Law 4548/2018
features of each corporate entity will also may apply.
bring light to their main differences:
The AE is generally considered the
Anonymi Eteria most appropriate form for large multi-
The AE is the equivalent of a Société stakeholder businesses and may be
Anonyme, namely, a stock company. Law privately held or publicly traded.
4548/2018 governing the AE, provides that
Limited Liability Company
the liability of shareholders is limited to the
amount of their shareholding participation, The EPE is governed by Law 3190/1955, as
i.e., their contribution to the share capital, amended and in force. As a general rule,
which is divided into and represented by the liability of the partners is limited to the
shares of stock. The AE may issue different amount of their contributions. However,
classes of shares (common and preferred), such liability is joint and several until

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the due formation of the company upon even amount to EUR 0. In light of this,
completion of the publication formalities contributions to an IKE’s capital can be
before the General Commercial Registry made either through capital contributions
take place. It should be noted that the (meaning contributions in cash or in
establishment of a single-partner EPE is kind), non-capital contributions (e.g., an
invalid if: employment relationship, know-how or
other goods which are not of a monetary
 the sole partner (individual or legal
nature) or contributions of guarantee
entity) is the sole partner of another
(namely the undertaking of liability for
single-partner EPE; or
company debts vis-à-vis third parties).
 the sole partner of the single-partner
EPE is another single-partner EPE. An IKE is often the most cost-efficient form
and offers such a flexible structure that it
Additionally, foreign entities and foreign has become increasingly popular in recent
individuals must be registered with years (especially with start-up businesses).
the competent Greek fiscal authorities
and obtain an AFM in order to become General Partnership
partners in an EPE. The due formation of The OE is governed by Law 4072/2012, as in
an EPE is not subject to a minimum capital force. It constitutes a partnership in which
requirement. Therefore, the partners may all partners are liable, jointly and severally,
freely determine the amount of capital to for the partnership debts.
be contributed. Contributions in an EPE are
of a capital nature, although payment may Such a business type is very flexible and
take place either in cash or in kind. It is to requires minimum costs for establishment
be noted also that each company part must and legal compliance, yet entails a serious
have a nominal value of at least EUR 1,00. risk for the partners, as they are subject to
unlimited personal liability for corporate
The EPE constitutes the common vehicle for debts. All partners of an OE qualify as
small and medium-sized businesses since “merchants”, by operation of law, solely
it combines features of a partnership and a on the basis of their participation in an OE
corporation. (derivative commerciality of the partners).
Private Company The bankruptcy of the legal entity of the OE
results ipso facto in the parallel bankruptcy
The IKE is governed by Law 4072/2012, as of its partners. The OE is therefore most
amended and in force. As a general rule, an used for small family businesses. There are
IKE is solely responsible for any and all its no minimum capital restrictions for due
liabilities, without joint liability on behalf formation of an OE.
of its partners. It may be established by 1
(one) or more natural or legal persons or Limited Partnership
be incorporated as (and later become) a
The EE is also regulated by Law 4072/2012,
single-member company. Moreover, foreign
as in force. An EE is a partnership with 1
entities and foreign individuals must be
(one) or more general partners and 1 (one)
registered with the competent Greek fiscal
or more limited partners. Specifically, an EE
authorities and obtain an AFM in order to
cannot exist without at least 1 (one) general
be partners of an IKE.
partner. Should the general partner cease
The due formation of an IKE is not subject to participate for any reason whatsoever,
to a minimum capital requirement. It is such partner must be replaced in due
worth noting that the IKE’s capital may course, otherwise the partnership will be

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dissolved. Conversely, if the EE has 1 (one) Article 24 of Law 1892/1990, as amended

limited partner and such limited partner and in force, without the prior approval
ceases to participate in the EE in any way, from the competent decentralized
the partnership may continue trading in the administration office which shall lift the
form of an OE. relevant restrictions upon the interested
parties’ filing of a lawful petition to that
The general partners in an EE have
end. Another example is Legislative Decree
unlimited personal liability, whereas the
210/1973, which allows special approval of
limited partners have limited liability up to
contracts for the transfer to foreign (natural
the amount of their contribution. General
or legal) persons or for the use/exploitation
partners are fully liable for any of the EE’s
of mining rights by such persons.
debts jointly and severally with the latter.
Thus, any third party may seek settlement Additionally, industry specific legal
of any of its claims against the EE from a framework shall also apply for share
general partner, without being obliged to acquisitions that exceed minimum
firstly turn against the partnership itself. thresholds in certain sensitive industries
including banking, telecommunications
A limited partner may be held fully liable
and media, gaming, investment
for the EE’s debts solely If their name is
management, insurance etc.
included in the partnership’s corporate
name and the debtor in question is not 4. Are there any foreign exchange
aware that they are a limited partner. There restrictions or conditions applicable
are no minimum capital restrictions for the to companies such as restrictions to
due formation of an EE. foreign currency shareholder loans?
B. Foreign Investment No. There are currently no foreign exchange
restrictions applicable to Greek corporate
3. Are there any restrictions on foreign
entities.
investors incorporating or acquiring
the shares of a company in your 5. Are there any specific considerations
jurisdiction? for employment of foreign
employees in companies
Generally, foreign investments do not
incorporated in your jurisdiction?
require approval from Greek authorities,
except for certain restrictions on foreign The Greek Immigration Code operates
investments involving real estate on a numerus clausus basis, meaning that
occupation or ownership in border regions provides for specific types of residence
and on certain islands, with regard to permits the requirements of which have to
national security considerations. be met by the individual in order for him/
her to be entitled to its acquisition. In this
More specifically, non-EU/European
respect, the entrance of the third-country
Free Trade Association individuals or
nationals to Greece for working purposes
legal entities may not proceed with any
is subject to certain requirements (e.g.,
transaction in which a contractual right or
issuance of a visa and or obtainment of a
a right in rem is granted in their favor, or
residence permit) that have to be followed
such individuals or legal entities may not
by the individuals themselves and their
acquire shares of companies (irrespective
employers.
of the companies’ legal forms) that own
real estate property located in certain The appropriate type of visa or residence
border regions of Greece prescribed by permit depends on a number of factors

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related to the employment relationship C. Corporate Governance

(direct employment, secondment,
teleworking etc.), the job position, the 6. What are the standard management
employee’s specialty (highly qualified, structures (e.g., general assembly,
managerial, trainee, etc.), the employer’s board of directors, etc.) in a corporate
status (Greek entity, Greek branch, Intra- entity governed in your jurisdiction
Company transfer, EU based company, and the key liability issues relating
specific legal framework entity, etc.), to these (e.g., liability of the board
the length of employment and more, members and managers)?
depending on the characteristics of each The management structures found in the
case. In general, almost all work-related most common legal entities are:
Greek residence permits are valid for a
3 (three)-year period with the option of  the General Meeting of Shareholders
further renewals. (“GM”);

After determining the suitable type of  the meeting of partners for EPEs and
work permit, the applicant must gather the IKEs;
supporting documentation and submit the  the board of directors (“BoD” or
application with the relevant documents “Administrative Body”);
at the competent Greek Consulate of his/
her permanent residence abroad. Upon the  the board of administrator/s for EPEs
submission of a complete application file and IKEs; or
at the Greek Consulate, in principle within  the sole director/administrator for small
10 (ten) to 15 days, the Consulate will AEs.
issue the required Visa D, in order for the
third-country national to enter Greece with Greece follows the one-tier governance
the purpose of obtaining the respective model. The typical governing body in
residence permit. Greece is the BoD/Administrative Body. In
AEs the BoD consists of at least 3 (three)
Shortly after his/her entry into Greece, members and not more than 15 (the
the third-country national must proceed exact number is determined by the GM
to the filing of the application for his/ or the articles of incorporation), while
her residence permit and then receive the administrative body in EPEs and IKEs
an interim residence permit which will consists of 1 (one) or more administrators
be valid up to the issuance of the Greek acting either separately or jointly.
residence permit. Said document will
Micro and small AEs have the right to
entitle him/her to lawfully reside and work
appoint a sole director/administrator
in Greece. However, said document does
instead of a board of directors, but this is
not constitute a resident permit thus is not
not applicable to medium, large and listed
a travel document permitting the travel and
companies. The classification of companies
stay in the Schengen Area. At a later stage,
as “micro”, “small”, “medium” and “large” is
the competent immigration authority will
based on quantitative criteria, provided for
set an appointment for the provision of his/
under Law 4308/2014 on Greek Accounting
her biometric information (i.e., fingerprints
Principles. The sole director/administrator
and signature specimen) and then, upon
must always be an individual and the rules
review of the full file, issue the applicable
governing the BoD apply accordingly.
residence permit card.
Large and medium-sized companies, or
companies with shares admitted to trading

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on a regulated market may not appoint a The BoD therefore operates through
single-member board. various separate committees (e.g., audit,
remuneration and nomination committees)
The administrative body’s duty is to
in public companies, which also have:
manage the company and represent it both
judicially and out of court (in its relations  an internal audit unit;
with third parties). The administrative body,  a shareholders’ relations unit; and
in general, is competent to administer
the company’s assets and perform the  a corporate announcements unit.
object of the company’s activity, within The GM in AE and the meeting of partners
the limits of the law save for reserved in EPE and IKE, are a company’s supreme
matters to be decided at the level of governing body and the only competent
the GM. The administrative body may body to resolve on certain material
delegate the powers of management and issues set forth in the law and the articles
representation of the company to 1 (one) or of incorporation (i.e., amendment of
more persons – members or non-members the articles of association, increase or
– if this is permitted under the articles of reduction of the company’s share capital
incorporation. The articles of incorporation in AE, election of BoD members etc.). Its
may also authorise the administrative resolutions are binding on the BoD and
body or require the administrative body to managers as well as on all shareholders of
entrust internal control to 1 (one) or more the company including those absent or
non-members. Additionally, following dissenting.
a respective provision in the articles of
Key liability issues of the administrative
incorporation or a resolution by the BoD,
body and managers
AEs may also elect an executive committee
to which certain powers or functions of BoD members and administrators have 2
the BoD may be delegated. The executive (two) fiduciary duties towards the company
committee’s composition, responsibilities, when managing its affairs, namely:
tasks and manner of decision-making, as  a duty of loyalty (to promote the
well as any matter relating to its operation, company’s best interests, accomplish
shall be governed by the articles of the company’s objectives and omit
incorporation or the resolution of the BoD actions that could be harmful to the
that elected the committee. company’s interests); and
The Hellenic Federation of Enterprises  a duty of care (to abide by their
has also issued the Code of Corporate obligations provided in the law, the
Governance (CGC), which is not mandatory company’s Articles of Incorporation and
for companies but rather constitute “soft the resolutions of the GM).
law”. The code provides that companies
admitted to a regulated market should, As a general rule, under Greek law, a
in addition to the BoD, establish an audit BoD member is liable only vis-à-vis the
committee to audit financial information, company for any default (either willful
misconduct or negligence, including slight
operate the internal audit of the company
negligence), namely any act or omission
efficiently, handle risk management and
that took place during the management of
audit the independence and objectivity of
corporate affairs that was harmful to the
the auditors of the company.
company. This liability shall not exist if the
BoD member proves that they showed the

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diligence of a prudent director operating certain criminal offences provided for

in similar circumstances and thus met the by law. Monetary fines (and/or, in some
requirements of the “business judgment cases, even imprisonment) are triggered
rule” in the performance of their duties, for BoD members who fail to comply
taking into consideration their particular with obligations imposed by the law with
skills and capacities, their respective respect to various issues, such as making
position and/or the duties that were false statements to the public about the
assigned to them. registration and payment of share capital.
Liability does not exist, under the “business 7. What are the audit requirements in
judgment rule” test, where acts or corporate entities?
omissions:
Law 4308/2014 on Greek Accounting
 were performed on the basis of a lawful Principles as in force, provides for the
GM resolution; or mandatory audit of the annual and
consolidated financial statements of
 constitute a reasonable business medium sized and large private AEs,
decision, which was reached in good drafted by the BoD, by external chartered
faith in order to further the corporate auditors or auditing firms which are elected
interest, based on sufficient information by the company’s GM during the fiscal year
available at the time. in question to that end. Conversely, public
It should be noted that, with respect to the AEs listed on a regulated market are also
aforementioned fiduciary duties, liability obliged to have an additional internal audit
and exemption therefrom also apply to unit which operates in accordance with
third persons (non-BoD members) who relevant applicable provisions.
have been assigned representation and/ D. Shareholder Rights
or managerial powers by the BoD. Breach
of the BoD members’ fiduciary duties 8. What are the privileges that can
may trigger a legal action brought by the be granted to shareholders? In
company against them. The company’s particular, is it possible to grant
claims are time-barred 3 (three) years after voting privileges to shareholders for
the act or omission. appointment of board members?

A BoD member’s liability vis-à-vis third Under Greek law an AE may issue both
parties may be on the basis of tort if it is ordinary and preferred shares. Ordinary
established that an illegal act or omission shares carry all the shareholders’ rights
has a direct causal link with damage provided for under the applicable
sustained by the third party, including legislation including financial, participation
moral damages. This liability may apply and ancillary rights. Preferred shares may
where the company’s suppliers, employees, be issued with or without voting rights (or
with voting rights only regarding specific
shareholders or the Greek state are
matters) and grant their holders with
concerned.
privileges. Such privileges may consist
Furthermore, directors and managers of preferential financial rights including
may be personally held liable under the right to a preferential collection of
tax and social security legislation. Such dividends in whole or in part prior to the
liability extends to personal assets of the ordinary shares, the right to fixed dividends,
directors and managers. Directors and interest, or the right to preferentially collect
managers may also be held liable for the company’s liquidation proceeds or

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any other financial benefit as provided for the BoD; the right to request information
under the company’s articles of association. regarding the company’s share capital,
Preferred shares can be issued as the classes of issued share, the amount of
convertible into ordinary shares. However, restricted shares; the right to obtain a copy
the issuance of preferred shares with of GM minutes; the right to petition the
multiple voting right is prohibited under dissolution of the company etc.
Greek law.
Shareholders representing 1/20 of the
In terms of the direct appointment of board company’s paid-up share capital are
members, pursuant to Law 4548/2018 entitled among others to request the
on AEs, 1 (one) or more shareholders convocation of the GM by the BoD within
may be granted the right to directly 45 days from the service of such request to
appoint members of the BoD subject to the chairman; to request the inclusion of
a relevant provision in the company’s addition of items in the forthcoming GM’s
articles of association which shall specify agenda; to request the postponement of
the conditions for the exercise of such the adoption of resolutions in certain or all
right including but not limited to the items of the agenda by the GM; to request
required shareholding percentage as well a competent court to order the company’s
as the appointment notice. A mandatory extraordinary audit; to block “related party
threshold is set by the law restricting the transactions” etc.
holder of such right to directly appoint
Shareholders representing 1/10 of the
more than the 2/5 of the entire number of
company’s paid-up share capital are
the members of the BoD. Such right is often
entitled to block the waiver of claims
awarded to minority shareholders.
against directors; to file a petition to
9. Are there any specific statutory rights the competent court for the removal of
available to minority shareholders BoD members which have been directly
available in your jurisdiction? appointed by another shareholder etc.
Law 4548/2018 on Societe Anonymes, Shareholders representing 1/5 of the
sets out the statutory rights granted to company’s paid-up share capital are
minority shareholders of non-listed AEs. A entitled to request a competent court to
distinction between blocking minority and order the company’s extraordinary audit;
other minority rights is useful. The blocking the right to block the adoption of a GM
minority refers to the increased quorum resolution without a GM meeting being
and majority requirements for the adoption held in accordance with Article 135 of Law
of certain decisions by the GM, that is, a 4548/2018. Shareholders representing
quorum of 1/2 of the paid-up share capital 1/3 may request the competent court to
and a majority of 2/3 of those present of order the liquidation of the company on
represented at the GM. the grounds of an important reason which
makes the continuation of the company
On the other hand, other minority rights are
impossible.
recognized to any shareholder of an AE or
a shareholder representing 1/20, 1/10, 1/5, As mentioned above, minority shareholders
1/3 and 2/100 of the company’s paid-up may be granted the right to directly
share capital respectively. appoint members of the BoD. Sell-out
rights are also available to minority
Minority rights available to any shareholder
shareholders pursuant to Greek law.
include the right to request specific
information on the company’s business by

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10. Is it possible to impose restrictions they become due and payable and requests
on share transfers under the to be declared bankrupt (threatened
corporate documents (e.g., articles cessation of payments).
of association or its equivalent in
In cases of bankruptcy of legal entities, the
your jurisdiction) of a company
liability of the shareholder or the partner
incorporated in your jurisdiction?
of such entity for the bankrupt’s entity
Yes. Restrictions on share transfers may debts depends on the company type of
be imposed either by virtue of the articles the bankrupt entity. The autonomous legal
of association of the company or through personality of capital companies (i.e., AEs,
a private shareholders’ agreement. In EPEs and IKEs) resulting in the distinction
particular, the restrictions may consist of of their assets and liabilities from the assets
the issuance of restricted shares which and liabilities of their shareholders is a
may be lawfully transferred solely upon the well-established principle under Greek
prior approval of the company’s BoD or GM, law. Consequently, shareholders may not
while Greek law also recognizes the right of be held liable and their personal assets
first refusal, the right of first offer, drag and are shielded against insolvency, tort, and
tag along rights, whereas the shareholders contractual claims of creditors of the
may also agree in other share transfer company.
restrictions which may either be included However, the doctrine of piercing of the
in the company’s articles of association corporate veil i.e., the possibility to reach
and disclosed to third parties or form part the shareholders or partners of a company
of a shareholders’ agreement enforceable with a capital structure in order to obtain
between them. relief has been endorsed in a very small
11. Are there any specific concerns or number of instances by the case law of the
other considerations regarding the Supreme Court of Greece.
composition, technical bankruptcy This is not the case however (i.e., distinction
and other insolvency cases in your of the company’s assets and liabilities from
jurisdiction? the assets and liabilities of its shareholders/
The main considerations regarding partners) for personal company types, i.e.,
insolvency cases in Greece primarily relate OEs and EEs where the general partner
to shareholder/partner liability under of such companies is liable also with his/
the provisions applicable to the specific her personal estate for the debts of the
corporate entity involved. bankrupt entity.

Pursuant to the provisions of Law By way of exception to what has been

4738/2020 (Greek Insolvency Code), mentioned above for companies with an
bankruptcy may be declared following a autonomous legal personality (AEs, EPEs
and IKEs), there are certain exceptions
court decision when a debtor (being either
constructed under the Greek Insolvency
a natural person or a private legal entity
Code where the shareholder/partner might
with an economic object) is in cessation
be found liable for compensating the
of payments, i.e., when such debtor is
company’s debtors. More specifically:
unable to fulfil its/his/her overdue financial
obligations in a general and permanent  If the shareholder/partner exercised
way (cessation of payments) or when the influence to the board members and
debtor foresees an imminent inability to as a consequence, the board members
fulfil its/his/her financial obligations when did not file for bankruptcy in a timely

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manner. In this case, the shareholder/ Furthermore, pursuant to Law 4601/2019,

partner is liable for the actual loss or the acquisition of a company may be
loss of profit suffered by creditors as concluded as a merger, demerger or
a result of any deterioration of the spin-off which benefits from the universal
bankruptcy estate which has occurred succession of the business undergone
due to such delay and for debts accrued corporate transformation by the transferee
from the 31st day following cessation by operation of law.
of payments and until the filing for
bankruptcy, provided that they have 13. What are the advantages and
acted under willful misconduct or disadvantages of a share purchase
gross negligence. The liability of the as opposed to other methods?
aforementioned persons is joint and As mentioned in our answer under
several and the relevant lawsuit is filed Question 12 above, the structuring of
by the bankruptcy trustee on behalf of a transaction vastly depends on the
the creditors. particularities of each specific deal
 If the shareholder/partner exercised in the sense that the advantages or
influence to the board members and disadvantages of a specific acquisition
as a consequence, the board members method are often highlighted or played
proceeded with or omitted actions down by the investors and their advisors
that lead the company to cessation of taking into consideration the various legal,
payments. In this case, the shareholder/ tax, regulatory and other aspects of said
partner can be held jointly liable with investment opportunity.
the bankrupt entity for compensating In light of the above, share deals are often
the company’s debtors for any opted for when the investor wishes to
damaged caused. acquire the entire business operated by the
E. Acquisition target company and control all its assets
by purchasing the entirety of the issued
12. Which methods are commonly used share capital or a controlling stake. Share
to acquire a company, e.g., share deals are completed by the execution of
transfer, asset transfer, etc.?
a share purchase agreement (“SPA”) and
In the Greek market, M&A transactions may other ancillary agreements governing
be structured either as share deals or asset the parties’ rights and obligations and/
deals depending on various considerations or enabling the smooth transition and
of the parties involved as well as the integration of the acquired business to
particularities of each specific investment the purchaser’s corporate entity. For the
opportunity. completion of a share deal, the negotiation
The option of a business transfer as a and conclusion of the main transactional
whole is also available where a group of document, the SPA, shall suffice and no
assets forming a business may be sold separate agreements will be required
and transferred to the interested investor for the assignment and transfer of each
but is subject to liability considerations separate asset or legal relationship of the
of both the seller and the purchaser target as in the case of a business transfer.
who may be held jointly liable under the Furthermore, the lawful transfer of shares
provisions of the Greek Civil Code. For the from the seller(s) to the purchaser is a
due completion of a business transfer, rather straightforward procedure under
the parties must comply with all specific Greek law which typically does not entail
formalities for the transfer of each separate complex regulatory and time hurdles. The
asset forming part of the business. key advantage of a share purchase lies in

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that the seller does not actually transfer Regarding share deals, subject to the
any assets, liabilities or contracts of the specific statutory provisions, the execution
company separately but rather simply of the SPA does not typically require
sells and transfers the shares of the entity any corporate approval from the target.
holding such assets, liabilities, and various Regulatory clearance (e.g., merger control
legal relationships. Consequently, the clearance) and sector-based approvals (e.g.,
purchaser by acquiring the shares acquires acquisition of participations in insurance
control over the entire business operated companies, gaming companies, credit
by the target entity. and financial institutions and investment
Conversely, as mentioned above, the firms etc.) may be required in accordance
purchaser also acquires and undertakes with the applicable framework. A change
the liabilities of the target company which of control in the target may also trigger
are not exempted from such transaction the requirement for the issuance of
structure as in the case of an asset deal new administrative licenses. Third-party
where a specific asset of a company is consents may also be required in the
acquired by the purchaser. In that sense, an context of contractual arrangements of the
asset deal may be the optimal structuring parties (e.g., bank financing, commercial
where the target company is in a distressed agreements with suppliers etc.).
position.
Regarding corporate transformations,
With regard to a corporate transformation a GM resolution for the approval of the
(merger, demerger, spin-off ), as opposed transformation adopted with an increased
to a share deal, this may result in the quorum and majority is required by all
combination or separation of 2 (two) entities involved. Regulatory clearance
businesses under the universal succession and approvals may also be required
effected by operation of law rather than the (e.g., in cases of a merger or a demerger
holding of the shares of the target entity. In involving the incorporation of an entity
view of the potential synergies, a corporate for the purposes of completion of the
transformation may be more beneficial latter). Corporate transformations may also
for the investor compared to a share deal. be subject to third-party consents in the
Finally, the tax incentives as applicable by context of contractual arrangements of the
the recently introduced Law 5162/2024 (or parties.
other regimes that could apply on a case
by-case basis i.e. law 4395/2022 providing 15. What are the regulatory
incentives to SMEs’ transformations and the competition law requirements
special regime of law 2515/1997 for credit applicable to private acquisitions in
institutions may also play a key role in the your jurisdiction?
investor’s choice. However, the disclosure Greek antitrust legislation reflects EU
formalities, the deadlines as well as the competition law principles, namely
30-day cool-off period provided for the Articles 101 and 102 of the Treaty for the
protection of creditors’ rights may advocate Functioning of the European Union and
in favor of a share deal structuring. the respective European merger control
14. What are the approvals and rules. Law 3959/2011, as in force (Greek
consents typically required (e.g., Competition Act) prohibits certain business
corporate, regulatory, sector agreements whose object or effect is the
based and third-party approvals) restriction of free competition (Article 1)
for private acquisitions in your as well as the abuse of dominant position
jurisdiction? (Article 2). The scope of application of such

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laws extends equally to nationals and non- only an AE may be admitted for trading on
nationals. The competent national authority a regulated market. Furthermore, several
monitoring adherence to the national dedicated pieces of legislation which are
framework is the Hellenic Competition also applicable in public M&A transactions
Commission (“HCC”). are listed below:
Notification obligations are triggered in  Law 3461/2006 transposing Directive
the event of contemplated concentrations 2004/25/EC into Greek law (Greek
(i.e., changes of control on a lasting basis, Tender Offer Law) on takeover bids for
such as mergers, acquisitions of control listed Greek companies;
etc.) that are likely to raise competition-law
 Law 3556/2007 transposing Directive
concerns. In particular, in order to qualify
2004/109/EC into Greek law (Greek
for notification to the HCC, a concentration
Transparency Law) on disclosure
must cumulatively:
obligations in the case of acquisition of
a. Meet the turnover thresholds specified significant holdings in listed companies;
in Article 6 (1) of Law 3959/2011, i.e.,
 Regulation (EU) 596/2014 on market
the total turnover of the parties to the
abuse (Market Abuse Regulation);
concentration in the worldwide market
must exceed EUR 150,000,000, and  Regulation (EU) 2017/1129 on the
at least 2 (two) of the undertakings prospectus to be published when
concerned must have a turnover securities are offered to the public or
exceeding EUR 15,000,000 each in the admitted to trading on a regulated
national market (it has to be noted market (Prospectus Regulation) and
that turnover thresholds may differ per Articles 57–68 of Law 4706/2020;
sector); and
 ATHEX Regulation on disclosure
b. Not be otherwise subject to merger requirements of listed companies on
control by the EU commission (one- the regulated market of the Athens
stop-shop principle), i.e., it must not Exchange.
meet the requirement of European
17. Is there a requirement to disclose
dimension under EU Regulation
a deal, for instance to regulatory
139/2004; rather it must only affect
authorities? Is it possible to keep a
the Greek market or a substantial part
deal confidential?
thereof.
Subject to the competition law
Concentrations meeting the above criteria
requirements mentioned above and
must be notified to the HCC within 30 days
other regulatory approvals or notification
from the date of the relevant “triggering
requirements which are industry-specific, it
event”, such as the conclusion of the
is possible to keep a deal confidential.
agreement giving rise to the concentration.
It is to be noted though that, regarding
16. Are there any specific rules
asset deals, business transfers or corporate
applicable for acquisition of public
transformations, under the Presidential
companies in your jurisdiction?
Decree 178/2002 transposing the TUPE
The main legal framework set forth in our legislation (Transfer of Undertakings -
answer under Question 1 above, do also Protection of Employment Regulations)
apply in the context of acquisition of public into Greek law, the transferor and the
companies taking into consideration that transferee are obliged to inform the

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affected employees of the date or proposed control) or the due completion of other
date of the transfer, its reasons, the legal, requirements by the seller based on the
economic and social implications of the specificities of the transaction. Furthermore,
transfer and any relevant measures to the the parties may agree for the SPA to provide
benefit of the employees in due course for the non-occurrence of a Material
before the transfer. Adverse Change (“MAC”) as a condition
to closing, with the MAC definition to
18. Can sellers be restricted from
widely vary based on the industry and the
shopping around during a
negotiations of the parties.
negotiation process? Is it possible
to include break fee or other 20. What are the typical warranties
penalty clauses in acquisition and limitations in acquisition
documents to procure deal documents? Is it common to obtain
exclusivity? warranty insurance?
Yes, exclusivity clauses and relevant Subject to the negotiations of the parties
restrictions are often negotiated and the due diligence findings which may
and included in the transactional affect the level and extent of warranties
documentation of an M&A deal in Greece. provided, the acquisition agreement
The parties may also be held liable under usually includes representations and
the Greek Civil Code for any loss suffered warranties covering title to the shares and
by the other party during the negotiation capacity of the seller, the share capital
phase. structure of the company, the company’s
Break fees could be included in a foreign incorporation and existence, the company’s
law governed SPA but seem rather compliance with applicable law, regulatory,
unusual in the current Greek M&A market. tax and employment law compliance,
Conversely, their enforceability under Greek solvency of the company and the sellers,
law is contested. In any case, if the SPA title to the real estate assets and movable
is terminated by the seller this will grant assets, title to intellectual property rights,
compensation rights to the purchaser. lack of encumbrances and liens on the
Other penalty clauses could be included in company’s assets, lack of material ongoing
the SPA but may be challenged as excessive litigation, environmental law licensing
on the grounds of proportionality. and compliance, taxation and employees
etc. The representations and warranties
19. What are the conditions precedent provided by the seller are governed by
in a typical acquisition document? the applicable provisions of the Greek
Is it common to have conditions to Civil Code on the liability of the seller in
closing such as no material adverse case of breach but may be qualified by
change? the information provided to the purchaser
Yes, it is common to include conditions during the due diligence process.
precedent to closing in an acquisition
Depending on the due diligence findings,
agreement in Greek M&A transactions.
the parties may also agree on the provision
These may consist of regulatory
of specific indemnities (typically for tax
approvals (e.g., merger control clearance,
and employment matters) which are
environmental licensing, industry-specific
enforceable under Greek law.
regulatory approvals etc.), third-party
approvals or waivers (in cases of contractual In terms of the available limitations, the
arrangements restricting the change of parties may agree to limit their liability

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(time limitations, caps, de minimis Similar to many other jurisdictions, debt

amounts included in SPAs etc.) but such acquisition financing can be sourced
limitation may not extend to cases of gross through traditional bank loans or by
negligence or willful misconduct which issuing debt securities. In practice, issuing
even if contractually agreed between a bond loan under Article 59 et seq. of
the parties will be null and void and not Law 4548/2018 (i.e., a loan represented by
enforceable. Furthermore, the statute of bonds to be subscribed for by creditors /
limitations 2 (two) years for movable assets investors either through private placements
including shares and 5 (five) years for or through public offerings) is often the
immovable assets) may not be shortened or preferred method for raising funds to
extended unless under the warranty period acquire a target company.
provided for under the SPA/acquisition
agreement in accordance with the This is mainly because, under Greek law,
provisions of the Greek Civil Code. bond loans enjoy a stamp duty exemption,
regardless of whether the lender is a
Warranty and indemnity insurance is licensed credit institution. In addition, bond
not yet a widely spread practice in the loan instruments benefit from the banking
Greek market although its use has been levy exemption, i.e., they are exempted
increasing over the past few years in Greek from a levy 0.6% on the annual outstanding
M&A transactions. amount of the loan that is applicable for
21. Is there a requirement to set a standard loans provided by Greek banks.
minimum pricing for shares of a Lastly, notarial and security registration
target company in an acquisition? fees related to Greek bond loans are fixed
at a nominal fee of EUR 100, as opposed
Under the Greek Tender Offer Law on
to notarial and registration fees in the
takeover bids for listed Greek companies,
context of other loans which are calculated
there is a minimum pricing requirement
proportionately to the principal amount of
providing that the offeror who is obliged
the loan/secured amount.
to proceed with the mandatory bid must
offer a fair and equitable consideration Moreover, in any financing taking the
in cash per share which cannot be lower form of a bond financing the security
than: (a) the average market value of the interests securing the claims thereunder
securities which the takeover bid concerns are established, as per the provisions of the
for a period of 6 (six) months preceding the law, directly in the name of the bondholder
date on which the offeror became obliged agent for the benefit of all lenders/
to make the takeover bid; or (b) the highest bondholders. Therefore no ‘parallel debt’;
price at which the offeror or any persons structure would be required in the context
acting on behalf of or in concert with him of bond loan financings.
have purchased such securities during a 12
month period preceding the date on which To be noted however that bond loans
the offeror became obliged to make the enjoying the aforementioned legal and tax
takeover bid. benefits may only be issued by companies
in the form of Greek Société Anonymes
22. What types of acquisition financing
are available for potential buyers in As regards the second question regarding
your jurisdiction? Can a company financial assistance, we note that in order
provide financial assistance to a for a Greek company to lawfully and validly
potential buyer of shares in the grant guarantee and/or security on its own
target company? assets to secure debt which was drawn

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by any party to finance the acquisition of 23. What are the formalities and
such company’s shares (or the shares of procedures for share transfers and
such company’s parent entities, as the case how is a share transfer perfected?
may be), the company shall maintain a
A share transfer is completed in accordance
non-distributable reserve in the liabilities with the provisions of Law 4548/2018 on
section of its balance sheet being equal AEs, by virtue of the following steps:
to the guaranteed/secured amount used
to finance such acquisitions (the non-  the execution of a share transfer
distributable reserve). In addition, under agreement for the transfer of rights in
Greek law in no case shall such guaranteed/ rem on the shares;
secured amount be such to turn the  the annotation of the share certificates
Company’s net equity to an amount (if any) and their delivery to the
lower than its paid-up share capital plus purchaser by the seller or the issuance
non-distributable reserves (the financial of new share certificates by the target
assistance statutory limit). Provided that the company in the name of the purchaser
financial assistance statutory limit is met at and their delivery to the purchaser; and
all times and also provided that financially
the non-distributable reserve can be  the lawful registration of the transfer
with the company’s shareholders’
viably kept in the company’s financial
registry. Such registration is dated and
statements, the shareholder’s meeting of
executed by the transferor and the
the Greek company may vote in favor of
transferee or their proxies.
the provision of guarantee/security for the
financial assistance purposes. The board Under the applicable provisions, the parties
of directors of the company would need are not obliged to sign and execute the
to provide such shareholders’ meeting registration with the shareholders registry
in advance with a report explaining the if the company receives a copy of the
benefits of the transaction to the company share transfer agreement which has been
and the safeguards that are in place for it. executed between the parties.
It is on the basis of this BoD report that the Additional formalities apply for the lawful
shareholders will resolve upon granting transfer of shares of listed companies.
or not the financial assistance. All in all
the conditions to whitewash financial 24. Are there any incentives (such
assistance in Greece are the following: as tax exemptions) available for
acquisitions in your jurisdiction?
(i) the non-distributable reserve;
Share acquisitions are exempt from indirect
(ii) no breach of the financial assistance taxes (VAT and stamp duty), real estate
statutory limit at any time; transfer taxes and transfer taxes, with an
(iii) BoD report justifying the need for exception of a 0.20% sales tax that applies
financial assistance provision; exclusively in case of transfer of listed
shares admitted for trading in a stock
(iv) Shareholders’ resolution on the basis exchange.
of the BoD report. To be noted that
Pursuant to recent legislation (Law
the BoD report and the shareholders’
4935/2022) providing for tax incentives
resolution are published with the
in corporate restructurings, it is provided
General Commercial Registry.
that in case of acquisition of shares by
Greek legal entities in other companies, any

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costs incurred at the level of the acquiring tax-neutrality of the said restructuring.
company should be tax deductible to Available options are mergers, demergers,
the extent that they are related to said partial demergers, spin-offs, contributions
acquisition. More specifically, said costs of businesses or business sectors, share
may be deductible provided that the exchanges, and conversions. Greek laws
following conditions are cumulatively providing for a tax neutral restructuring are
satisfied: the Greek tax incentive laws (i.e., 2166/1993
or 1297/1972), Law 2578/1998 on cross-
 the total turnover of the company,
border mergers among EU entities and Law
whose shares are transferred, and of
4172/2013 introducing the provisions of
the acquiring company should be
the EU Merger Directive for both domestic
equal or exceed the amount of EUR
and cross border restructurings among EU
450,000 based on the latest approved
entities as well as Law 4935/2022 providing
and published financial statements or
incentives mainly for restructurings for
the latest income tax returns, where
micro, small and medium sized enterprises
applicable; and
in accordance with the definition of the
 the total amount of tax-deductible Commission Regulation (EU) No 651/2014
expenses should not exceed 30% of (to be noted other special regimes apply
the average turnover of the acquiring to restructurings of specific sectors). The
company during the last 3 (three) years requirements, procedure and impact (e.g.,
prior to acquisition. entitlement to carry forward tax losses,
restrictions upon future sale of assets,
These conditions are not required to be
reduction of tax going forward) vary
satisfied, in case the acquiring company
depending on the legal framework to apply.
has not completed 1 (one) full year since
Therefore, an analysis is to be made prior
its incorporation or has no other activity
to opting for the tax framework to apply in
other than the holding of the acquired
each restructuring taking into account the
participation.
background of the companies involved.
In parallel to the aforesaid rule, the Greek
Income Tax Code provides a restriction as
F. Enforceability
regards the deduction of costs related to 25. Can acquisition documents be
participations that generate tax exempt executed in a foreign language?
dividends on the basis of the conditions set
Yes, acquisition documents may be
under the EU Parent-Subsidiary Directive
executed in a foreign language. It is
(2011/96/ΕΕ) and tax-exempt capital gain
quite common for the transactional
from the disposal of shares which applies
documentation in an M&A deal to be
under similar conditions. However, up until
drafted in English and if required for the
today the relationship of the deductibility
purposes of registration of documents with
incentive provided under Law 4935/2022
the public authorities, be accompanied by
with the complete restriction provided
an official translation thereof in Greek.
under dividend & capital gain exemption
regime, has not been clarified by the Tax 26. Can acquisition documents be
Administration and relevant guidelines are governed by a foreign law?
anticipated to shed light into this issue.
Yes, pursuant to the Regulation (EC) No.
To the extent that acquisitions are 593/2008 of June 17, 2008 on the law
accomplished through a restructuring, applicable to contractual obligations (Rome
there are several frameworks for achieving I), subject to any mandatory provisions of

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Greek law which will prevail and apply in has been drawn up in counterparts,
all material respects. Notwithstanding the then the execution by the one party of
choice of a foreign governing law on the the counterpart which is to be delivered
acquisition document, the provisions of to the other party suffices. In addition,
Greek law will also apply to rights in rem digital transaction management solutions
located in Greece (i.e., real estate assets, may also be useful to parties wishing
shares etc.). In this regard, a share purchase to remotely sign a single transaction
agreement to be entered into for the sale document.
and purchase of shares in a Greek entity,
which is governed by foreign law as per the Furthermore, as regards the digital
choice of law of the parties, shall include execution of documents, Greece has
the Greek law provisions governing the enacted Law 4727/2020 on digital
sale and lawful transfer of shares of Greek governance which in conjunction with
entities. Regulation (EU) No. 910/2014 on electronic
identification and trust services for
27. Are arbitration clauses legally electronic transactions in the internal
permissible or generally included in market (eIDAS Regulation) rules that a
acquisition documents? qualified electronic signature has the same
Yes. Arbitration clauses are legally legal effect as a handwritten signature.
permissible under Greek law and may be In light of this, it is possible for parties
incorporated in the acquisition documents. to a transaction to digitally sign private
ICC arbitration is often opted for given its documents (notarial deeds and other
wide acceptance as the most trustworthy public documents are exempted under the
institutional arbitration available. In such applicable framework) as long as they hold
case, standard or model ICC arbitration a qualified electronic signature. However, if
clauses are safe to adopt and be included in the requirements for a qualified electronic
the acquisition document. signature are not met, such documents
shall be freely admissible and assessed as
28. Are there any specific formalities legal evidence in legal proceedings.
for the execution of acquisition
documents? Is it possible to G. Trends and Projections
remotely/digitally sign documents? 29. What are the main current trends in
Under Greek law, there are no specific M&A in your jurisdiction?
formalities for the execution of an Following the distress of the COVID-19 and
acquisition document in the context early post COVID-19 era, the Greek M&A
of M&A deals, save for the transfer of market seem to have been bouncing back
real estate assets where the acquisition and currently demonstrates significant
agreement must be drawn up in the form developments in technology, energy,
of a notarial deed and be executed before a
insurance and food and beverage sectors.
Greek Notary Public.
The new digital universe in conjunction
Under the Greek Civil Code, where the with legislative developments, the
law provides for or the parties have increasing commitment and sophistication
agreed upon the contractual type, for the of investors and advisors and the enhanced
acquisition agreement to be valid and incentives for investment opportunities
enforceable the handwritten signature portends an upcoming growth in the M&A
of the parties is required to be set on the transactions in Greece. What remains to
same document. However, if the agreement be seen is whether such growth patterns

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are likely to be affected by the increasing

inflation and economic turbulences or
whether M&A stakeholders will maintain
the momentum.
30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
The new Law 5055/2023 on cross-border
corporate transformations transposing
Directive (EU) 2019/2121, as regards cross-
border conversions, mergers and divisions
into Greek law is a landmark development
for the Greek M&A market. The new
provisions which came into force and
effect as of the publication of the law with
the Government Gazette on September
29, 2023 (GG Issue A’ 161/29.09.2023),
form part of the wider Greek framework
on corporate transformations, Law
4601/2019, which was amended to include
both national and cross-border mergers,
demergers and conversions of entities
constituting a comprehensive tool for M&A
lawyers, advisors, and stakeholders.

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HUNGARY
WOLF THEISS

János Tóth
Partner
[email protected]

A. General oriented business operations are: the

limited liability company (Korlátolt
1. What is the main legal framework Felelősségű Társaság) (“Kft.”) and the private
applicable to companies in your company limited by shares (Zártkörűen
jurisdiction? működő Részvénytársaság) (“Zrt.”).
The corporate and contractual legal The Kft. is characterized by the contribution
system in Hungary is based on its civil of a fixed amount of initial registered
law. Therefore, the main rules governing capital to the company by its owners
businesses and their transactions are set (known as “quotaholders” or “members”),
forth in acts and regulations, although whose liability is thereafter generally
a limited precedent system has been limited, except for events when the
introduced in Hungary requiring lower corporate veil is pierced on the basis of
courts to follow the interpretation of the relevant laws. Ownership interests in a
laws adopted by the precedents of the
Kft. are in proportion to the amount of the
Hungarian supreme court.
members’ contribution and referred to as
2. What are the most common types “quotas,” as Kfts do not formally issue any
of corporate entities (e.g., joint shares. Hungarian Forint (“HUF”) 3 million
stock companies, limited liability is the minimum registered capital of a Kft.
companies, etc.) used in your required by law. The Kft. is managed by its
jurisdiction? What are the main managing directors and does not require
differences between them (including a board of directors for the purposes of its
but not limited to with regard to the operation.
shareholders’ liability)?
The Zrt. is founded with an initial registered
In Hungary, the two main types of capital share capital consisting of shares of a
companies carrying legal personality pre-determined number and face value,
distinct from their owners and most in the case of which the obligation of the
commonly used for pursuing profit- shareholder(s) to the company extends

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to the provision of the face value or B. Foreign Investment

issue value of shares. HUF 5 million is
the minimum registered capital of a Zrt. 3. Are there any restrictions on foreign
investors incorporating or acquiring
required by law. The Zrt. is managed either
the shares of a company in your
by its board of directors or the appointment
jurisdiction?
of a chief executive officer is also possible.
As of the date of drafting this chapter,
Although the Zrt. is seen as a company
there is no distinction between domestic
form entailing more formalistic corporate
and foreign nationals with respect to their
governance rules and more cumbersome ability to set up newly or acquire ownership
operational requirements (which from a in existing Hungarian companies.
cost perspective means that a Kft may be
registered and operated with significantly Hungary has been advocating a welcoming
lower costs), both offer the same level of legal and regulatory environment for
reasonable flexibility in terms of designing foreign investors, successfully attracting
the daily operation in the legal sense. In significant amount of investments over
practice, however, the overwhelming the past decades. Before 2019, no investor
screening regime had existed in Hungary,
majority of companies established, also
except for certain sectorial reviews available
by large corporations with extensive
in selected regulated industries. These
operations in Hungary, is in the form of
included energy, utilities, media, banking,
Kft’s.
and mining, in which the acquisition of
Both types of these companies can certain controlling stakes had long been
be established by either one or more subject to prior approval of the competent
shareholders (or members) who can be national regulator. (See also question E 14
either private individuals or legal entities of below for more details.)
any nationality. The shareholders’ liability In 2018, the Hungarian Parliament
in both instances is shielded from the adopted an act setting out rules to
liabilities of the company, unless classic enable the screening of acquisitions of
instances (e.g., abusive business practice certain Hungarian companies engaged
forced on the company in a situation in providing strategic services, or
threatening with insolvency) require the otherwise handling critical infrastructure
concept of piercing the corporate veil to or technologies by foreign investors that
prevail. Also, after the occurrence of the have a background outside the EU (the “FDI
threat of insolvency of the company, its Act”).
management must perform their duties Since 2020, certain additional foreign direct
for the benefit and in the interest of the investment (“FDI”) screening requirements
company’s creditors, instead of those of the have complemented the existing regime
company and the company’s shareholders. applicable under the FDI Act (the
Violation of this obligation may result in Alternative FDI Regime).
the personal liability of the management
members. (See also question D 11 below for Although FDI screening was designed
more details.) not to capture any investors from the EU,
the European Environment Agency (EEA)
A change of the legal form (i.e., or Switzerland, now the Alternative FDI
transformation of a Kft. to a Zrt. or vice regimes requires investors from outside
versa) is always possible. and inside these locations to make a filing

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for prior Minister approval. Furthermore, Without the Minister’s approval, a

the industries caught by the Hungarian FDI transaction is considered null and void
screening requirements are sweeping in under Hungarian law, and no changes
nature and go far beyond what has been can be entered into any relevant public
captured under the relevant EU framework registries (such as the corporate registry),
regulation. Therefore, in quite a number of nor will the acquirers be permitted to
instances, investors find themselves facing be entered in the relevant books of
an FDI screening requirement in respect shareholders.
of the Hungarian angle of their deals, even
if otherwise simultaneous signing and 4. Are there any foreign exchange
closing would be possible. restrictions or conditions applicable
to companies such as restrictions to
In addition to the straightforward foreign currency shareholder loans?
acquisition of shares, the deal structures
that are also captured include the As of the date of this chapter, there is
acquisition of convertibles or rights not any foreign exchange restrictions or
in usufruct, as well as corporate conditions applicable to companies set up
transformations, asset acquisitions, capital in Hungary.
injections and even in-kind contributions,
5. Are there any specific considerations
irrespective of whether the deal is for good
consideration or for free. for employment of foreign
employees in companies
With respect to the procedural aspects, incorporated in your jurisdiction?
the filing must be made within ten days of
concluding the relevant agreement. The As of the date of this chapter, there are not
review periods are quite lengthy (i.e., 60 any restrictions or conditions applicable
calendar days under the lasting regime, to companies set up in Hungary in respect
whereas 30 business days under the of the nationality of their management
Alternative FDI regime) which, under both members (who are legally not required
regimes can be further extended at the to assume any employment position
discretion of the acting Minister (with up to within the company either). In respect
another 60 calendar days under the lasting of proposed employment of foreign
regime and 15 calendar days under the nationals by the company, the customary
Alternative FDI regime). work permitting, and residency rules will
need to be observed. With a few special
Both FDI screening regimes currently
exemptions, the employment of third
applicable in Hungary trigger a mandatory
filing obligation with a clear standstill country nationals in Hungary will be
obligation and, furthermore, both subject to prior authorisation. Foreign
relevant laws provide that any transaction members of the company’s management,
implemented without having first however, can assume employment at the
obtained the competent Minister’s prior company with foreign shareholding with
acknowledgement would be considered less amount of administrative hurdles.
null and void from the Hungarian law The same less demanding regulatory
perspective. Furthermore, the Minister can requirements will apply to intra-group
impose administrative fines for any breach secondment of foreign employees to
of the approval requirement in the amount Hungary.
of at least 1% of the acquirer’s annual net
turnover and up to double the transaction
value.

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C. Corporate Governance the executive officer is superseded by legal

regulations, the deed of foundation, and
6. What are the standard management the resolution of the company’s supreme
structures (e.g., general assembly, body and, with the exception of sole
board of directors, etc.) in a corporate member companies, may not be instructed
entity governed in your jurisdiction by the shareholders.
and the key liability issues relating
to these (e.g., liability of the board If shareholders so prefer, the management
members and managers)? can be placed under the supervision of a
supervisory board, which must be in place
The key decision-making body of the for all public companies and for certain
company, responsible for making larger private companies.
decisions in fundamental business and
personal matters of the company, is The management of a company facing
the meeting of its shareholders. In the solvency difficulties is under the obligation
case of sole shareholder companies, the to observe and safeguard the interests of
only member has the powers otherwise the company’s creditors, instead of the
vested in the supreme body and interests of the company or its shareholders
communicates its decisions in writing (as during the ordinary course of business).
to the company’s management. The This is particularly delicate because the
competence of the shareholders’ meeting thin line between the ordinary course
extends, in particular, to the approval of business and the threat of insolvency
of the company’s financial statements, is not always clearly identifiable. The
decision on the distribution of any profit same cautiousness is expected from
as well as enforcement of claims against a management when acquiring assets
shareholder, the management members. from a company in solvency difficulty,
as transactions disregarding creditors’
Any number of managing directors interests may later be challenged or be
manage a Kft., while a Zrt. is managed by subject to claw-back claims.
a board of directors or a chief executive
officer. However, due to the dispositive In general, there is no obligation for the
regulation of Hungarian law, the forms of directors of a company to proactively file
management bodies may be established for insolvency. If the company is threatened
with insolvency, however, its management
flexibly at companies, therefore a board
must without delay escalate the matter to
of directors may also be appointed for a
the shareholders by way of convening the
Kft. Executive officers may be granted
shareholders’ meeting in order to adopt
independent or joint rights to represent the
the relevant resolutions on providing
company. Both an independent and a joint
supplementary capital contributions or
signing authority can be further restricted
securing the equity situation by other
contractually (e.g., in the company’s articles
means, or reducing the initial capital.
as well as management’s own mandate
or employment contract), however, such 7. What are the audit requirements in
restriction is void vis-à-vis third persons corporate entities?
unless the third person was aware of the
Hungarian law provides that with certain
restriction.
exceptions, the auditing of the annual
Executives manage the company accounts is mandatory for all companies
independently with the priority of the running double-entry books. In cases
company’s interest and, in this capacity, when an audit is not mandatory on the

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basis of the law, still the shareholder of The law in Hungary allows minority
the company is free to decide whether to shareholders to potentially obtain a wide
engage a chartered auditor. range of minority protection tools from the
controlling shareholder on a contractual
The auditing of annual accounts is not
basis in addition to the statutory minimum.
mandatory if both of the following
These additional minority protection tools
conditions are met:
would include anti-dilution protection,
• the company’s annual net sales veto rights through their equity ownership
(calculated for the period of one year) in certain selected matters, such as the
did not exceed HUF 600 million on appointment of management, and other
the average of the two financial years corporate or business matters involving the
preceding the financial year under business or the holding structure.
review, and Hungarian law recognises minority
• the number of employees of the protection rights for shareholders holding
company on average of the two at least 5% of the voting rights in Zrts
financial years preceding the financial and Kfts and for shareholders holding
year under review did not exceed 50 at least 1% of voting rights in public
persons. companies. These minority rights are as
follows: (i) requesting the convening of
D. Shareholder Rights the shareholders’ meeting; (ii) requesting
8. What are the privileges that can that an agenda item not included on the
be granted to shareholders? In agenda is discussed; (iii) requesting special
particular, is it possible to grant audits of the last financial statements
voting privileges to shareholders for of the company or any economic event
appointment of board members? in connection with the actions of the
company’s management in the previous
The Hungarian corporate laws offer wide two years; (iv) initiating the enforcement
room for shareholders to deviate from of claims on behalf of, and for the benefit
ordinary voting rules and patterns and of, the company against the members of
so it is possible to allocate under the the company, members of the company’s
company’s articles voting privileges or supervisory board, the company’s executive
other preferences to some of the shares. officers, or the company’s auditor. There
Such preferences include preference to are also certain decisions that can only
receive dividend in priority, liquidation be passed by a three-quarter majority of
priority, voting priority; priority regarding the votes (e.g., changing the form of the
the appointment of management company or decreasing the company’s
members; right of first refusal; as well as registered capital) and a decision on
any combination of the same. In fact, the amending the articles of association that
law allows shareholders to regulate classes changes rights of one or more shareholders
of shares carrying any preferences and to the detriment of such shareholder(s),
privileges other than those specifically may be vetoed by such shareholder(s).
defined in law as long as the company’s
10. Is it possible to impose restrictions
articles specify the content and extent of
on share transfers under the
those rights.
corporate documents (e.g., articles
9. Are there any specific statutory rights of association or its equivalent in
available to minority shareholders your jurisdiction) of a company
available in your jurisdiction? incorporated in your jurisdiction?

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Shares (or quotas of a Kft.) may generally apparent from the share certificates and
be freely transferred once the shareholder the company’s articles. Accordingly, any
(or member of the Kft.) concerned has such transfer restriction or rights (pre-
fully paid its contribution to the company. emption, option, etc.) must be physically
Transfer of quotas between the members recorded (i.e., printed or stamped) on the
of the Kft., and shares between the share certificates (or digitally recorded on
shareholders of a Zrt. can be generally the securities account where the shares
transferred without any restriction. are kept available in case of dematerialized
shares) in order to be considered valid vis-á-
In case of a Kft., both the shareholders vis third parties.
(members) as well as the company itself has
statutory pre-emption rights in case the Shareholder’s rights may only be exercised
quota is offered for sale to third-parties. In once the shareholder has been registered
case the quota is sold in breach of such pre- in the book of shares. In case the share has
emption rights, the aggrieved parties may been acquired through the violation of the
initiate legal proceedings within a one-year restrictions listed above, the shareholder
deadline to establish the ineffectiveness of may be denied registration into the book of
the transfer. shares and will not be entitled to exercise
shareholders’ rights.
The articles of association of any company
may introduce further restrictions to 11. Are there any specific concerns or
the share transfers or may render those other considerations regarding the
subjected to the company’s prior approval composition, technical bankruptcy
or even create option rights for the shares and other insolvency cases in your
respectively. The company’s articles may jurisdiction?
also exclude the transfer of shares to third From the commencement of insolvency
parties other than by means of a sale proceedings, the court-appointed
and purchase agreement (e.g., division of administrator assumes the right to exercise
marital assets or inheritance). all shareholder rights and represents the
The shareholder may further establish other company, as shareholders and members
transfer restrictions regarding the shares of the company’s management lose their
in a separate agreement. Such restrictions powers over the company.
can include the (i) requirement for prior Hungarian law provides for a specific
approval in case of transfer of shares (which liability regime for shareholders of a Kft.
may be delegated to the management or and Zrt. with control over at least 75 % of
board of the company), (ii) restriction on the shares or the votes in the company
certain persons acquiring certain types requiring them to have unlimited liability
or classes of shares, (iii) shareholders or for unsatisfied claims of the company’s
shares themselves may have a call, put, pre- creditors if such shareholders have misused
emption or voting rights (or the mixture of their limited liability.
these rights) provided to them.
Liability of the shareholders towards the
However, since these agreements are company’s creditors can also be established
generally not apparent from the Hungarian if the shareholders disposed of the assets
companies’ registry, and as such their of the company as those would have
effectiveness is limited to the contracting been their own; they have diminished
parties, third parties will not be bound the wealth of the company for their own
by such provisions, unless those are or to third parties’ benefit, in a way that

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they could have known if proceeded with • No requirement for the transfer of
due care, that the company would not be agreements: the main disadvantage of
able to pay up its debts to its creditors. an asset purchase is that the transfer
The shareholder’s unlimited liability is of individual assets often requires the
also established if the shareholder has consent of third parties. Alternatively,
conducted disadvantageous business unless the affected agreements
policy in the company. contain pre-agreed change-of-control
provisions, commercial agreements will
E. Acquisition not be affected by the transaction.
12. Which methods are commonly used
• Limited effect on licenses: generally,
to acquire a company, e.g., share share deals leave operational licenses
transfer, asset transfer, etc.? held by target companies unaffected.
The business decision on how to best Exceptions from this general rule
structure an acquisition under Hungarian are companies operating in certain
law needs to be examined on a case by regulated industries such as energy
case basis. Hungarian law recognizes all and utilities, telecommunications and
prevailing and commonly known methods financial services. Accordingly, even
used to acquire a company, such as share transfers may be subject to the
share transfers, asset transfers as well as approval of the Energy Authority or the
absorbing a part of business carved out National Bank of Hungary.
from an existing company by way of a legal • Employee consultation not required:
merger. if otherwise not provided in collective
13. What are the advantages and agreements, share purchases
disadvantages of a share purchase generally do not require approval
as opposed to other methods? by trade unions or other employee
representative bodies. Nevertheless,
In case of a share purchase, the buyer where the retention of employees
acquires the shares of the target company is an important element of the deal
thereby also taking ownership of all employees’ representative bodies must
assets, which is the main advantage of be adequately notified and consulted.
such purchase. The practicality of the
share purchase makes it the most popular Although asset purchases remain a less
method of acquisition in Hungary. popular solution for acquisition purposes
in Hungary, the method itself still provides
• Less complex and offers the benefit convenient solutions for specific scenarios
of continuity: share deals allow the (i.e., spin-off, distressed sale situations,
parties of a transaction to transfer downsizing or sale of business line). In
complete businesses in whole, by case of an asset purchase, the acquirer
transferring ownership title of the has widespread flexibility in terms of
acquired company. The main advantage which assets of the targeted company it
of a share deal lies in the ability of the purchases. Therefore, an asset acquisition
method to transfer the entire business structure also allows the carving out of
of the target company in one step and any liabilities to be assumed for assets
does not carry the complexity related disconnected with the business acquired,
to transferring assets (i.e., IP rights, real effectively avoiding spillover of any
properties, contracts, physical assets) liabilities that remained hidden during
individually. due diligence exercise. In order to single

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out the subject of any such transaction angle that otherwise do not meet the
the related sale and purchase agreement EU’s relevant turnover filing thresholds
contains an annex with the detailed list of and require antitrust approval from the
assets to be acquired. Asset transfer can European Commission will still need to
also be more advantageous if the target consider any filing requirement with the
company is financially distressed. In case Hungarian national competition authority.
of a share purchase, however, the target’s
liabilities are transferring to the purchaser The merger control clearance requirement
together with the underlying ownership in Hungary may be triggered by purchases
(unless contractually the parties agreed of assets forming a going concern,
to carve out any such liabilities), which is acquisitions of minority shareholdings
usually the main disadvantage of a share coupled with veto rights, setting up joint
deal. ventures or changes in shareholder voting
structures, provided the relevant local filing
14. What are the approvals and
thresholds are exceeded.
consents typically required (e.g.,
corporate, regulatory, sector The relevant Hungarian merger control
based and third-party approvals) thresholds are based on the parties’
for private acquisitions in your Hungarian net turnover. When calculating
jurisdiction? the thresholds, only net turnover derived
Hungary has long been considered as a from Hungary must be considered. The
jurisdiction that is closely aligned with practice of the Hungarian competition
the key policy principles and follows the authority regarding the method of
leading precedents regarding regulatory calculating the relevant turnover and
reviews and the resulting decision-making the allocation of such turnover among
relevant to private equity funds and the members of groups of undertakings
transactions that are generally applicable in is fully in line with that of the European
the EU regulatory environment. Commission in the context of the EU
Accordingly, investors will face the same merger control rules.
conventional regulatory requirements in The long-existing turnover-based
terms of designing and completing their notification threshold test in Hungary
acquisitions as elsewhere within the EU. requires a transaction to file for prior
Sectorial consent requirements in banking clearance from the Hungarian competition
and insurance or energy and infrastructure
authority if:
as well as media or mining are coupled
with merger control review and the newly • the combined net turnover of all
introduced requirement for the screening undertakings concerned (including
of FDI in selected strategic sectors by companies controlled jointly by
investors (see question B.3 above for more members of the groups of undertakings
details). concerned) derived from Hungary in
15. What are the regulatory the previous financial year exceeded
competition law requirements HUF 20 billion; and
applicable to private acquisitions in • at least each of two undertakings
your jurisdiction? concerned derived net turnover from
In the context of merger control Hungary in excess of HUF 1.5 billion in
regulations, acquisitions with a Hungarian the previous financial year.

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The practice the Hungarian competition The Hungarian competition authority

authority pursues as to the method of has the right to prohibit a concentration
calculating the relevant turnover and the if it constitutes a significant impediment
allocation of such turnover among the to competition in the relevant market,
members of the groups of undertakings particularly as a consequence of creating or
respectively is closely in line with that of the strengthening a dominant position.
European Commission in the context of the
EU merger control rules. 16. Are there any specific rules
applicable for acquisition of public
In addition, according to an alternative companies in your jurisdiction?
filing test, a merger control review will
also be necessary for the implementation Shareholders of a Hungarian public
of a concentration if it is not obvious company (either direct or indirect owners
that the concentration does not result in of the issued share capital of the given
any significant impediment to effective public company or entities directly or
competition in any of the relevant markets indirectly holding any voting right in
and the undertakings concerned have a such public company) must report to the
combined aggregate net turnover derived National Bank of Hungary (“NBH”) and to
from Hungary that exceeds HUF 5 billion. the issuer if their voting rights or shares
This alternative (voluntary) filing to which voting rights are attached reach,
requirement intends to capture mergers exceed or fall below 5%, 10%, 15%, 20%,
concerning new emerging technology 25%, 30%, 35%, 40%, 45%, 50%, 75%, 80%,
markets that are not necessarily generating
85%, 90%, 91%, 92%, 93%, 94%, 95%, 96%,
the levels of net turnover that would trigger
97%, 98% or 99%.
a merger filing requirement under the old
filing thresholds. In their notification filed with the NBH,
Although there is no longer any filing shareholders must disclose the identity
deadline under Hungarian law, the parties of the company or person acquiring the
are required to refrain from giving effect shareholding, the date of the transaction,
to the transaction prior to the merger the relevant thresholds and the details of
clearance. A notification form must be the securities. If the shareholder has not
lodged with the Hungarian competition complied with its obligation to file the
authority following the signing of the notification with the NBH and the issuer,
contract or the acquisition of control it may not exercise its voting rights in the
(whichever is earlier), or, in the case of a Hungarian public company.
public offer, following the publication of
The acquirer must make a public takeover
the public offer.
offer if it acquires 25% of the shareholding
The Hungarian competition authority interests in a Hungarian public company
may attach conditions or obligations to and, apart from the acquirer, no other
its approval, which must be met by an shareholder holds more than 10% of the
appropriate deadline. The approval may be voting rights, or if it acquires 33 % of the
amended if the company does not fulfil an shareholding interests. These provisions do
obligation or meet a condition prescribed not apply if the takeover is made during a
by the decision for a reason which is not formal restructuring or bankruptcy process.
attributable to it. Unless the conditions
are met, the approval is ineffective, and The form of consideration is based on
the Hungarian competition authority may a commercial agreement between the
initiate measures to recreate a state of bidder and the shareholder, although in
effective competition on the market. Hungary one would typically see a cash

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consideration or a combination of cash target company. In this case, the minority

and shares more often than just shares. If shareholders are entitled to offer their
the bid reaches or exceeds the mandatory shares for sale to the bidder within three
offer threshold, the bidder must offer cash months of the date on which the target
for the shares upon the request of the company published the acquisition.
shareholder.
In addition, Hungarian law allows that if
The takeover rules in Hungary are rather the articles of association of the Hungarian
restrictive and only permit a bidder to target company provide that a bidder has
withdraw from its bid if the participating acquired at least 75% of the shareholding
interest to be acquired is less than 50%, interests, such bidder may convene a
or if the Hungarian competition authority general meeting in order to amend the
has not cleared the takeover of the target articles of association and remove and
company from the antitrust perspective in appoint the board members. At this
the meantime. general meeting, any special rights of the
other remaining shareholders will not
Takeover offers in Hungary cannot be
be applicable. As compensation for the
subject to any financing out, as the bidder
requirement to waive these special rights,
is expected to provide evidence that it has
the remaining shareholders will enjoy a put
sufficient funds available to cover the entire
option vis-à-vis the bidder within 90 days of
consideration payable for the shares. The
the date of publication of the acquisition of
funds can be cash, government securities
voting rights reaching or exceeding 75%.
issued by any Member State of the EU (as
well as an OECD Member country) or a bank As a general rule, Hungarian law on
guarantee issued by a credit institution that takeovers requires the bidder to treat all
is established in any Member State of the shareholders equally. In practice, this
EU (or any Member country of the OECD). means that the terms of an offer must be
the same for all shareholders (taking the
Deal security measures (e.g., break fees,
share classes into consideration), and no
match rights, force-the-vote provisions,
more favourable arrangement is permitted
and non-solicitation provisions) are not
with any selected shareholders.
acceptable pursuant to the mandatory
Hungarian laws. It is very common for the bidder to acquire
shares from the principal shareholders
If the bidder has reserved the right in the
of the Hungarian public target company
bid documentation to launch a squeeze-
before launching a mandatory bid for the
out mechanism and successfully acquired
rest of the shares. This sale and purchase
at least 90% of the shares in the Hungarian
agreement includes the typical contractual
public company, and further verifies that
clauses concerning representations and
it has sufficient financial means to cover
warranties. Irrevocable commitments by
the purchase price, such bidder will legally
the principal shareholders of the Hungarian
be allowed to exercise a call option with
target company would be applied in this
respect to the remaining shares of the
context, which is permissible but not at all
minority shareholders within three months
customary. However, any such agreement,
of the last day of the acceptance period.
including irrevocable commitments, must
The put option reserved for minority be drafted with a view to ensuring that
shareholders must also be taken into none of the shareholders is placed in a
consideration when a bidder acquires at more favourable position than others.
least 90% of the shares of the Hungarian There is no common practice in Hungary

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for irrevocable commitments, so the available under Hungarian law on a

parties would be free to arrange for their contractual basis. Such arrangements
withdrawal or termination. are either included in the transaction
agreement or agreed by the parties already
During negotiations, the bidder must
earlier in the transaction process, usually
ensure that utmost confidentiality
before the buyer commences their due
is maintained since an unintended
diligence. Break fee provisions (also known
information leak would trigger its
as broken deal fees) may be contained in a
obligation to launch a mandatory takeover
separate agreement or may be included in
offer.
heads of terms.
17. Is there a requirement to disclose
19. What are the conditions precedent
a deal, for instance to regulatory
in a typical acquisition document?
authorities? Is it possible to keep a
deal confidential? Is it common to have conditions to
closing such as no material adverse
Unless the transaction triggers any change?
regulatory filing requirement (e.g.,
sectoral regulator, merger control or FDI The typical level of conditionality in private
screening) or the company is publicly listed transactions in Hungary is rather limited to
and so is subjected to certain disclosure the legal mandatory minimum, including
requirements under the prevailing obtaining all relevant (suspensory)
listing rules, there is no requirement regulatory approvals, such as antitrust
under Hungarian law to formally make clearance or seeking shareholder approvals
a public disclosure of the transaction. (to the extent they are prescribed in the
Note, however, that the new shareholder relevant corporate constitutive instruments
is required to notify the company’s or other shareholder arrangements) or
management, who, in turn, will be required other third-party consents (required on the
to apply for the registration of such basis of change of control clauses included
shareholder change with the Hungarian in contracts with key account business
companies’ register. Furthermore, the partners material to the continuing of
applicable anti money laundering rules the target’s business). Certainly, a novel
regarding ultimate beneficiary owners condition is the need to obtain FDI
(“UBO”s) also require that any new UBO screening approval from the competent
is notified to the relevant Hungarian UBO Minister. Other conditions to completing
register which is accessible, with certain a private transaction in Hungary, such as
restrictions and limitations, to the public. material adverse change provisions, are
18. Can sellers be restricted from substantially less frequent and would
shopping around during a routinely trigger sensitive discussions
negotiation process? Is it possible between the parties. Very apparently,
to include break fee or other deal certainty has become an even
penalty clauses in acquisition more important feature for the parties
documents to procure deal when discussing conditionality in their
exclusivity? acquisition agreement and whenever
possible simultaneous signing and closing
Break fees, or other penalty clauses is a preference.
to encourage the parties to remain at
the negotiating table rather than take Generally, the following conditions are
action that may unreasonably cause the introduced and must be completed for the
transaction not to proceed, are generally consummation of a transaction:

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• collecting approval of competition • lawfully acquired clear title free of

authorities or other industry specific any third-party claims, litigation or
bodies; encumbrance;
• carrying out changes to the • all asset types affected by the
management of the target company; acquisitions (real estate, financials,
tangibles);
• drafting and preparing relevant
• requisite power and authority to
corporate documents and passing
relevant resolutions required under represent target;
applicable laws to give effect to the • current and contingent liabilities;
transfer both substantively as well in • employees;
local corporate registry;
• contracts;
• balance sheets evidencing the financial • tax issues;
status of the target company at the
• intellectual property rights;
time of completion/closing;
• IT infrastructure;
• acknowledgment letters confirming
• licenses and permits
the settlement/repayment of loans,
outstanding liabilities of the target The most common limitations on
company, if any; warranties include:
• consents of third parties or transfer of • rights of disclosure against warranties,
relevant contracts (in light of possible generally including data room content.
change of control provisions discovered Accordingly, legal issues identified
during the due diligence). in the course of a due diligence and
Condition precedents are generally to be disclosed to both parties will effectively
satisfied until closing of the transaction limit or prohibit one’s ability to claim
and are either mutual undertakings of the damages regarding the respective
parties or a unilateral obligation. Certain finding.
precedents, if falling within the exclusive • setting a minimum claims threshold for
competence of the contracting parties, may both individual and aggregate warranty
be waived by the other party. However, the items;
non-completion of a condition precedent
may give reason to claim damages for • setting up a cap on seller’s maximum
breach of contract or even lead to the liability (i.e., a maximum amount) or
parties rescinding from the transaction. purchaser’s recovery (i.e., a maximum
percentage relative to purchase price);
20. What are the typical warranties
and limitations in acquisition • time limitations for bringing claims
documents? Is it common to obtain (except for items which have
warranty insurance? mandatory limitation periods i.e., real
estate title, tax matters);
Following international standards,
acquisition agreements usually provide • exclusion of claims due to change in
for an extensive list of warranties, which legislation/law;
generally cover:
• prevention of double recovery
• the corporate good standing of the under warranties (i.e., indemnity and
target entity; insurance); and

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• qualification of warranties with the considerations in dealings between

knowledge or awareness of the parties affiliated entities).
(or their respective management,
22. What types of acquisition financing
advisers or key employees).
are available for potential buyers in
Warranties are most commonly subject your jurisdiction? Can a company
to disclosure. A disclosure schedule (or provide financial assistance to a
disclosure letter) forms an integral part potential buyer of shares in the
of a transfer agreement. Its purpose target company?
is to disclose matters that represent The most commonly used form of
exceptions to the sellers’ representations consideration is cash (equity), either
and warranties set forth in the agreement, funded by the buyer directly or partially or
qualifying the warranties. completely from debt.
Disclosure letters may include general Public companies may also opt to issue
disclosures (searches, publicly available shares to acquire funds for acquisitions,
information obtained by the buyer, which may also be combined with other
information disclosed in the books and elements (cash or debt). Other types of
accounts of the target company, due consideration are less common (rights,
diligence exercise etc.) and/or specific receivables, real estate) however, they
disclosures, which are tailored to the can be negotiated by the parties for
particular transaction and are cross-referred transactions involving private companies.
to warranties. Disclosure qualifications
The factors in choice of consideration may
usually also include data room content
be the seller’s preferences, the financial/
substantiating any corresponding economic conditions of the target company
limitations. and the parties’ negotiations. However,
Warranty and indemnity (W&I) insurance both seller and buyer have different
has been reasonably embedded in preferences – while the seller will opt to
Hungarian transactions, although it is still receive the purchase price in cash upon
not predominantly customary in Hungary. sale immediately or remain engaged in the
The coverage provided by the relevant business with the use of a joint venture
insurance policy is most dependent on the setup or incentivized combined business,
warranties ultimately negotiated into the the buyer will try to pay consideration in
transaction agreement. the course of a longer period, introduce
partial payment (which may be combined
21. Is there a requirement to set a with share schemes to incentivize retained
minimum pricing for shares of a owners as management) or purchase price
target company in an acquisition? retention mechanisms, or even try to set up
an earn-out mechanism with the relevant
There is no general legal requirement under
(usually complex) review and business
Hungarian law for setting any minimum
integrity requirements.
pricing for shares of a target company
in an acquisition. When the transaction Under Hungarian law, a Kft. and a Zrt.
parties conclude their agreement, however, are allowed, indeed, to provide financial
they will be advised to pay attention to assistance without restrictions. However, as
their tax positions respectively resulting a general rule, a Hungarian public company
from the purchase price they have agreed limited by shares is prohibited from offering
(e.g., corporate income tax incurring financial assistance for the acquisitions of
over the value margin or transfer pricing its own shares unless such assistance is:

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• subject to market conditions; provide the document with full probative

force, meaning its contents must be
• provided from assets of the company
considered valid until proven otherwise in
available for the payment of dividends;
court. In case of certain documents, general
and
practice has established that quicker
• the general assembly approve such enforcement is an essential requirement,
decision by at least a three-quarters as such incorporating documents (mostly
majority upon a proposal put forward security) into a notarial deed may also be
by the board of directors. considered (or required).
The above-mentioned recommendation The following formalities are applicable in
of the board of directors must contain the case of the transfer quotas of a Kft:
reasons, the risks involved, the conditions,
• a written business quota sale and
the price of the shares and the advantages
purchase agreement;
the company is likely to gain by providing
such financial assistance. The proposal • waiver of pre-emption rights of the
of the board of directors is later to be members of the company or any third
submitted to the competent court of party having such rights (if applicable);
registry keeping the records of the public
• any additional formal approval for
company.
the transfer or compliance with any
23. What are the formalities and restrictive provision (generally required
procedures for share transfers and under the articles of association);
how is a share transfer perfected?
• declaration of the buyer to the
Foreign companies must execute management of the company on its
documents in accordance with the laws of acquisition of the business quota;
their incorporation. If, however, documents
• registration of the buyer in the
are executed based on a power of attorney
member’s list of the company following
additional formal requirements may also
the member’s declaration by the
be applicable, which based on the country
managing director;
of issuance may be either notarization or
certification of signatures by a consulate • registration of the new member of the
or depending on the place of execution, company in the company’s registry.
attachment of an apostille.
The formal requirements of share transfer in
Companies in Hungary must be a Zrt. vary depending on the actual method
represented by their duly authorized the shares were issued.
representative(s) either with joint or
Formality requirements for the transfer of
individual signatory rights. The details of
printed shares include the endorsement
such rights of representation are detailed in
carried out on the printed share and the
the articles of associations of the company
actual physical handover. A separate sales
and registered in the company’s registry.
agreement can be concluded, although not
Although not required by law, parties may
required.
opt to have the share purchase agreement
signed with the addition of two witnesses, Transfer of electronic or dematerialized
have it countersigned by an attorney or shares (i.e., kept available on specific
have their signature certified by a notary securities accounts) are carried out by way
public. Such additional formalities will of transfer between the individual securities

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accounts of the parties, accompanied by a if it holds directly or indirectly at least

separate sale and purchase agreement. 75% of shares in a company that fulfils the
aforementioned conditions.
An additional important requirement is
to register the new owner of the share The acquisition of shares in a real estate
(both printed and electronic) in the book holding company is exempt from transfer
of shares of the company. In the absence tax if:
of such registration, the share transfer will
• the buyer has acquired the shares
not be considered effective vis-à-vis the
from its related party with the buyer’s
company and the new shareholder will not
main activity being either renting and
be entitled to exercise shareholders’ rights,
operating of own or leased real estate
regardless of its ownership of the share.
or buying and selling of own real estate;
24. Are there any incentives (such or
as tax exemptions) available for
• it takes place within the frame of a
acquisitions in your jurisdiction?
preferential exchange of shares.
In a transactional context, the key area
For the above-mentioned exemptions
concerns the real estate transfer tax (RETT).
to apply, the legislation requires that
As a general rule, the same RETT incurs for
the buyer not be resident in a low tax
transferring equity in a Hungarian entity
jurisdiction.
qualifying as a real estate holding company
as if the real property would transfer in an The acquisition of real estate from a related
asset deal. Otherwise, the acquisition of party is exempt from transfer tax, provided
shares in a Hungarian entity is not subject that the buyer’s main activity is either
to any transfer, sales or value added taxes. renting and operating of own or leased real
estate or buying and selling of own real
If an entity qualifies as a real estate holding
estate. Further exemptions are set out in
company for RETT purposes, then the
the legislation, for example acquiring real
acquisition resulting in at least 75% of its
estate under a lease-back arrangement
shares being held by the buyer and its
or activities in connection with the
related parties triggers RETT in Hungary
construction of a residential building.
at the buyer at a rate of 4% of the market
value of the Hungarian real estate held F. Enforceability
by the real estate holding company. If
25. Can acquisition documents be
the market value of a real estate property
executed in a foreign language?
exceeds HUF 1 billion, the tax rate on the
exceeding part is 2%, but the RETT liability Hungarian law does not preclude that
is capped at HUF 200 million per real acquisition documents are negotiated and
estate property. Under Hungarian RETT executed in a foreign language. As much
legislation, an entity should be regarded as as any such documents will need to be filed
a real estate holding company if the value with some Hungarian authority or court
of the real estate in Hungary owned by that in the context of their proceedings (e.g.,
entity exceeds 75% of the total value of the registering new shareholder, conducting
assets (excluding liquid assets, monetary regulatory approval proceedings, a
claims, accruals, and loans) of the entity competent authority opening investigation
shown on the balance sheet most recently of matters arising out of the transaction
formally approved. An entity should also etc.), however, such authorities any courts
be regarded as a real estate holding entity will require an official Hungarian translation

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of the relevant transaction documents for Awards of arbitral tribunals are directly
their own procedural purposes. enforceable through the Hungarian judicial
enforcement system in the same manner
26. Can acquisition documents be
as state court judgements. Also, Hungary
governed by a foreign law?
is party to, inter alia, the Convention on the
An acquisition agreement can provide Recognition and Enforcement of Foreign
for any foreign governing law. It is very Arbitral Awards (New York Convention),
common in cross-border transactions that the Convention on the Settlement
the parties insist on having the relevant sale of Investment Disputes between States
and purchase agreement governed by their and Nationals of Other States (ICSID
local law, however. Convention), the European Convention
on International Commercial Arbitration
In cases where the parties’ national law is (European Convention), the Energy Charter
agreed as governing, Hungarian law will Treaty and nearly sixty bilateral investment
generally not apply, save for mandatory protection treaties, ensuring recognition
provisions which must be used for matters and enforcement of arbitral awards also in
falling under the exclusive competence of an international context.
Hungarian law, just to name a few examples
most relevant to a share purchase: 28. Are there any specific formalities
for the execution of acquisition
• the transfer of shares and their documents? Is it possible to
registration in the corporate registry; remotely/digitally sign documents?
• certain parts of real estate law; Unless otherwise provided by law, transfer
• laws related to the registration of documents do not require special legal
financial securities; formalities. A share sale and purchase
agreement does not require special
• labour law; and form, however, a real estate sale and
• competition law regulations. purchase agreement must be prepared
and countersigned by an attorney at law
27. Are arbitration clauses legally or incorporated into a notarial deed. A
permissible or generally included in power of attorney granted with respect
acquisition documents? to a real estate sale and purchase must be
In private transactions, arbitration clauses provided in the same form having the same
(including international arbitration fora) formalities as the documents executed
are legally permissible any widely used based on such power of attorney.
by the transacting parties. An increasing According to the eIDAS Regulation
number of contracts in commercial matters (Regulation (EU) No. 910/2014 and its
contain arbitration clauses. In transactions corresponding Hungarian implementation
involving Hungarian state assets or other act), qualified electronic signature must
state interest, however, there are certain have the equivalent legal effect of a
statutory restrictions on setting forth handwritten signature. A digital document
arbitration. Also, there are a number of attached with a qualified electronic
disputes that cannot be submitted to signature based on a qualified certificate
arbitration, such as those arising from issued in one Member State must be
consumer contracts, orders for payment considered as a written document and
procedures, public administration and the signature will qualify as an equivalent
enforcement procedures. electronic signature in all other Member

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States. However, one must note that the

use of digital electronic signatures in share
or asset transfers are to this date almost
unprecedented.
G. Trends and Projections
29. What are the main current trends in
M&A in your jurisdiction?
Hungary continues to be a popular
investment destination within the Central
and Eastern European (CEE) region.
Investors also seem to favour Hungary’s
long-lasting political stability and the
healthy condition of its macroeconomic
environment and stable budgetary status.
Foreign investors also closely monitor the
macroeconomic environment of Hungary,
such as the inflation rate or the base rate of
the National Bank of Hungary, which could
have significant impact on their investment
decisions.
Looking ahead, the local market sentiment
is that deal activity is likely to remain
reasonably stable in Hungary, despite
uncertainties across global markets
and slower trends elsewhere in Europe
reflecting a more cautious and less active
deal-making environment.
30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
As of the date of this chapter, not any major
developments or changes are expected in
respect of laws applicable to doing M&A in
Hungary.

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INDIA
JSA ADVOCATES & SOLICITORS

Sidharrth Shankar Prakriti Jaiswal

Partner Partner
[email protected] [email protected]

A. General contains provisions applicable to public

companies, private companies, and
1. What is the main legal framework one-person companies.
applicable to companies in your
jurisdiction? (b) The Competition Act, 2002
(“Competition Act”): The Competition
The corporate ecosystem in India Act prescribes provisions to keep the
has a set of exhaustive commercial market in check as it promotes fair
laws governing the various aspects of competition in markets in India. It
companies. The parliamentary statutes protects the interests of consumers and
delegated legislations and by-laws offer ensures freedom of trade for market
a comprehensive legal framework that participants. The Competition Act: (i)
govern and regulate the companies in prohibits anti-competitive agreements;
India. (ii) prohibits abuse of dominance;
Some of the pivotal business regulations in (iii) regulates acquisitions, mergers
India are as follows: and amalgamations, exceeding the
prescribed thresholds; (iv) establishes
(a) The Companies Act, 2013 (“Companies Competition Commission of India
Act”): Companies incorporated in India (“CCI”) including its investigative wing
and foreign corporations conducting i.e., Office of Director General and sets
business in India are regulated by out their functions and powers; and
the provisions of the Companies (v) lays down the procedure for appeal
Act. It regulates the incorporation, against the order of the CCI. On April 3,
management, governance, operation, 2023, the Indian Parliament passed the
dissolution or winding up of the Competition Amendment Bill, 2023, The
companies. The Companies Act amendments aims to streamline legal

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provisions and bring the law into sync 2. What are the most common types
with international best practices and of corporate entities (e.g., joint
changing economic reality. stock companies, limited liability
companies, etc.) used in your
(c) The Foreign Exchange Management
jurisdiction? What are the main
Act, 1999 (“FEMA”): FEMA and the rules
thereunder govern foreign investment, differences between them (including
capital flow, remittance, establishment but not limited to with regard to the
of liaison, branch and project offices, shareholders’ liability)?
loans and external commercial In India, corporates have the option to
borrowing. set-up their business operations either in
(d) The Consolidated Foreign Direct the form of incorporated entities (i.e., as
Investment (“FDI”): The latest FDI policy a company or limited liability partnership
(issued vide Consolidated FDI Policy (“LLP”)) or unincorporated entities (i.e., as a
of 2020), effective from October 15, branch/liaison office).
2020 (“Consolidated FDI Policy”), read Incorporated Entities: In India, the most
with the FEMA regulations reflects the popular forms of companies are: (i) a private
current policy framework on FDI. In limited company, and (ii) a public company.
the event of any change in the foreign Apart from these two, the Companies Act
investment regime during the year, the
also prescribes provisions for setting up
Government of India issues FDI Press
one-person company.
Notes which are incorporated in the
subsequent Consolidated FDI Policy. A private limited company is a joint stock
company. It is governed under the ambit
(e) The Securities and Exchange Board of
of the Companies Act. It is formed by a
India Act, 1992 (“SEBI Act”): SEBI Act
voluntary association of persons. The
and rules thereunder offer a framework
maximum number of members cannot
for listed entities and govern the capital
exceed 200 (two hundred). The transfer
markets and securities transactions.
of shares of a private limited company is
(f) Indian taxation laws: The principal typically restricted. It prohibits the entry of
taxes and duties that the Central the public through subscription of shares
Government is empowered to levy are and debentures. A public company means
income tax, customs duty, and central a company which is not a private company.
excise. The principal taxes levied by the As such, a public limited company is also
state governments are value added governed under the provisions of the
tax, stamp duty, state excise duty, land Companies Act. There is no limit on the
revenue, entertainment tax and tax on number of members, and it is formed by
professionals. Goods and Services Tax the association of persons voluntarily. The
(“GST”) is levied on supply of goods and transferability of its shares is not restricted,
services by both central government as and the company can invite the public for
well as state governments and proceeds subscription of shares and debentures.
are shared by them. Other differences between a private and
In addition to above legislations, the public company include composition of its
labour laws, the environment laws, the board of directors (“Board”), constitution of
Contract Act, 1872 and the sector specific committees including the audit committee,
legislations also apply to entities running appointment of independent directors and
businesses in India. retirement of directors by rotation.

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In addition to the private and public two modes: Government route and
companies, an LLP, which is a hybrid Automatic route, subject to the threshold
corporate business structure falling set by the Consolidated FDI Policy. Under
between a partnership firm and a corporate the Government route, an investor is
body, can be set up in accordance with required to take the approval from relevant
the provisions of the LLP Act, 2008 (“LLP government bodies. Under the automatic
Act”). It provides the benefits of limited route, investment is allowed to certain
liability of a company but allows its limits or up to 100%. However, for certain
members the flexibility of organizing crucial sectors/activities, the Government
their internal management on the basis of India has restricted foreign investment.
of a mutually-arrived agreement, as is These sectors/activities include (i) gambling
the case in a partnership firm. Following and betting, including casinos, (ii) lottery
are certain requirements prescribed for business including government, private
setting up an LLP in India: (i) requirement lottery and online lotteries, (iii) business of
to have minimum 2 (two) designated chit funds (except for investments made by
partners, which could be either individuals Non-resident Indians (“NRIs”) and Overseas
or corporate bodies; and (ii) out of the Citizens of India (“OCIs”) on a non-
repatriation basis), (iv) real estate business
prescribed partners, at least 1 (one) partner
or construction of farm houses, (v) trading
should be a person resident in India.
in transferable development rights, (vi)
Unincorporated Entities: Foreign entities manufacturing of cigars, cheroots, cigarillos
not opting to be incorporated in India and cigarettes, of tobacco or of tobacco
are permitted to conduct their business substitutes, (vii) activities/sectors not
operations through any of the following opened to private sector including Atomic
forms: (i) Branch Office (“BO”); (ii) Liaison Energy and Railway Operations (other than
Office (“LO”); and (iii) Project Office (“PO”). permitted activities), (viii) Nidhi company
and (ix) foreign technology collaboration in
The Foreign Exchange Management any form including licensing for franchise,
(Establishment in India a branch office or trademark, brand name, management
a liaison office or a project office or any contract is also prohibited for lottery
other place of business) Regulations, 2016 business and gambling and betting
as amended from time to time and such activities.
other circulars issued by Reserve Bank of
India (“RBI”), including the Master Direction To safeguard the Indian industries, the
on Establishment of BO/LO/PO or any Department for Promotion of Industry
other place of business in India by Foreign and Internal Trade issued Press Note 3
Entities, regulate the establishment of BO/ (2020 Series) clarifying that an entity of
a country, which shares land border with
LO/PO in India and the nature of activities
India or where the beneficial owner of an
permitted to be undertaken.
investment into India is situated in or is a
B. Foreign Investment citizen of any such country, can invest only
after it obtains government approval.
3. Are there any restrictions on foreign
investors incorporating or acquiring 4. Are there any foreign exchange
the shares of a company in your restrictions or conditions applicable
jurisdiction? to companies such as restrictions to
foreign currency shareholder loans?
The Indian economy offers open and
equal market opportunities to foreign The Foreign Exchange Management
investors. An investor can invest through (Borrowing and Lending) Regulations,

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2018 governs the cross-border lending for long-term engagements, prior RBI
and borrowing by Indian entities. In recent approval is required.
times, we have seen a rise in external
A foreign national who is:
commercial borrowings (“ECB”), being
borrowed by an eligible resident entity (a) on a deputation in India is allowed
from outside India. The loan can be in to open, hold and maintain a foreign
foreign currency or in Indian Rupees as well. currency account with a bank outside
Pursuant to the ECB framework, foreign India and may receive the entire salary
shareholders are permitted to provide loans payable to him in India by credit to
in the form of ECBs under the automatic such account abroad provided that the
route. The ECB liability-equity ratio for ECBs income tax chargeable should be paid
raised under the automatic route cannot on the entire salary in India.
exceed 7:1. However, this ratio will not be
applicable if the outstanding amount of all (b) employed by an Indian company in
ECBs, including the proposed one, is up to India is allowed to open, hold and
USD 5 million or its equivalent. Such ECBs maintain a foreign currency account
may be provided in foreign currency or with a bank outside India and remit the
in Indian Rupees. The ‘recognized lenders’ whole salary received in India in Indian
must necessarily be residents of FATF or Rupees subject to the payment of
IOSCO compliant countries. Foreign equity income tax in India.
holders will have to meet this criterion to An employment visa is granted to
be ECB lenders. foreigners desiring to come to India for
ECBs need to be routed via an authorised the purpose of employment subject to the
dealer-Category I bank (“AD Bank”) and fulfilment of certain conditions, including:
must meet other prescribed aspects (a) The applicant must be a highly skilled
of the ECB framework, particularly the and/or qualified professional, who
minimum average maturity periods, is being engaged or appointed by
all-in-cost provisions and filing and a company/organisation/industry/
reporting requirements with the AD undertaking in India on a contract or
Bank. The minimum average maturity employment basis.
of an ECB would vary depending on the
purpose of the ECB. ECBs must have a (b) The foreign national being sponsored
minimum average maturity of 3 (three) for an employment visa in any sector
years. However, for certain categories of should draw a minimum salary of Indian
ECBs, different minimum average maturity Rupee (“INR”) 1,625,000 per annum.
periods are prescribed which range from 1 However, this condition of annual floor
(one) to 10 (ten) years. limit is exempt for certain classes of
jobs.
5. Are there any specific considerations
for employment of foreign C. Corporate Governance
employees in companies
6. What are the standard management
incorporated in your jurisdiction?
structures (e.g., general assembly,
Indian entities are allowed to avail the board of directors, etc.) in a corporate
services of foreign nationals. Short-term entity governed in your jurisdiction
assignments with foreign nationals can be and the key liability issues relating
undertaken without prior approval of the to these (e.g., liability of the board
RBI, subject to certain conditions, whereas members and managers)?

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The Board represents the shareholders and aggregate, outstanding loans and deposits
is obligated to protect the interest of all exceeding INR 50,00,00,000 are required
stakeholders. It is the key body monitoring to appoint at least 2 (two) independent
the operation and management of a directors. Further, under the provisions
company with certain matters reserved for of the Companies Act, certain classes of
the shareholders. In India, the corporate companies are required to have women
governance legislations prescribe a one- directors on their Board. Companies are
tier Board structure that is collectively required to comply with the Secretarial
responsible for the affairs of the company. Standards issued by the Institute of
Generally, the authority is delegated to Company Secretaries of
officers to manage the business on a day-
India, which provide for certain
to-day basis, under the overall supervision
compliances to be undertaken by a
of the Board, with material matters
company in relation to the meetings of its
requiring Board approval. The Board is
Board of Directors and the shareholders.
supposed to exercise strategic oversight
over business operations. Simultaneously 7. What are the audit requirements in
the Board must ensure compliance with the corporate entities?
legal framework, financial accounting and
Recently, there has been some activism
reporting systems and timely regulatory
among corporate entities for statutory,
and general disclosures.
financial, and secretarial audits as the
Every year, companies are required to Companies Act mandates that every
hold a minimum 4 (four) Board meetings company is required to appoint an
in such a manner that not more than 120 individual or an audit firm as an auditor,
(one hundred twenty) days must intervene to hold office for 5 (five) years. The process
between 2 (two) consecutive meetings and of audit checks a company’s finances and
each year hold at least 1 (one) shareholders’ analyses the operational efficiency. It boosts
meeting (Annual General Meeting). the stakeholders’ confidence and results in
statutory hygiene. The following companies
The composition of the Board depends
are mandatorily required to have an audit
upon the nature of the company. A
committee consisting of a minimum of
private limited company is required to
3 (three) directors with independent
have a minimum of 2 (two) directors
directors forming a majority: (i) every
whereas a public limited company can
listed company; (ii) all public companies
have a minimum of 3 (three) directors. A having paid up capital of INR 10,00,00,000
company can appoint a maximum of 15 or more; (iii) all public companies having
(fifteen) directors, which can be extended turnover of INR 100,00,00,000 or more;
by passing a special resolution. There is no and (iv) all public companies having in
restriction on appointing foreign nationals aggregate outstanding loans or warrants
as directors. However, every company is or debentures or deposits exceeding INR
required to have at all times at least 1 (one) 50,00,00,000 or more.
resident director, who has stayed in India
for a total period of minimum 182 (one In addition to the above, the following
hundred and eighty-two) days during the classes of companies are required to
financial year. To maintain transparency undertake secretarial audits: (i) listed
and fair decision making, the Companies entities; and (ii) public companies with,
Act also provides for the appointment of paid-up capital of INR 50,00,00,000 or more;
independent directors to the Board. Every or a turnover of INR 250,00,00,000 or more;
unlisted public company with a paid-up or outstanding loans or borrowings from
capital of INR 10,00,00,000 or having a banks or public financial institutions of INR
turnover of INR 100,00,00,000 or having, in 100,00,00,000 or more.

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D. Shareholder’s rights (b) protection against oppression and

mismanagement;
8. What are the privileges that can
be granted to shareholders? In (c) class action suit;
particular, is it possible to grant (d) other statutory rights under
voting privileges to shareholders for the Companies Act to minority
appointment of board members? shareholders;
Shareholders have a say in the constitution (e) contractual rights under shareholder
of the Board as the appointment of
agreements; and
directors requires shareholders’ approval
in a general meeting. A retiring director is (f) judicial protection to minority
also eligible for reappointment. In the case shareholders.
of a public company, if 2 (two) or more
10. Is it possible to impose restrictions
directors are to be appointed or elected by
on share transfers under the
a single resolution, a motion to this effect
corporate documents (e.g., articles
must first be passed unanimously by all
of association or its equivalent in
shareholders without a vote being cast
your jurisdiction) of a company
against it. Alternately, each director should
incorporated in your jurisdiction?
be voted individually and not through a
single resolution. The Articles of Association In terms of the provisions of the Companies
(“AoA”) may authorize the appointment Act, a private company may restrict the
of not less than 2/3rd directors of the transfer of its shares through its AoA. It
Board in accordance with the principle of protects the core of a private company,
proportional representation. thus, any restriction on transfer of shares as
Further, the appointment of independent agreed under the shareholders agreement
directors is approved at a shareholders’ and duly incorporated in its AoA are
meeting and is eligible for reappointment binding and can be enforced against
on passing of a special resolution by the shareholders of a private company.
the shareholders and disclosure of the However, transferability of the shares is
reappointment in the Board’s report. not restricted in a public company, and
the company can invite the public for
9. Are there any specific statutory rights subscription of shares and debentures.
available to minority shareholders
available in your jurisdiction? 11. Are there any specific concerns or
other considerations regarding the
The Companies Act provides companies
composition, technical bankruptcy
with an option to adopt a proportional
and other insolvency cases in your
representation mechanism for director
appointments, so as to enable the jurisdiction?
representation of minority shareholders There is no separate test for technical
on the Board. Indian law also permits bankruptcy under the current legal
minority shareholders to file claims of and regulatory framework and a formal
oppression and mismanagement against corporate insolvency resolution process
the company or the member/members. The (“CIRP”) of a corporate debtor prescribed
key protections for minority shareholders under the insolvency law in India may be
can be broadly classified as below:
initiated based on the corporate debtor’s
(a) protection against reconstruction and inability to pay its debt. However, creditors
amalgamation (squeeze out provisions); have certain frameworks for restructuring

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defaulted loans of borrowers instead of the sanction of the relevant National

resolving the borrower through a CIRP. Company Law Tribunal (“NCLT”). This is not
We have outlined below a summary of a popularly used route due to protracted
the frameworks and the considerations timelines due to court supervision and
for composition and re-organisation and debtor control on the process.
insolvency.
Additionally, out of court or informal
Composition and Reorganisation: work out or restructuring or settlement of
debt can also be separately contractually
A company that has defaulted on
agreed between the parties outside the
payments to banks and certain other
abovementioned statutory and regulatory
categories of non-bank lenders can be
reorganized/restructured under the frameworks.
Prudential Framework for Resolution of Formal Insolvency Resolution and
Stressed Assets Directions dated 7 June Liquidation Proceedings:
2019 by the RBI (the “Stressed Assets
Framework”), which prescribes the The Insolvency and Bankruptcy Code,
process that the lenders may follow after 2016 (“IBC”) provides a comprehensive
a default which includes formulating insolvency framework in India, which for
and implementing a resolution plan for a corporate entity contemplates a CIRP
resolution of stressed loans and giving and in case of failure of CIRP, liquidation
incentives and disincentives by providing of the entity. Under the IBC, certain types
reduced provisioning for regulated of creditors - operational creditors or
lenders upon restructuring of the loan or financial creditors, are permitted to file an
additional provisioning based on the delay application for CIRP against a company
period. The process involves signing of (“Corporate Debtor”) which has defaulted
an inter-creditor agreement and then any in making a payment of INR 10,000,000 or
decision on the resolution to be agreed more.
by lenders representing 75% by value of Once the application is admitted, the
total outstanding credit facilities (fund- NCLT by order declares a moratorium
based and non-fund-based) and 60% of prohibiting initiation of any proceeding
lenders by number, which shall be binding against the Corporate Debtor and transfer/
on the dissenting minority. Dissenting disposal of and creation of encumbrance
lenders are required to be paid a minimum over any asset or any foreclosure, recovery
liquidation value i.e., the realizable value or enforcement of any security interest
of the assets of the debtor if such borrower on the assets of the Corporate Debtor.
were to be liquidated. If the restructuring NCLT also appoints an interim insolvency
is not successful under the Stressed Assets resolution professional (“IRP”), who takes
Framework, the lenders may proceed with a
over the management of the Corporate
formal CIRP under the IBC.
Debtor and takes all actions on behalf of
Separately the Companies Act, also the Corporate Debtor. The IRP also forms a
provides for a mechanism of a scheme of committee of creditors (“COC”), comprising
compromise or arrangement including only of financial creditors. The IRP may be
between a company and its creditors or a confirmed as the resolution professional
class of creditors. This requires the consent (“RP”) by the COC or the COC may appoint
of three-quarters of the creditors in value another person or entity as a RP. After
and the majority being present and voting checking criteria requirements, the RP
and is court supervised i.e., requires invites prospective applicants to submit

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plan or plans for the insolvency resolution E. Acquisition

of the Corporate Debtor as a going concern
and then presents all resolution plans at the 12. Which methods are commonly used
meetings of the COC. It is the duty of the to acquire a company, e.g., share
RP to preserve and protect the assets of the transfer, asset transfer, etc.?
corporate debtor, including the continued Subject to the objective and purpose of
business operations of the corporate acquisition, a transaction can be structured
debtor. in different ways such as share purchase,
Decisions are taken by the COC by 51%, asset purchase and slump sale. Share
66% or 90% majority of financial creditors purchase is a type of acquisition in which
depending on the decision taken. The the buyer takes over the target entity by
COC by a vote of 66% or more of the total purchasing all the shares or majority shares
financial debt may approve a resolution of a target entity. Interestingly, the entire
plan submitted by a resolution applicant. liability of the seller is taken over by the
Therefore, for creditors who constitute less buyer in a share transfer.
than 66% of the financial debt, the approval
A slump sale is a term commonly used
of other financial creditors will be required
to denote the transfer of business as a
to accept a resolution plan. Operational
going concern (assets and liabilities are
creditors have to be paid in priority to the
transferred). Another way of looking at it
financial creditors of the Corporate Debtor
would be the sale of an undertaking or a
as part of the resolution plan.
business for a lump sum price. Notably, a
If the resolution plan is not viable/ ‘slump sale’ is defined under the Income
sustainable or if it is not approved by the Tax Act, 1961, as a sale of any one or more
COC or the NCLT, the COC can choose undertakings for a lump sum consideration,
to liquidate the Corporate Debtor. The without values being assigned to the
waterfall mechanism setting out the individual assets and liabilities of the
priority of various classes of creditors is set undertaking being transferred.
out under the IBC which is required to be
adhered to for distribution of liquidation On the other hand, an asset sale is an
proceeds. A secured creditor will have an itemised sale involving transfer by way of
option to realise its security and receive sale of the constituent assets of a business,
proceeds from the sale of the secured division or unit of an undertaking. The sale
assets as a priority. In case of any shortfall price is ascertained for each asset and there
in recovery, the secured creditors will rank is no transfer of liabilities of the business.
junior to the unsecured creditors to the The method of acquisition really depends
extent of the shortfall. on what the buyer is actually seeking to
The CIRP is required to be completed within gain from acquiring the target as that will
a period of 180 (one hundred eighty) days be a large influencer to decide the method
from the date of admission of application of transaction.
to initiate CIRP, which may be extended
13. What are the advantages and
if approved by the NCLT by a period of
disadvantages of a share purchase
90 (ninety) days. The CIRP (except for the
as opposed to other methods?
implementation of the resolution plan)
must be completed within a period of As discussed in the response above, the
330 (three hundred thirty) days from the mode of acquiring a company depends on
commencement date. several factors including the transactional

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requirements and business understanding (d) Insurance Regulatory Development

among the parties. Often, the share Authority for insurance companies;
purchase option is opted when the parties (e) The Securities and Exchange Board of
don’t look forward to entering fresh India (“SEBI”) for listed entities, mutual
contracts, licenses and are comfortable with and venture capital funds; and
the losses, liabilities and other tax credits to
be carried forward. Share purchase can be (f) Ministry of Civil Aviation for aviation.
time efficient, subject to regulatory or third- 15. What are the regulatory
party approvals, if any. Also, it provides competition law requirements
availability of double tax treatment applicable to private acquisitions in
benefits. Similarly, one of the major your jurisdiction?
advantages of asset purchase and slump
sale transactions over a share purchase is The acquisition of shares/voting rights/
that it offers buyer an opportunity to pick assets/control of an enterprise requires
and choose the assets and liabilities which prior clearance from the CCI if it exceeds
are to be acquired. In an asset purchase, the assets or turnover threshold prescribed
the buyer may also choose not to take in the Competition Act. The Competition
over any liabilities but purchase only the Act prohibits:
handpicked assets whereas the slump sale (a) Anti-Competitive Agreements: it
offers comfort to the purchaser to acquire includes contracts (horizontal and
any arm or vertical of the company as per vertical) for production, supply,
the business and transactional objectives. distribution, storage, acquisition
14. What are the approvals and or control of goods, or provision of
consents typically required (e.g., services, which cause or are likely to
corporate, regulatory, sector cause an appreciable adverse effect on
based and third-party approvals) competition.
for private acquisitions in your
(b) Abuse of dominant position: abuse of
jurisdiction?
dominance by an enterprise or a group.
There are several factors which determine Establishing abuse of its dominant
the requirement for obtaining approvals position according to the scheme of
and consents/ licenses, such as the sector the Competition Act involves a three-
in which the company operates, the nature stage process: (i) determination of the
of the acquisition, nature of company relevant market which is determined
(whether listed or unlisted) and resident on the basis of relevant product and
status of the acquirer. The Companies Act geographical market; (ii) determination
and rules thereunder provide for general of dominance in that relevant market;
framework for issuance and transfer of and (iii) determination of an abuse
shares. Such transactions require sector committed by the dominant enterprise
specific compliances from the following in the relevant market.
regulators:
(c) Combination: If any of one of the
(a) RBI in case of banking and NBFC below (assets or turnover threshold) is
companies; exceeded, prior approval of the CCI is
(b) Ministry of Defence in case of defence required.
sector;
(c) Department of Telecommunication for
telecom companies;

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India Thresholds
Alternative Entity Assets Turnover
1. Acquirer and INR 2500 crores Or INR 7500 crores
target, together (USD 288 million) (USD 864 million)

2. Acquirer’s group INR 10000 crores Or INR 30000 crores

and target, (USD 1152 million) (USD 3456 million)
together
World-Wide Thresholds

Alternative Entity Assets Turnover

3. Acquirer and USD 1250 million USD 3750 million

target, together (USD 1.25 billion) (USD 3.75 billion)
(INR 10847 crores) Or (INR 21648 crores)
Of which in India INR 1250 crores INR 3750 crores
(USD 144 million) (USD 432 million)
4. Acquirer’s group USD 5000 million USD 15000 million
and target, (USD 5 billion) (USD 15 billion)
together (INR 28864 crores) Or (INR 86592 crores)
Of which in India INR 1250 crores INR 3750 crores
(USD 144 million) (USD 432 million)

16. Are there any specific rules SEBI through the SEBI (Substantial
applicable for acquisition of public Acquisition of Shares and Takeovers)
companies in your jurisdiction? Regulations, 2011 (“Takeover Code”)
governs any direct or indirect acquisition
In India, mergers and acquisitions of
of shares, voting rights or control of public
entities are the subject matter of the
companies listed on recognized stock
Companies Act. The National Company exchanges in India. It is the obligation of
Law Tribunal approves amalgamations, the acquirer to make an open offer under
mergers, and de-mergers for listed and the Takeover Code in case the acquisition
unlisted companies. The provisions of exceeds the thresholds specified under
the Companies Act and the Foreign the Takeover Code, and the obligation of
Exchange Management (Cross Border the promoters and shareholders to make
Merger) Regulations, 2018, permit cross- disclosures related to the shareholding
border mergers in India. Thus mergers, beyond certain thresholds.
amalgamations of foreign companies with
Indian companies and Indian companies 17. Is there a requirement to disclose
a deal, for instance to regulatory
with foreign companies are permissible.
authorities? Is it possible to keep a
Prior RBI approval is required when a
deal confidential?
foreign company wishes to merge with an
Indian company. The initial negotiation can be kept

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confidential, however, as the deal is also provides for the execution of certain
concluded, companies are required to agreements, settlement and fulfilling
fulfil certain obligations of regulatory of obligations etc. in relation to the
filings and corporate compliances. The transaction.
filings under the FEMA, SEBI rules and
In India, material adverse clauses are
Competition Act and intimation to the
generally made a part of the acquisition
Registrar of Companies and shareholders
documents where there is a time gap
under the Companies Act make it difficult
between signing and closing of the deal.
to keep a deal confidential. Interestingly, in
This contractual mechanism averts the risks
case of an open offer, the acquirer itself is
for the parties. Material adverse clauses
required to make the public announcement
give the buyer the right to walk away from
and disclose all vital information in the
the acquisition before closing if intervening
newspaper advertisement.
events have a material adverse effect on the
18. Can sellers be restricted from target.
shopping around during a
20. What are the typical warranties
negotiation process? Is it possible
and limitations in acquisition
to include break fee or other
documents? Is it common to obtain
penalty clauses in acquisition
warranty insurance?
documents to procure deal
exclusivity? Traditionally, the warranties in the
acquisition documents cover title, capacity
Indian laws do not restrict the inclusion of
and authority, absence of conflicts and
contractual clauses prohibiting the sellers
other similar matters. In addition to
from accepting higher bids from third
these, there are business warranties as
parties during the diligence or negotiation
well including those relating to assets,
process. Usually, the purchasers prefer to
indebtedness, tax related liabilities,
add no-shop clause in the term sheet/ letter
litigation etc. In order to safeguard their
of intent and break fee clause in the share
interests, sellers usually negotiate a cap
purchase/ subscription agreements. On
on their liabilities through a limitation of
the other hand, the seller may negotiate
liability clause in the acquisition documents
hard to bring the monetary value down
through de minimis provisions, thresholds
under the break fee clause or add a reduced
limit etc. Recently, warranty insurance has
timeframe proviso in a no-shop clause
gained significance in share transactions as
while exploring for a better value of its
it offers comfort to the parties involved in
stocks.
the transaction.
19. What are the conditions precedent
21. Is there a requirement to set a
in a typical acquisition document?
minimum pricing for shares of a
Is it common to have conditions to
target company in an acquisition?
closing such as no material adverse
change? The RBI prescribes the pricing guidelines
for subscription and sale of shares to non-
To offer comfort to the parties in a
residents:
transaction, a conditions precedent clause
is inserted in the transactional documents. (a) Listed entity: the price of shares must
Generally, it details all the authorizations, not be less than the price at which a
permissions, novation and permits which preferential allotment can be made. The
are necessary before closing the deal. It price per share must be certified by a

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SEBI registered merchant banker or a are held in physical form, the executed
chartered banker. share transfer deed (duly stamped), is
required to be delivered to the company
(b) Non listed entity: the price of a share
whose shares are being transferred along
must be at the fair value of the shares
with the share certificates. Subsequently,
as determined by a merchant banker
the company approves the transfer of
or a chartered accountant by following shares and records the transfer in its
the internationally accepted pricing registers. It endorses the transferee details
methodology. on the share certificate and returns it to
(c) Rights issue allotment: for listed shares, the transferee. Where shares are held
the shares price must be determined in dematerialized form, the delivery
as per the SEBI regulations; and instruction slips relating to shares,
for unlisted shares, the share price signed by the transferor, is required to be
must not be less than the price at deposited with the depository participant
which shares are issued to resident where the transferee is maintaining his/
shareholders. her demat account. Thereafter, shares will
be credited in the demat account of the
22. What types of acquisition financing transferee.
are available for potential buyers in
24. Are there any incentives (such
your jurisdiction? Can a company
as tax exemptions) available for
provide financial assistance to a
acquisitions in your jurisdiction?
potential buyer of shares in the
target company? The Indian jurisdiction offers a favourable
business environment to conduct business,
A company is not authorised to provide
there are a lot of incentive schemes for
financial assistance to a potential buyer
promoting business, however there is no
of shares in the target company as the
tax incentive or exemption available in
Companies Act prohibits a company from
India for acquisitions.
giving any financial assistance, whether
directly or indirectly and whether by means F. Enforceability
of a loan, guarantee or provision of security 25. Can acquisition documents be
or otherwise, to any person to purchase or executed in a foreign language?
subscribe for any shares in such company
or its holding company. It is preferred to execute an agreement in a
language which offers comfort to all parties
23. What are the formalities and involved as some of the key principles of
procedures for share transfers and Indian contract regime are:
how is a share transfer perfected?
(a) consensus ad idem i.e., meeting of
In a share purchase transaction, the seller minds. It means that two or more
and purchaser are required to agree to persons agree on the same thing in the
the terms of such transfer, inter-alia, the same sense; and
share purchase consideration, the title of
(b) free will and consent, without
shares, conditions precedent to transfer,
any undue influence, coercion,
conditions after transfer, relevant support
misrepresentation etc.
and assurances, and adequate protection
mechanism through representations, Thus, for a contract to be enforceable in
warranties and indemnities. In case shares India, there should be meeting of minds

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and the consensus among the parties must clause from the entire contract. It allows
be a result of free will. In line with these the parties to elect the substantive law
principles, it is clear that parties executing governing the dispute to be different
acquisition documents in a foreign from the law governing the arbitration
language need to understand the terms agreement. For convenience, the law also
and sign/execute the same so as to not allows parties to choose a different venue
affect its validity. for the arbitration as compared to the
judicial seat.
26. Can acquisition documents be
governed by a foreign law? The Arbitration Act makes it mandatory
for pleadings to be completed within a
When a foreign company enters in a
period of 6 (six) months and the award to
contract with an Indian company, it often
be passed within 12 (twelve) months from
prefers that the agreement is governed by
the completion of pleadings, which may
a foreign law, and enforceable in a foreign
be extended for a further period of 6 (six)
court. As such, there is no established
months. An arbitral award is amenable to
practice for international contracts since
challenge before courts in India, however,
it is subject to negotiations among the
the court’s powers to interfere with arbitral
contracting parties. The parties are free to
awards are very limited.
choose the law governing their contract.
However, insertion of this clause does not Enforcement of a foreign award made
bar the Indian courts to investigate and by countries to which the New York
identify the stated/unstated objective for Convention or the Geneva Convention
inserting a foreign jurisdiction clause. The applies and has a reciprocal arrangement
Indian courts may not enforce a choice of with India is enforceable in India. Such
law clause and strike down the same if: enforceability is subject to compliance with
certain conditions prescribed under Part II
• it is not aligned to Indian public policy;
of the Arbitration Act.
• it is intended to evade the
28. Are there any specific formalities
indispensable Indian legal provisions.
for the execution of acquisition
27. Are arbitration clauses legally documents? Is it possible to sign
permissible or generally included in documents remotely/digitally?
acquisition documents?
To make any agreement enforceable, it
The Arbitration and Conciliation Act, 1996 is required to be stamped adequately
(“Arbitration Act”) was introduced to along with attestation by at least 2 (two)
offer a quick and cost-effective resolution witnesses for each signing party. Further,
of domestic and transnational business if a foreign company is authorising a third
and commercial disputes. The arbitration party to execute documents on its behalf in
clause forms an intrinsic part of commercial India, it will have to pass a board resolution
contracts as the Alternative Dispute approving the same.
Resolution mechanism has become a
The primary law governing e-signatures
sought-after option among parties to
and their validity in India is the Information
resolve disputes. Commercial entities often
Technology Act, 2000 (“IT Act”). The IT
prefer institutional arbitration in contracts.
Act eliminated the need for signatures
The arbitration clause offers comfort to necessarily be made by hand to be
to foreign parties as Indian law also considered credible thereby ushering
recognises the severability of an arbitration more technologically-advanced era of

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e-signatures. It drew its inspiration from doing business in India by reducing several
the Model Law on Electronic Commerce compliances. Indian startups also offer the
adopted by the United Nations Commission promising scenario for the foreign investors.
on International Trade Law (“UNCITRAL”).
Certain sectors such as energy, healthcare,
Subsequently, UNCITRAL also adopted
the Model Law on Electronic Signatures infrastructure, defence information
to enable and facilitate the use of technology continue to catch the eyeballs
e-signatures. The IT Act was amended to of the institutional investors. As per some
substitute the word ‘digital signature’ with reports, in India, M&A activity fell reported
the word ‘electronic signature’ in several at USD 83.8 billion in 2023, down 50.6 per
places thereby recognising digital signature cent from a year ago. In 2022, the total M&A
as a part of the wider scope of electronic activity stood at USD169.70 billion and
signatures. Pursuant to amending the USD123.14 billion in 2021. The slump in
IT Act, amendments were made to the M&A activities is due to global geopolitical
Indian Evidence Act, 1972 in view of the issues.
evidentiary value of electronic records,
30. Are any significant developments
e-signatures and e-contracts. By these
or changes expected in the near
amendments, digitally signing a document
future in relation to M&A in your
is recognised as a legally-compliant manner
jurisdiction?
of signing a document. However, there
are certain documents which specifically Post pandemic, the Indian market has
require a notarial process with a physical performed well. GDP during 2023-24 is
signature and are required to be registered estimated at 7.3 % as compared to 7.2 % in
in order to be legally enforceable. And 2022-23. Certain policy measures such as
hence, a digital signature will not be valid production link schemes, green hydrogen
on such agreements. regulations, infrastructure push may boost
G. Trends and Projections the drone, healthcare, pharma, automobile,
green-energy, electronic, semiconductor
29. What are the main current trends in sectors in India. Indian industries have also
M&A in your jurisdiction? taken precautionary steps anticipating
In 2023, due to the global uncertainties, the slowdown in the global economy,
there has been a subdued momentum in though India, for the time being, seems
M&A activities in India. Companies are now to be resilient to this. Considering several
shifting towards smaller, more strategic factors, including the forthcoming
deals. However, sectors like aviation, elections, global investors are wary of deals.
banking, FinTech, and healthcare are However, certain sectors, as discussed
showing promising signs. The recent steps above, continue to garner interest, and look
by the Government of India have eased promising in the near future.

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ITALY
STUDIO LEGALE PADOVAN

Marco Padovan Jose A. Alvarez de Edoardo Poletti Alessandro Carofiglio

Managing Partner Cienfuegos Senior Associate Associate
mpadovan@ Senior Associate epoletti@ acarofiglio@
studiopadovan.com Jacienfuegos@ studiopadovan.com studiopadovan.com
studiopadovan.com

A. General is typical in small and medium-sized

enterprises and allows significant flexibility
1. What is the main legal framework as to governance rules to be established in
applicable to companies in your the by-laws.
jurisdiction?
The minimum corporate capital of a Società
The companies in Italy are governed by per azioni (“SpA”), which is a joint stock
Articles 2247 to 2620 of the Italian Civil company, is €50,000. Generally speaking,
Code. this is the form of company chosen by
larger enterprises. It entails stricter and
2. What are the most common types
more comprehensive governance and
of corporate entities (e.g., joint
control rules. Further differences between
stock companies, limited liability
SpAs and SRLs shall be discussed below.
companies, etc.) used in your
jurisdiction? What are the main A variety of partnerships (Società di persone)
differences between them (including are also available but they are not often
but not limited to with regard to the used by international investors. Such
shareholders’ liability)? entities do not provide any limitation to the
members’ liability for the partnership’s debt.
The minimum corporate capital for a
Società a responsabilità limitata (“SRL”) B. Foreign Investment
which is a limited liability company, is 3. Are there any restrictions on foreign
€10,000. A simplified limited liability investors incorporating or acquiring
company is available for a share capital the shares of a company in your
lower than €9,900 This kind of structure jurisdiction?

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No general restrictions on foreign C. Corporate Governance

investment or ownership in Italian
6. What are the standard management
companies, and foreign investors can
structures (e.g., general assembly,
acquire a business and purchase interests
board of directors, etc.) in a corporate
under the same conditions applicable to
entity governed in your jurisdiction
national investors, subject to the conditions and the key liability issues relating
of reciprocity. Transactions concerning to these (e.g., liability of the board
certain strategic industrial sectors related members and managers)?
to Defense and National Security (including
5G technology and cloud services), as The shareholders’ meeting is the body
in charge for approval of accounts and
well as other strategic sectors (including
appointment of directors both for SpA and
communications, energy, transport, health,
SRL. In an SRL, specific authorizations for
food, and finance), must be notified to the
decisions by the shareholders’ meeting or
Italian Government under the so-called specific shareholders may be required if
Golden Power regime. The notification specifically provided in the by-laws.
obligation covers not only the acquisition
of control but also, under certain As to the management of the company:
conditions, transactions over minority SpA: Three distinct models of management
shareholdings. Failure to notify a relevant are available:
transaction under the Golden Power regime
− Traditional model: Management is by
may result in fines up to twice the value
either a board of directors, or by a sole
of the transaction and, in any event, at director. Traditional model is the more
least 1% of the cumulative turnover of the widespread model.
parties.
− Monistic model (sistema monistico):
4. Are there any foreign exchange Management and control are carried
restrictions or conditions applicable out by a board of directors and a
to companies such as restrictions to committee set up within it.
foreign currency shareholder loans?
− Dualistic model (sistema dualistico):
No foreign exchange limitations. The ability Management is entrusted to a
of any foreigners to become shareholders management board (consiglio di
or directors is subject to reciprocity rules gestione), elected by the supervisory
unless a treaty has been established board (consiglio di sorveglianza), which
with the relevant jurisdiction providing in turn is elected by the shareholders’
meeting.
otherwise.
SRL: Management is carried out by a sole
5. Are there any specific considerations
director or a board of directors. Directors
for employment of foreign
can also act jointly or severally.
employees in companies
incorporated in your jurisdiction? 7. What are the audit requirements in
corporate entities?
In principle, foreign employees need to
obtain a work permit to work in Italy, with SpA:
certain exceptions. The global number of − In the traditional governance system,
permits available is fixed each year by the the Board of Statutory Auditors shall
government. control the company’s compliance with

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the law and the by-laws, the respect Furthermore, the appointment of a
of the good managing practices and Supervisory Body or Auditor is in any
the adequacy of the organizational, case compulsory when a limited liability
administrative and accounting systems. company: (a) is obliged to the drafting of
The statutory accounting control the consolidated financial statements; (b)
is entrusted to a registered auditor controls a company whose accounts are
(revisore contabile) or to an auditing firm subject to compulsory audit.
(società di revisione), registered in the
D. Shareholder Rights
official auditors’ register. The by-laws
of SpAs which are not subject to the 8. What are the privileges that can
obligation of drafting consolidated be granted to shareholders? In
financial statements may provide that particular, is it possible to grant
the Board of Statutory Auditors be also voting privileges to shareholders for
entrusted with the accounting control appointment of board members?
activities. In such case, all members SPA. By-laws may provide for special
of Board of Statutory Auditors are to categories of shares such as: (i) shares
be registered in the official auditors’ assigned not in proportion with the
register. In the Dualistic and Monistic subscribed corporate capital; (ii) shares
governance systems, the accounting which may discipline the holders’
control is entrusted to a registered participation to losses or profits differently,
auditor or to an auditing firm. save for the prohibition to wholly exclude
SRL: the participation to losses or profits; (iii)
the extraordinary shareholders’ meeting
The By-Laws may provide for the may also resolve on the assignment of the
appointment of either a Supervisory Body profits to employees, by issuing special
or an Auditor, determining the relevant categories of shares; other similar financing
powers and competences (including the instruments (different from the shares)
accounting control). Should no provision may be resolved upon by the shareholders’
be stated in the deed of incorporation, meeting, although the holders are not
the Supervisory Body is formed by a sole granted any voting rights; (iv) shares
individual. conferring rights of vote limited to a
certain business and/or a specific matter,
Notwithstanding this, the appointment or excluding the right of vote. Not listed
of the Supervisory Body/Auditor is companies may issue shares with plural
compulsory, when the company has voting rights, up to a maximum of three
exceeded at least two of the following votes, limited to specific subjects or to the
thresholds, for two subsequent accounting occurrence of specific conditions.
years:
SRL:
− total value of the assets: € 4,000,000;
By-laws may provide for quotas with a
− profits: € 4,000,000; value not proportional with conferred
− average number of employees: 20. contributions; therefore, quotas may entitle
different corporate rights. They may also
In such a case, the principles governing provide that quota holder be entitled to
SpAs apply; if the By-Laws do not provide specific corporate rights concerning the
otherwise, accounting control shall be management of the company, as well as the
accomplished by the Supervisory Body or distribution of the profits, or the provision
Auditor, as the case may be. of accessory services.

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9. Are there any specific statutory rights − challenge shareholders’ meeting

available to minority shareholders resolutions;
available in your jurisdiction?
− initiate any legal actions for liability of
SpA: directors.
Ownership of at least 5% of the share Quota holders holding at least 2/3 of the
capital allows a minority shareholder to: share capital may decide on the waiver or
− challenge a resolution that does not settlement in respect of an action claiming
comply with the law or the articles of liability of directors, provided that no quota
association; holders representing at least 10% of the
share capital oppose such decision.
− report facts deemed to the auditing
body, requesting it to investigate and Quota holders representing 33% of the
report and formulate any proposals to capital may request that a quota holders‘
the shareholders’ meeting. meeting be convened to resolve certain
matters.
A shareholding of at least 10% of the share
capital allows the minority shareholder to; Both SpAs and SRLs:
− request the directors to convene the Each shareholder/quota holder has the
shareholders’ meeting; right to withdraw all or a part of their
− denounce to the tribunal any facts shares/quotas, if he has not voted in favor
on the grounds of a well-founded of any resolutions as a consequence of
suspicion of serious irregularities in which the shareholders/quota holders have
management that may cause damage approved certain changes in the by-laws
to the company. including the modification of the corporate
purpose, the company’s transformation into
A shareholding of at least 20% of the share another form of company, the transfer of
capital allows the minority shareholder to: the registered office abroad or revocation
− initiate any legal actions for liability of of the liquidation (other specific grounds
directors and/or auditors. for withdrawal may differ in SpAs and SRL).
A shareholding of at least 33% of the share All shareholders hold certain information
capital allows the minority shareholder to: rights. They are entitled to inspect the
Shareholders’ (or quota holders’) book
− request the adjournment of the
shareholders’ meeting on the grounds and the Shareholders’ (or quota holders’)
that no sufficient information has been Meeting minute book and to obtain copies.
provided to pass resolutions on the The shareholders/quota holders may
matters on the agenda; examine the copy of the yearly financial
statements of the company together
− veto the extraordinary shareholders’ with full copies of the yearly financial
meeting on the second call. statements of the controlled companies
SRL: and a summary of the essential data of
the last yearly financial statements of
All quota holders, irrespective of their affiliated companies. These documents
shareholding in the company, may:
are to be available at the registered office
− exercise their rights to information of the company, along with the reports by
on the company’s performance and the Directors, the Statutory Auditors and
consultation of corporate documents; the entity entrusted with the accounting

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control, during the 15 days before the the term from which any maximum
meeting to discuss the yearly financial period for a claw back action aimed at its
statements and until its approval. annulment is to be determined.
10. Is it possible to impose restrictions E. Acquisition
on share transfers under the
12. Which methods are commonly used
corporate documents (e.g., articles
to acquire a company, e.g., share
of association or its equivalent in
transfer, asset transfer, etc.?
your jurisdiction) of a company
incorporated in your jurisdiction? Both asset and share deals are often
used. A specific feature of the Italian
It is possible to introduce limitations such legal system are the rules governing the
as the right of first refusal or consent by the transfer of “azienda” or “ramo di azienda”
other shareholders (or the quota holders). (going concern) by means of a particular
If the limitation is based upon mere consent succession in title which contain a
(that is without providing a criterium as to comprehensive regulation of the rights of
the suitability of the new shareholder or the purchaser and the seller.
quota holder) the clause must provide: 13. What are the advantages and
disadvantages of a share purchase
− for SpAs only, the obligation by the
as opposed to other methods?
company to purchase the shares of
the shareholder who intends to sell its The aforesaid method (purchase of going
stake at the company’s expense (within concern “ramo di azienda”) allows purchaser
the limits provided for the purchase of and seller to conventionally define the
treasury shares); scope of the targeted assets. Still, legal
provisions provide specific liabilities of the
− the obligation to purchase by the other purchaser in a context where the purchaser
shareholders/quota holders or third is automatically takes over the contracts
parties; which are not of a strictly personal nature.
− a right of withdrawal in favor of the In this context, the purchaser is jointly and
shareholder/quota holder who intends severally liable with the seller for the debts
to sell. of the going concern transferred that arose
prior to the transfer provided they are
11. Are there any specific concerns or recorded in the accounts.
other considerations regarding the All employment contracts are automatically
composition, technical bankruptcy taken over after the assignment and the
and other insolvency cases in your parties are jointly and severally liable for
jurisdiction? debts to employees not yet paid. This kind
Insolvency law has been recently modified of transaction may also be structured as a
thoroughly. contribution to an existing or new company
(“conferimento di ramo di azienda”). Tax
Acquisitions in the framework of insolvency and legal implications are to be examined
proceedings are to take place with the carefully on a case-by-case basis.
agreement of the relevant organs of the
14. What are the approvals and
insolvency proceedings.
consents typically required (e.g.,
An additional concern typical to all kind corporate, regulatory, sector
of transactions under Italian law is that of based and third-party approvals)
the need for an “ascertainable date” of the for private acquisitions in your
transaction document in order to establish jurisdiction?

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Corporate: Authorities concerning the As a general rule, negotiations must

approval of the relevant transaction by the proceed in good faith and a party arbitrarily
legal entities involved such as resolutions, interrupting negotiations may face some
PoA, etc. liabilities. Furthermore, a letter of interest is
Regulatory: It largely depends on the usually signed by the prospective purchaser
relevant sector. Authorization is typically at the beginning of the negotiations
needed in the banking sector to the extent guaranteeing, to a certain point, that an
that the each shareholder of a bank or a arbitrary abandonment of the negotiations
financial institution need to meet certain does not take place. The response to the
requirements. (See question 3 above for question is largely in the hands of the
Golden Power). parties and depends on the documents
agreed at the outset of their negotiations.
15. What are the regulatory
competition law requirements 19. What are the conditions precedent
applicable to private acquisitions in in a typical acquisition document?
your jurisdiction? Is it common to have conditions to
In general, mergers and acquisitions are closing such as no material adverse
to be authorized as long as the relevant change?
national or European threshold is reached. There are no particular restrictions as to the
As to the Italian jurisdiction, a clearance is conditions precedent.
needed if the aggregate total turnover in 20. What are the typical warranties
Italy of all the companies involved exceeds and limitations in acquisition
€ 582million (threshold updated as of 24 documents? Is it common to obtain
March 2025) and the domestic turnover warranty insurance?
of two of the target companies, branch or
merged companies exceed, individually Warranties usually include title and value of
for each company, €35 million (threshold certain assets.
updated as of 24 March 2025). Warranty insurance is not a common
16. Are there any specific rules procedure under Italian acquisition
applicable for acquisition of public practice. Usually, banks demand guarantees
companies in your jurisdiction? or escrow agreements combined with a
price review formula are the usual scheme
There are no specific rules.
to mitigate risks by the purchasers.
17. Is there a requirement to disclose
a deal, for instance to regulatory 21. Is there a requirement to set a
authorities? Is it possible to keep a minimum pricing for shares of a
deal confidential? target company in an acquisition?

Disclosure of prospective acquisitions Not as such, but an unjustifiable law price

to competition authorities (or to other could increment the risk of any claw back
authorities as the case may be) are covered actions in case of insolvency of the seller or
by confidentiality. fraud to the seller’s creditors and could give
rise to tax concerns.
18. Can sellers be restricted from
shopping around during a 22. What types of acquisition financing
negotiation process? Is it possible are available for potential buyers in
to include break fee or other your jurisdiction? Can a company
penalty clauses in acquisition provide financial assistance to a
documents to procure deal potential buyer of shares in the
exclusivity? target company?

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In general, an acquisition may be financed − incentives to support companies

either with equity or debt. investing in training and development
of managerial skills;
Prohibition of financial assistance has been
seen in the past as an obstacle to leveraged − incentives to strengthen the capital
buy-outs. Following the reform of corporate structure of companies;
law in 2003, such transactions are now − deductions for construction
admissible under certain conditions. investments in business premises;
Usually, the acquisition of the shares of the
‘target’ company is followed by the merger − tax incentives for investments in start-
between the acquiring company and the ups and innovative SMEs.
target. Otherwise, the acquisition of only From the standpoint of the seller, it is worth
certain assets is targeted. In any case a new mentioning a regime of participation
‘vehicle’ company shall be established, for exemption is provided for capital gains
the purposes of providing the financing (difference between sale price and tax
necessary for the acquisition. Once the value of the shares) on sales of shares (95%
buy-out is completed, the vehicle will be exempt), subject to certain conditions.
integrated with the acquired company by
means of a merger. As long as an equity investment is in place,
a tax deduction is provided amounting to
23. What are the formalities and the net increase in the equity employed
procedures for share transfers and in the entity, multiplied by a rate yearly
how is a share transfer perfected? determined by the Italian Ministry of
Finance.
The deed of transfer (in case of a SRL) or
the certification of the transfer of shares F. Enforceability
(girata, in case of SPA) are documents to
25. Can acquisition documents be
be formalized before a Notary Public and
executed in a foreign language?
therefore will be drafted in Italian (or at
least translated into Italian if the form of the A share purchase agreement may well be
document is a scrittura private autenticata – executed in a foreign language, although it
private deed certified by the Notary Public). is recommendable that any documents to
be potentially submitted to Italian courts
24. Are there any incentives (such
are drafted in Italian. See also question 28
as tax exemptions) available for
below for more details.
acquisitions in your jurisdiction?
26. Can acquisition documents be
Not linked to acquisitions, tax incentives
governed by a foreign law?
are provided for start-up companies, and
specific programmes including: Yes as to the acquisition documents, such
as the share purchase agreement. Certain
− tax credit for investments in capital
aspects inherent to the relevant target
goods: the incentive that supports
company such as the registration of the
companies investing in new, tangible
shares (in case of SRL) will be in any case
or intangible assets relating to
submitted to the exclusive jurisdiction of
technological or digital improvement of
the Italian Courts and shall be governed by
production processes;
Italian law. For these reasons it is not usual
− measures to stimulate investment to insert foreign law or foreign jurisdiction
in research and development, in SPAs regarding acquisition of Italian
technological innovation; companies.

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27. Are arbitration clauses legally G. Trends and Projections

permissible or generally included in
29. What are the main current trends in
acquisition documents?
M&A in your jurisdiction?
Yes, arbitration clauses are legally
From a business perspective, contrary to
permissible and are generally included in
the general picture, M&A deals in Italy
acquisition documents. increased both in volume and value
28. Are there any specific formalities according to observers. Due diligence
for the execution of acquisition activities tend to become more financially
documents? Is it possible to focused and tend to include various
scenarios of inflation, growth or even
remotely/digitally sign documents?
recession and foreign exchange trends with
See also question 23 above for more increasing attention to HR policies. These
details. trends may not necessarily reflect in new
contractual techniques.
Private documents are usually signed
remotely. Documents to be formalized 30. Are any significant development
before a Notary Public are usually signed in or change expected in the near
person or by means of a proxy. future in relation to M&A in your
jurisdiction?
No significant developments are expected
in the near future.

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IVORY COAST
GENI & KEBE

Dr. Francky Lukanda Brigitte Otele Marlène Dassourou

Senior Associate Senior Associate Associate
[email protected] [email protected] [email protected]

A. General • 2018 Ordinance on the Investment

Code;
1. What is the main legal framework
• 2019 Ordinance Amending the 2018
applicable to companies in your
Ordinance on the Investment Code;
jurisdiction?
• 2013 Ordinance on Competition;
The main legal framework applicable to
• 2017 Law on the Repression of Offences
companies in Côte d’Ivoire as far as M&A
are concerned includes: by OHADA Uniform Acts; and
• 2016 Law on Setting up, Organization
• 2002 WAEMU Regulation on Antitrust and Functioning of Commercial Courts;
Procedures;
• 2024 Law Creating a Register of
• 2014 OHADA Uniform Act on Beneficial Owners of Legal Persons and
Commercial Companies and the Legal Arrangements
Economic Interest Group;
• 2024 OHADA Uniform Act on
• 2010 OHADA Uniform Act on General Organizing Simplified Recovery
Commercial Law; Procedures and Measures of Execution”
• 2017 OHADA Uniform Act on
Accounting Law and Financial 2. What are the most common types
Reporting; of corporate entities (e.g., joint
stock companies, limited liability
• 2010 OHADA Uniform Act on Securities;
companies, etc.) used in your
• 2015 OHADA Uniform Act Organizing jurisdiction? What are the main
Collective Proceedings for Clearing of differences between them (including
Debts; but not limited to with regard to the
• 2024 Cote d’Ivoire General Tax Code; shareholders’ liability)?

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Côte d’Ivoire/Ivory Coast is part of Société Anonyme (“SA”)

a regional organisation that aims at
A SA company, also referred to as a
harmonizing business law across 17 African public limited company, is a company
jurisdictions namely, the Organization for in which shareholders are only liable for
Harmonization of Business Law in Africa the company debts to the extent of their
(“OHADA”). As a result, OHADA company contributions and in which the rights
law (“OHADA Company Law”) applies to of the shareholders are represented by
Côte d’Ivoire. shares. The SA company may have only one
shareholder.
In the OHADA region, the most common
type of company used in group structures Under the OHADA Company Law, a SA must
is the private limited company also known have a minimum stated capital of XOF10
by its acronym SARL (société à responsabilié million divided into shares with a minimum
par value of XOF10,000 each.
limitée) and the public limited company
also known by its acronym SA (société One of the features that may be decisive
anonyme). when considering the SA corporate
structure as opposed to the SARL
The main differences between the most structure is that a SA company is eligible
common types of corporate entities are for registration at the stock exchange,
as follows: subject to the requirements of the Financial
Markets Authority.
Société A Responsabilité Limitée (“SARL”)
The management structure of a SA
A SARL company is a company in which company is determined by the articles
members are liable for the company debts of association and consists of one of the
only proportionally to their contributions following structures:
and whose rights are represented by equity
• SA company with board of directors, or
interests. A SARL company is formed by a
natural person or legal entity, or by two or • SA company with a general director.
more natural persons or legal entities.
Appointment of Directors
Under the OHADA Company Law, unless In both SARL and SA companies, the
otherwise provided for by national directors are appointed by the shareholders
legislation, the amount of stated capital in accordance with the rules set out in the
shall be at least XOF1,000,000 divided into articles of association, or in a subsequent
equal equity interests whose nominal value instrument, subject to the limitations
is not less than XOF5,000. In Côte d’Ivoire, set out in OHADA Company Law. The
national law removes these minimum proposed directors must consent to their
capital requirements altogether. appointment and certify that they are not
subject to any incumbency preventing
Unlike the SA structure, a SARL company them from exercising their proposed
is not eligible for registration at the stock functions.
exchange. A SARL company is managed
In a SARL company, when the appointment
by one or more natural persons called is made in a subsequent instrument to
gérant(s) appointed in the articles of the articles of association, the decision
association or in a subsequent instrument shall be taken by a majority of members
of the company. A SARL company is more holding more than half of the capital,
suitable for small-size businesses. unless otherwise provided in the articles of

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association. However, in a SA company, the On the other hand, the procedure for the
first directors are appointed by the articles removal of a director in a SA company
of association or, where appropriate, by the will differ depending on whether the
general assembly meeting. management of the company involves a
board of directors or a general director.
During the life of a SARL or SA company,
If the management structure of a SA
directors are appointed by the general
assembly meeting. The appointment company involves a board of directors,
document indicates the duration of the the latter may remove its chairperson at
director’s mandate and their remuneration. any time without the need to establish a
A director’s mandate can be renewed just cause. Under the same management
unless otherwise provided for by the structure, in the event of a temporary
articles of association. or permanent absence of the general
manager, the board of directors must
In both SARL and SA companies, any immediately designate a replacement
directors’ appointment shall be subject until appointing a new general manager.
to the formality of registration with Similarly, the general manager and the
the competent Trade Registry and tax deputy general manager may be removed
administration, together with publication in by the board of directors for just cause.
the relevant gazette.
By contrast, where the management
Removal of Directors structure of a SA company involves a
Absent any provisions of the articles director general, the general assembly
of association of a SARL company, the of shareholders can remove the general
director(s) are appointed for a period of manager or the deputy general manager
four years. for just cause at any time.

By contrast, the directors’ term of office Any decision to remove a director of a

in a SA company may be freely specified SARL or SA company must be filed with
in the articles of association, provided the competent Trade Registry within one
that if the appointment is made after the month of the relevant decision.
incorporation of the company then the Liabilities of shareholders
term of office cannot exceed six years and
if the appointment is made through the The liability of any shareholder cannot
articles of association or with a general exceed their respective contribution to the
assembly meeting then the term of office share capital.
cannot exceed two years. Sometimes courts extend to shareholders
Aside from the lapse of their mandate, the collective proceedings opened against
any directors in a SARL company may the subsidiary where they consider that
be removed for just cause by a decision there has been a confusion of assets or
of either the shareholders holding more activities between the two assets and that
than half of the equity interests of the the subsidiary is a fictitious company. This
company, or the competent court in whose situation occurs when there is evidence
jurisdiction the company is headquartered. of transfers of assets between the two
Failure by SARL company to provide just corporations without consideration.
grounds for its decision to remove any Therefore, care must be taken to ensure the
directors will give rise to the payment of economic and legal independence of the
damages to the concerned directors. subsidiary.

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The liability of shareholders can also apply are expected, in all sectors of the value
in the framework of Director/Manager chain, from exploration to exploitation,
liability. Depending on the form of the to give preference to Ivorian companies
company, shareholders can act as the for subcontracting activities, provision of
manager of a subsidiary. In that capacity, services and supply of goods, and enjoins
the shareholders can be jointly and them to exploit the financial and insurance
severally liable, as the case may be, to the services available in Côte d’Ivoire.
company or third parties for violations of
4. Are there any foreign exchange
legal or statutory provisions applicable to
restrictions or conditions applicable
the company, or for violations of the articles
to companies such as restrictions to
of association, or for mistakes made during foreign currency shareholder loans?
their management.
Pursuant to the Article 2 of the 2010
Besides these two instances, there is WAEMU Regulation N°09 relating to the
no other case where the liability of a external financial relations of the Member
shareholder is contemplated under Côte States of the West African Economic and
d’Ivoire laws. Monetary Union (“WAEMU”), the foreign
The issue of liabilities of directors will be exchange transactions, capital flows
further discussed in Section C (6) below. and settlements of any kind between a
WAEMU Member State and a foreigner
B. Foreign Investment or within the WAEMU between a resident
3. Are there any restrictions on foreign and a non-resident may only be carried
investors incorporating or acquiring out through the Central Bank (“BCEAO”),
the shares of a company in your the Administration or the Post Office,
jurisdiction? an approved intermediary or a manual
exchange licensee.
There are no general restrictions on foreign
investors incorporating or acquiring the Current payments to foreign countries
shares of a local company. However, there can be executed by the intermediaries
are sector-specific market access limitations mentioned in Article 2 of the 2010 WAEMU
applicable to foreign investments in the Regulation N°09, under their responsibility,
ride-hailing services, land, and suppliers in based on the principle of freedom of
the oil and gas sectors. transfer.

In sector of the ride-hailing services, Ivorian In that regard, payments to foreign

law requires the operator to establish a countries relating to transactions
local entity with at least 25% share capital concerning, among other things, interest
held by Ivorian nationals (See Article 8 and dividends, are authorized on a general
of the 2021 Decree No. 2021-860 on the basis, subject to the presentation of
Regulation of Private Public Transport of supporting documents to the relevant
intermediary (Article 4 of the 2010 WAEMU
Persons).
Regulation N°9). Furthermore, the transfer
In the land sector, foreign nationals or of sums required for, among other things,
foreign entities are precluded from holding the contractual amortization of debts
any interest in rural land. (See Article 1 of can be freely executed by the approved
Law on Rural Land). intermediary subject to the presentation of
supporting documents.
In oil and gas sectors, holders of oil and
gas companies operating in Côte d’Ivoire Payments abroad for capital transactions,

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other than those provided for in the conducted in accordance with the Cote
previous paragraph, must be the subject d’Ivoire laws and regulations. The same
of an application for foreign exchange goes for any dispute arising from the
authorization, submitted to the Minister of contemplated employment contract. The
Finance. Each application for authorization fact that a foreign employee conducts
must be accompanied by supporting temporary missions outside their usual
documents attesting to the nature and employment jurisdiction has no bearing
reality of the operation (Article 7 of the on the governing law of their underlying
2010 WAEMU Regulation N°9). employment contact. Côte d’Ivoire laws
will still apply to such an employment
Any reimbursement of any foreign relationship. The employer is bound to
borrowing must be reported for statistical comply with all Côte d’Ivoire laws and
purposes to the Directorate of External regulations.
Finance (“FINEX”) and the BCEAO, with all
reimbursement activity carried out through In addition, any employment contract or
an authorized intermediary (Article 11 of letter of employment shall be written in
the 2010 WAEMU Regulation N°9). The French and signed by both the employer
term extensions and early repayments of and the worker (see Article 4 of the
loans must be notified to the authorized Decree No. 96-287 of 3 April 1996 on the
intermediaries by borrowers. Employment Contract).
With respect to investment operations, any Employment contracts involving foreign
investments in a WAEMU member state nationals must be registered with the
and the transfer of investments between relevant employment regulator (i.e., Agence
non-residents are reported for statistical Emploi Jeune).
purposes to the FINEX and to the BCEAO in
In addition, expatriates working in Côte
the case of direct investment.
d’Ivoire must hold a residence permit.
5. Are there any specific considerations Residence permits are valid for a period of 5
for employment of foreign years, renewable for the same period.
employees in companies
incorporated in your jurisdiction? C. Corporate Governance
In terms of Article 1 of the Cote d’Ivoire 6. What are the standard management
Labour Code, any contract of employment structures (e.g., general assembly,
concluded to be carried out in Cote board of directors, etc.) in a corporate
d’Ivoire is subjected to the provisions of entity governed in your jurisdiction
the said Code. In other words, whenever and the key liability issues relating
the principal place of employment is Côte to these (e.g., liability of the board
d’Ivoire, there is a legitimate expectation members and managers)?
and a legal requirement that the underlying
employment contract be governed by Côte Board / management structure
d’Ivoire law.
The management structure of a SA
In practice, all processes related to the company differs depending on whether the
contemplated employment contract such management structure involves a board of
as visa permits, employee’s registration directors or a director general.
with both the labour inspectorate and the
social security body, local tax filings and Where a SA company involves a board
payments with respect to the concerned of directors, the typical management
employment contract are expected to be structure includes:

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• a board of directors consisting of Subject to any contrary provision or specific

between three and 12 members and restriction in the articles of association,
headed by a chief executive officer legal representatives of a SARL or SA
chosen between the board members company may delegate certain powers
to any person through a delegation of
• a general manager, and if applicable
authority. Unless the delegation provides
• a deputy general manager. otherwise, the beneficiary may sub-
delegate some of the powers they have
Alternatively, a SA company with a board of
received under the delegation.
directors may be structured as follows:
The directors, members of the board and
• a board of directors consisting of
shareholders’ liability
between three and 12 members and
headed by a chairperson and general Breach of general duties
manager, and if applicable
Directors owe their duties to the company
• a deputy general manager. itself. Therefore, the company or the
Where a SA company involves a director partners can bring a claim for the directors’
general, the typical management structure damage. A director may incur civil and
includes: criminal liabilities for breach of duty.

• a director general, and if applicable Civil liability

• a deputy director general. Without prejudice to the company’s

potential liability, any manager shall be
By contrast, the typical management individually liable to third parties for
structure of a SARL company consists of misconduct in the performance of their
one manager who may be assisted by one duties.
or several co-manager(s).
One or several shareholders may file an
In both SARL and SA companies, the action in the interest of the company after
decisions are made within the limits set serving a formal notice to the competent
forth in the articles of association, subject bodies if such bodies fail to respond within
to any additional requirements under the a time limit of 30 days. The applicants have
law. the ability to sue for damages for injury
In both SARL and SA companies, unless suffered by the company. In the event of a
otherwise provided for in the articles of successful claim, damages shall be awarded
association, directors have full powers to to the company.
commit the company with respect to third Criminal liability
parties without having to show proof of a
special instrument granting such powers. SARL directors are liable, individually
or jointly, as the case may be, to the
The company is bound by acts of its company or to third parties, either for
management body, officers and board violations of legislative or regulatory
that are not within the company purpose,
provisions applicable to private limited
unless it can prove that the third party was
companies, or of provisions of the articles
aware that the act was unrelated to such
of association, or for faults committed in
purpose or could not ignore it given the
their management.
circumstances. The mere publication of
the articles of association is not enough to Aside from a suit for compensation for
prove this. damages sustained personally, members

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representing a quarter of the shareholders • Failed to keep accounts in accordance

and a quarter of the equity interests may, with legal regulations (including
either individually or collectively, initiate a manifestly incomplete accounts).
lawsuit against the manager. The plaintiffs
Other key risks
are entitled to seek compensation for the
entire damage suffered by the company, to Personal liability for directors may, in
which any damages are awarded. certain circumstances, arise under Côte
d’Ivoire legislation including that relating
SA directors shall be individually or jointly
to environmental and health and safety,
liable to the company or third parties,
either for violating the legislative or employment, consumer protection and
regulatory provisions applicable to public bribery/anti-corruption. In certain cases,
limited companies, or for violating the criminal liability may arise.
provisions of the articles of association, or A director may also be disqualified
for faults committed in their management. by the court from acting as a director
Liabilities on insolvency or from taking part in the promotion,
formation or management of a company.
Liability for the company’s debts (action A disqualification order can be made for
en comblement de passif): a variety of reasons (e.g., conviction for
The director of a company facing an asset criminal offences relating to the running of
deficiency (insuffisance d’actif), in the a company, persistent breaches of statutory
context of insolvency proceedings, may obligations such as filing documents
be held personally liable for the debts of with the companies register, being found
the company if their actions, in breach liable for fraudulent or wrongful trading
of the director’s powers, have led to the and generally for conduct which makes a
asset deficiency. The director may only be director unfit to manage a company).
held liable in such a context if they have
committed a management fault (faute de Failure to comply with company-related
Gestion) which led to the asset’s shortfall. In obligations, such as the preparation and
this case, there is no potential relief. filing of accounts, can also lead to fines for
individual directors
Deliberately causing the insolvency of a
company (banqueroute): 7. What are the audit requirements in
corporate entities?
A director may be held personally liable
where he/she has: The OHADA Uniform Act prescribes a
certain level of oversight and audit based
• Made purchases with a view of reselling on the classification of the company. Not
at a lower price, or used destructive all companies are required to have their
means in order to receive funds, with an financial statements audited. Also, not all
intention to avoid or delay the opening
companies are required to have an audit
of receivership of the company.
committee.
• Misappropriated or concealed all or
part of the assets of the company. In a SARL company, the appointment of
at least one auditor is required when the
• Fraudulently increased the liabilities of registered capital exceeds ten million
the company. XOF (10,000,000) or the concerned
• Falsified the accounts or removed company fulfils either of the following two
accounting documents of the company. conditions:

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• the annual turnover exceeds two at least one vote. This right grant voting
hundred and fifty million XOF privileges to shareholders for appointment
(250,000,000) or of board members.
• the permanent staff exceeds 50 people. In addition, in the case of an increase of
capital by the incorporation of reserves,
The appointment of an auditor is optional
in SARL companies which do not meet the profits or issue premiums, double voting
aforementioned criteria. However, one or rights may be granted to registered shares
more shareholder(s) controlling at least given free of charge as soon as they are
one-tenth (1/10) of the registered capital issued to a shareholder in proportion to the
may apply to the court for the appointment old shares for which he/she enjoyed such
of an auditor (see Article 376 of OHADA voting rights.
Company Law).
9. Are there any specific statutory rights
By contrast, the appointment of an auditor available to minority shareholders
is mandatory in SA companies. The latter available in your jurisdiction?
shall be audited by one or more auditors,
natural person(s) or juridical person(s) The law protects minority shareholders
incorporated under one of the forms from the abuse of the majority. By law,
provided for by the OHADA Company Law. there is abuse of majority shareholder
power where the majority shareholders
The provisions relating to the powers,
passed a decision for their own benefit,
duties, obligations, liability, dismissal and
contrary to the interests of the minority
remuneration of the auditor shall be spelt
out in a specific instrument governing the shareholders, and without such a decision
profession of auditor. being justified by the company’s interests.

D. Shareholder Rights Collective decisions resulting from an

undue use of the majority powers shall be
8. What are the privileges that can void.
be granted to shareholders? In
particular, is it possible to grant 10. Is it possible to impose restrictions
voting privileges to shareholders for on share transfers under the
appointment of board members? corporate documents (e.g., articles
Shareholders can exercise their rights of association or its equivalent in
at the general meeting of the company your jurisdiction) of a company
through their voting rights. The company incorporated in your jurisdiction?
shall make various documents (relating Share transfer restrictions are freely
to the shareholding and control structure determined by the articles of association.
and the identity of the major shareholders
This is very commonly used in practice,
and partners) available to shareholders and
especially in the context of joint ventures,
partners at least thirty (30) days before the
consortia, minority interests etc. whether
general meeting.
in the context of private deals or private
Shareholders are entitled to access to equity investments because it allows
the company’s financial and accounting to tailor the capital of the companies
information. closely to their investment and strategy. In
Each share shall have voting rights addition, shareholders’ exclusion clauses
proportional to the percentage of share (clauses d’exclusion) may be inserted in the
capital it represents and shall give right to articles of association, and may in particular

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be triggered in the case of breach of the • Shares purchase;

articles of association or a change of control • Merger / demerger;
of a shareholder. • Partial assets contribution;
11. Are there any specific concerns or • Enforcement of an instrument of
other considerations regarding the transfer/assignment of shares as
composition, technical bankruptcy transferee;
and other insolvency cases in your • Consenting to the transfer of shares
jurisdiction? bequeathed by a deceased shareholder;
SARL company shall also be dissolved when or
a court decision to liquidate property, • Acquiescence following a free allotment
declare bankruptcy, or forbid the exercise of shares.
of a commercial activity has been passed
However, the legal and tax framework
in respect of a shareholder unless the
may differ from one method to another
company’s articles of association provide
depending on the structure of the
for the continuation or other members
transaction or the underlying transfer /
unanimously decide in favor of the
assignment document.
continuation of the business.
13. What are the advantages and
Insolvency law is governed by the 2015 disadvantages of a share purchase
OHADA Uniform Act Organizing Collective as opposed to other methods?
Proceedings for Clearing of Debts. Pursuant
to the provisions of this law, there are The advantages
three formal insolvency procedures for Share purchases generally have the
a company, namely the precautionary following advantages for sellers or buyers in
regulation, the judicial redress and the comparison to asset purchases:
liquidation procedure. The precautionary
regulation is a pre-insolvency rescue • Structural simplicity and business
procedure designed to avoid the cessation continuity
of payments or the cessation of the • Clean break for the seller
activities of the company and allows • Direct receipt of sale proceeds by the
for the discharging of the debts of the shareholders
company by way of a preventive concordat,
whereas judicial redress aims to safeguard A key advantage of a share purchase for a
the company and discharge its debts by buyer and seller is its structural simplicity:
way of a concordat of redress. As for the • The only assets that need to be
liquidation procedure, its purpose is the transferred from the seller to the buyer
realization of the assets of the debtor to are the shares in the target company.
discharge its debts.
• Unless the parties agree otherwise
E. Acquisition (for example, the seller may assume
12. Which methods are commonly used responsibility for certain liabilities
through indemnity provisions or retain
to acquire a company, e.g., share
some assets), there is no change in the
transfer, asset transfer, etc.?
underlying ownership of the various
There are basically several methods assets and rights, or responsibility for
to acquire a company in Cote d’Ivoire: the liabilities, that collectively comprise
including the target business.

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This continuity regarding the target In case of private acquisition, the

business removes many of the transaction extraordinary general meeting of the
complexities that otherwise arise on an acquiring company shall rule on the
asset purchase, often with resulting savings approval of contributions in-kind. Where,
in the transaction timetable and costs. In from the time the draft merger instrument
particular, it is not necessary to identify is filed with the registry of commerce and
each asset, right, or liability of the target securities and until the completion of
business that is included in, or excluded the transaction, the acquiring company
from, the transaction. Consequently, there permanently holds the entire capital of the
is a much lower risk that the buyer may acquired company or companies, there
omit to acquire a key asset or right which is is no need for an approval of the merger
required to continue operating the target by the extraordinary general meeting of
business. the acquired companies, or preparation of
The disadvantages the reports referred to in articles 671 and
672 of the 2014 OHADA Uniform Act on
Share purchases generally have the Commercial Companies and the Economic
following disadvantages for sellers or Interest Group.
buyers in comparison to asset purchases:
In a company whose shares are not
• The buyer may acquire unwanted or admitted to trading on a stock exchange,
hidden liabilities; the articles of association may stipulate that
• The sale must gain shareholder shares transfer to a third-party outside the
approval; company, whether free of charge or against
payment, shall be subject to the approval
• Cote d’Ivoire securities transfer taxes
of the board of directors or the ordinary
may apply;
general meeting of shareholders.
• Hardly any no debt pushdown options
are available. In case of merger or demerger, preferred
shares may be exchanged for shares of
The principal legal and commercial companies benefiting from the assignment
drawback of an asset purchase is the of assets with equivalent special rights,
complexity involved in documenting or on the basis of a specific exchange
and implementing the transaction. At parity taking into account abandoned
the very least, the need to address the specific rights. In the absence of exchange
matters below is likely to add to the overall for shares conferring equivalent special
transaction costs and timetable. At worst, rights, the merger or the demerger shall be
it could make the acquisition structure submitted to the approval of the special
unviable in practice. This may be the case meeting referred to in article 555 of the
when the parties are unable to obtain a 2014 OHADA Uniform Act on Commercial
third-party consent to the novation of a Companies and the Economic Interest
key business contract or approval from an Group. Any decision taken in contravention
applicable regulator for the transfer or re- of the foregoing shall be void.
grant of an essential license or permit.
15. What are the regulatory
14. What are the approvals and
competition law requirements
consents typically required (e.g.,
applicable to private acquisitions in
corporate, regulatory, sector
your jurisdiction?
based and third-party approvals)
for private acquisitions in your At a national level, the Competition
jurisdiction? Ordinance (Ordinance No. 2013-662 of 20

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September 2013) regulates competition to 10% of the annual turnover of each of

law in Côte d’Ivoire. the parties).
Côte d’Ivoire is a member of WAEMU and is Côte d’Ivoire is also a member of two other
therefore subject to the competition rules regional competition bodies, ECOWAS
and regulations of WAEMU. and OHADA. OHADA does not yet have an
operational regulator, its merger control
WAEMU and the national competition regime is not yet functional. On the other
authorities are responsible for monitoring hand, the ECOWAS competition authority
different aspects of competition law in Côte (“ERCA”) has been established, however,
d’Ivoire. Merger in Côte d’Ivoire is dealt with there is uncertainty as to whether it has
at WAEMU regional level. become operational and the current extent
Under the WAEMU competition law, a of its activities. Merger activities in Côte
merger is regarded as (i) a merger between d’Ivoire should thus be conducted with this
two or more previously independent regional competition body in mind.
undertakings; or (ii) the acquisition by one Anti-competitive practices in Côte d’Ivoire
or more persons already controlling at are governed and regulated by the WAEMU
least one undertaking, or by one or more Commission.
undertakings, whether by purchase of
securities or assets, by contracts or by any Horizontal and vertical agreements,
other means of direct or indirect control decisions and concerted practices between
of the whole or parts of one or more undertakings which have as their object
undertakings, or (iii) the creation of a joint or effect the prevention, restriction or
venture performing on a lasting basis all distortion of competition are prohibited
the functions of an autonomous economic unless they are exempt. Cartel conduct
undertaking. (such as price fixing and market division)
is prohibited. Abuses of dominance are
The WAEMU competition law provides for prohibited.
a voluntary merger notification regime.
A company which engages in an
Merging parties can implement a proposed
anticompetitive horizontal or vertical
transaction without prior competition
agreement, or which abuses its dominant
approval at their own risk.
position commits an offence and may face
Mergers are analyzed in light of the sanctions, the amount of which ranges
provisions applicable to abuses of between XOF 500 000 and XOF 100-million.
dominance. Merger transactions that create This amount can be increased to the
or reinforce a dominant position having as equivalent of 10% of the annual turnover or
a consequence a significant distortion of assets of the infringing companies.
competition are assimilated to abuses of a The National regulator remains competent
dominant position. to sanction the following unilateral
Given that merger notification is voluntary, conduct:
there is no risk of penalty for failure to a. refusal to sell;
notify unless the parties are found to have b. abuse of economic dependence;
implemented a merger which amounts to
c. discriminatory practices;
an abuse of dominance. In the latter case,
the concerned parties may face financial d. resale price maintenance and resale
penalties ranging from XOF 500 000 to XOF below cost; and
100-million (this amount can be increased e. tying.

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OHADA does not regulate prohibited Yes, if that is the intent of parties pursuant
practices. ECOWAS regulates to a written agreement entered into by the
anticompetitive practices. Activities in Côte parties.
d’Ivoire should thus be conducted with
19. What are the conditions precedent
this regional competition body in mind.
in a typical acquisition document?
However, there is uncertainty as to whether
Is it common to have conditions to
ERCA has become operational and the
closing such as no material adverse
current extent of its activities.
change?
16. Are there any specific rules
applicable for acquisition of public A typical acquisition document includes as
companies in your jurisdiction? conditions of precedent disclosure of up-to-
date corporate documentation establishing
The control of an Ivorian public company the validity of the incorporation of the
is most frequently obtained through a target company, its representatives’
voluntary or mandatory public tender offer. capacity to enter into the contemplate
Business or (partial) asset contributions in transaction, the validity of its business
consideration for shares (apports partiels permit, if any, and the clearance from any
d’actifs) are also used, although less insolvency procedures and, eventually tax.
frequently in cross-border transactions. It is common to have conditions to closing
Statutory mergers (fusions) of public such as no material adverse change.
companies are generally used in intra- Typically, acquisition agreements contain
group transactions but can also be a condition to closing allowing a party to
implemented on the back of a public offer refuse to complete the deal if the other
to obtain 100% of the shares and voting has suffered a material adverse change
rights of the target company. between the signing of the agreement and
17. Is there a requirement to disclose the closing of the acquisition.
a deal, for instance to regulatory 20. What are the typical warranties
authorities? Is it possible to keep a and limitations in acquisition
deal confidential? documents? Is it common to obtain
There is no general requirement to disclose warranty insurance?
a deal. However, depending on the sector In large scale transactions, the parties will
and the financial structure some deals may include warranties in a schedule to the
be subject to disclosure to the relevant contract and can span over many pages.
authorities. In addition, taking into account Five of the most common warranties
the tax aspect of a deal its might be difficult that parties include in larger transaction
to keep a deal confidential for more than a contracts are:
month from its execution unless the parties
are willing to face the penalties for late Solvency: The purchaser needs to make
registration. sure that the vendor warrants that the
company they are selling (Sale Company)
18. Can sellers be restricted from
is not:
shopping around during a
negotiation process? Is it possible • Insolvent;
to include break fee or other
• Subject to voluntary administration;
penalty clauses in acquisition
and
documents to procure deal
exclusivity? • Has not stopped paying its debts.

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Litigation: The warranties will also usually • The vendor is not aware of any
include a provision relating to litigation. It information that they have not made
guarantees that the Sale Company is not a available to the purchaser; and
party to any:
• All forecasts and projections in respect
• Investigations; of the business are reasonable, honestly
held and prepared with care.
• Prosecution;
This type of warranty places the burden
• Litigation; on the vendor to be able to provide the
• Legal proceedings; above assurances. It is why the vendor
often refuses to give this warranty. The
• Any other form of dispute resolution vendor often requires that the purchaser
process; or acknowledges that it is satisfied with
• Governmental proceedings. its enquiries before entering into the
transaction. The parties can negotiate
Power and Authority: Merger and this warranty with some limitations. For
acquisition contracts will always include a instance, the purchaser may agree that
warranty relating to power and authority. the warranty is limited to the vendor’s
It sets out that each party’s execution and knowledge of these matters.
performance of the agreement:
Accounts: The purchaser may also seek a
• Complies with its constitution (i.e., warranty from the vendor concerning the
articles of association); accounts of the business. The warranty
usually sets out that:
• Does not constitute a breach of any law
or obligation; and • The vendor has prepared the accounts
according to the relevant accounting
• The parties have obtained all the standards and applicable laws;
necessary authorizations to enter into
the agreement. • The vendor has prepared the accounts
on a consistent basis; and
It may also include clauses requiring the
• The reports provided give an accurate
parties to acknowledge that they:
and fair view of the financial position of
• Have the full power and capacity to the business.
enter into the agreement; and It will also include that the accounts
• Are validly incorporated in their places contain all the liabilities of the business and
of incorporation. that since the date the vendor prepared
the accounts, the vendor has conducted
Accuracy of Information: The purchaser business in the ordinary and usual way.
will want to include an ‘accuracy of
information’ warranty if the vendor has The warranty may also include a provision
provided due diligence material. However, stating that the vendor has not:
it is not uncommon for the vendor to • Sold, disposed of or created an
be reluctant about providing this. This encumbrance of its assets over a
warranty typically provides that: specific amount; or
• All of the information the vendor • Acquired assets over a certain amount
has given to the purchaser is not (except in the ordinary course of
misleading; business).

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The amount will depend on the value of usually referred to as a share purchase
the business. It is important if the purchaser agreement.
wants to make sure they are informed of
Share purchase agreements tend to be
any unusual transactions that could affect
particularly lengthy and complex when the
the business after the purchase.
transaction involves the sale of the entire
In addition, it is common to obtain issued share capital of the company, or it
warranty insurance. will otherwise pass control of the target
company to the buyer.
21. Is there a requirement to set a
minimum pricing for shares of a Transfer Form
target company in an acquisition?
A stock transfer form is a standard
There is no minimum pricing requirement. document used to transfer existing shares.
It contains details of the seller and the
22. What types of acquisition financing
buyer, the type and number of shares
are available for potential buyers in
transferred, and considerations concerning
your jurisdiction? Can a company
the shares’ payment.
provide financial assistance to a
potential buyer of shares in the Article 71 of Cote d’Ivoire General Tax
target company? Code requires some obligations relating
to Business Transfer Transaction to be
There is no law regulating financing of an
respected. Consequently, the seller should
acquisition. The parties are free to have
respect them to ensure the compliance of
recourse to the financing methods they
Business Transfer Transaction with Tax law:
see fit provided that is not contrary to the
public order and any other existing laws. • The seller must within a specified
period of ten days, send notification
23. What are the formalities and
to the Tax Administration of the date
procedures for share transfers and
on which the transfer was or will be
how is a share transfer perfected?
effective as well as if applicable, the
A transfer by way of a sale of the legal and names, first names and address of the
beneficial interest in shares involves the purchaser;
following stages:
• The Seller is also required to send to
Agreement for the Sale of Shares the tax administration within the same
period the declaration of their actual
The seller and the buyer agree to the sale
profit.
and purchase of the shares. There is no
legal requirement for an agreement to sell • The ten-day period in question will
and purchase the legal and beneficial title begin from the day on which the
to shares to be made in writing. In some purchaser has effectively taken over the
situations, it may be appropriate for the management of the Business.
transaction to be affected simply by the
Failing to comply with this disposition, the
delivery to the buyer of a duly executed
tax administration can initiate an estimated
stock transfer form and the buyer’s
taxation procedure on taxable profit. This
payment of the purchase price.
procedure allows the tax administration
However, it is common practice for both to rectify the taxpayer on legal grounds
parties involved to document the sale and without the taxpayer being able to justify
purchase of the shares in a written contract, himself or give his point of view.

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Approving Registration of the Transfer 26. Can acquisition documents be

governed by a foreign law?
When a stock transfer form is submitted
to a company for registration, the board Any acquisition, merger, demerger or
of directors are subject to a statutory (partial) asset contribution is governed by
obligation to either approve and register OHADA law. It is possible to subject some
the transfer or give the buyer notice of of the “acquisition” documents to a foreign
refusal to register the transfer and the law. Such a structuring shall be assessed
reasons for their refusal. carefully against the applicable law, on
a case-by-case basis to ascertain it does
Issuing a Share Certificate to the
Transferee not contravene to any other mandatory
requirements.
Following registration, the company issues
a new share certificate regarding the 27. Are arbitration clauses legally
transferred shares to the buyer. The share permissible or generally included in
certificate is evidence that the transferee is acquisition documents?
the legal owner of the transferred shares. Arbitration clauses are legally permissible.
Finally, the company will need to update 28. Are there any specific formalities
its register of transfers and persons with for the execution of acquisition
significant control or legal entities with documents? Is it possible to
significant control (Registre du commerce). remotely/digitally sign documents?
The company will also need to include the As a matter of general principle, the
updated list of shareholders in Companies acquisition documents must be executed in
House as part of its next Confirmation wet ink signature.
Statement.
G. Trends and Projections
There are no specific requirements
for the perfection of a share transfer, 29. What are the main current trends in
however there may be other requirements M&A in your jurisdiction?
depending on the complexity of the M&A trends slowed during the covid
transfer and the transaction. period. However, given the country
24. Are there any incentives (such resilience and thanks to its attractive
as tax exemptions) available for business environment, M&A deals have
acquisitions in your jurisdiction? started to retrieve its post-covid space.
Based on our experience, recent deals
Yes, please refer to our comments to the activity, as well as insight from our clients,
question 23. we are optimistic that exciting M&A
F. Enforceability opportunities lie ahead in 2023.
25. Can acquisition documents be 30. Are any significant development
executed in a foreign language? or change expected in the near
future in relation to M&A in your
As far as the SPA is concerned and to the
jurisdiction?
extent that it is limited to contracting
parties, the answer is yes. However, a There is no significant development or
French version is required as far as the change expected in the near future in
relevant regulator and the tax authorities relation to M&A in Côte d’Ivoire. OHADA
are concerned. generally provides an attractive framework

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for M&A transactions for foreign investors to harmonize other areas including
as it regulates eight areas of business law competition law, intellectual property law,
common to 17 sub-Saharan countries banking law, labour law, and evidence
as well as a common Court of justice and contract law across the region. These
and arbitration, which is competent for
projects are not expected to materialize in
recognition and enforcement of the awards
the near future.
in OHADA member states.
However, the OHADA system still has However, with the law as it currently
some weaknesses that may have impact stands, vigilant due diligence enquiries
on restructuring or M&A operations. For and negotiations will ensure that risks are
these reasons, there are plans underway minimized in the M&A transactions.

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JAPAN
TMI ASSOCIATES

Takashi Toichi Masanori Bito

Partner Partner
[email protected] [email protected]

A. General common type of corporate entity in

Japan. The Godo Kaisha (a limited liability
1. What is the main legal framework company, “GK”) is the next most commonly
applicable to companies in your used.
jurisdiction?
The KK is a company that issues shares
Mergers and acquisitions of Japanese and whose shareholders elect directors
companies are mainly governed by the to manage and operate the company. All
Companies Act of Japan (Act No. 86 of 2005, shareholders have limited liability. The GK is
as amended) (“Companies Act”). Public a type of membership company (Mochibun
mergers and acquisitions of Japanese Kaisha) with limited liability members
companies are also governed by the only, does not issue shares, and does not
Financial Instruments and Exchange Act of separate its members from its management
Japan (Act No. 25 of 1948, as amended, the structure. Regulations applicable to the GK
“FIEA”) and the stock exchange rules. are simpler than those that apply to the KK.
2. What are the most common types For example, the GK has no obligation to
of corporate entities (e.g., joint publicize its financial statements.
stock companies, limited liability A membership company whereby all
companies, etc.) used in your members have unlimited liability is called a
jurisdiction? What are the main Gomei Kaisha, and a membership company
differences between them (including that has members having unlimited liability
but not limited to with regard to the and members having limited liability is
shareholders’ liability)? called a Goshi Kaisha. These corporate
entities are not often used.
The Kabushiki Kaisha (a joint-stock
company, “KK”) is traditionally the most

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B. Foreign Investment 4. Are there any foreign exchange

restrictions or conditions applicable
3. Are there any restrictions on foreign to companies such as restrictions to
investors incorporating or acquiring foreign currency shareholder loans?
the shares of a company in your
jurisdiction? Prior notification for screening may be
required for FDI transactions that include
Under the Foreign Exchange and Foreign the following provided that the Japanese
Trade Act of Japan (Act No. 228 of target company (including its Japanese
1949, as amended, the “FEFTA”), a non- subsidiaries) operates its business in a
Japanese investor must, in principle, file Designated Business Sector:
a prior notification for screening by the
Japanese authorities if (i) the Japanese  a loan from a non-Japanese investor
target company (including its Japanese with a maturity of more than 1 (one)
subsidiaries) operates its business in a year to a Japanese target company
designated business sector (“Designated if the balance thereafter exceeds JPY
Business Sector”) and (ii) the planned 100,000,000 and exceeds 50% of the
foreign direct investment (“FDI”) falls within amount of debt, unless such loan is
one of the following categories: made in Japanese currency by a non-
Japanese investor residing in Japan; or
 Acquisition of the shares or voting
rights of a Japanese company listed  acquisition by a non-Japanese investor
on a Japanese stock exchange, if the of corporate bonds issued by a
investment ratio or voting rights ratio Japanese company (by solicitation to
amounts to 1% or more following the the specific non-Japanese investor)
acquisition; or with maturity of more than 1 (one) year
if the balance thereafter exceeds JPY
 Acquisition of any share or equity of 100,000,000 and exceeds 50% of the
a Japanese non-listed company (no amount of debt, unless such corporate
threshold applies). bonds are issued in Japanese currency
The Designated Business Sectors and are acquired by a non-Japanese
include, but are not limited to, weapons, investor residing in Japan.
aircraft, nuclear facilities, space-related, 5. Are there any specific considerations
semiconductors, dual-use goods, for employment of foreign
cybersecurity-related, critical infrastructure employees in companies
and important health/life sciences. incorporated in your jurisdiction?
Even if a Designated Business Sector is Non-Japanese persons residing in Japan
not relevant to your transaction, there are may only engage in activities within
filing obligations that need to be made the scope of their authorized status of
post-closing if the 10% threshold is met, in residence and period of stay. In principle,
principle. those who are to be appointed as an officer,
such as a director, or to work as a manager,
In highly regulated sectors, such as
such as a general manager, factory
aviation, freight forwarding, radio waves,
manager, or branch manager, are generally
broadcasting, banking, and insurance, there
required to obtain the “Business Manager”
are sector-specific regulations separate
status of residence. In addition, depending
from FEFTA.
on factors such as academic background,
work experience, and annual income, it is

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possible for the appointee to obtain the for and receive permission to change his/
“Highly Skilled Professionals (Advanced her status of residence from the Regional
Business Management Activities)” status of Immigration and Residence Administration
residence and corresponding preferential Office. Employers are required to notify the
treatment. In addition, measures to Public Employment Security Office of the
obtain so-called “Start-up Visas” as well foreign national’s name, status of residence,
as to ease the requirements for the etc. when hiring or separating from
“Business Manager” status of residence, are employment. Foreign nationals themselves
being implemented to promote foreign must also notify the Director-General of
businesses. the Residential Services Agency of any
In order for a company to employ a non- change in the name or address of their
Japanese person residing in Japan, such work organization or its disappearance,
employee needs to obtain the status or any withdrawal (including termination
of residence of “Engineer/Specialist in of contract) or transfer (including new
Humanities/International Services,” “Highly conclusion of contract) from the work
Skilled Professional (Advanced Specialized/ organization, except in cases where the
Technical Activities),” or “Intra-company foreign national is residing with a status
Transferee”. The activities that can be of residence based on his/her status and
performed in “Technical/Specialist in position.
Humanities/International Services” and C. Corporate Governance
“Intra-Company Transferee” are the same,
but in the case of transfer within the same 6. What are the standard management
company or secondment from a parent structures (e.g., general assembly,
company or affiliated company, the “Intra- board of directors, etc.) in a corporate
Company Transferee” status of residence entity governed in your jurisdiction
should be obtained. If the work activity is and the key liability issues relating
a job that requires skills, it is possible to to these (e.g., liability of the board
obtain “Skilled Labor” or “Specified Skilled members and managers)?
Worker” status of residence. All KKs have a shareholders meeting as
When a foreign national intends to work an organ, which appoints 1 (one) or more
in Japan, he/she generally first applies directors. In a KK there is no need to have a
for a Certificate of Eligibility at Regional board but, appointing minimum of 1 (one)
Immigration and Residence Administration director suffices and appointing a statutory
Office in Japan before entering Japan, auditor is not required. In this structure,
and then applies for a visa at the Embassy prompt decision-making can be made
or Consulate General of Japan abroad, by the director(s). In place of a board of
by presenting the Certificate of Eligibility directors meeting, shareholders themselves
issued. After the visa is issued, the foreigner must monitor the execution of business
must apply for landing at the port of entry conducted by director(s).
in Japan within 3 (three) months from
That being said, the standard management
the date of issuance of the Certificate of
structure in a conventional KK is a
Eligibility, in principle.
shareholders meeting, a board of directors
If a foreign national who intends to work in meeting and a statutory auditor. In this
Japan does not have a status of residence standard structure, a shareholders meeting
that allows him/her to engage in the shall appoint 3 (three) or more directors
planned work activities, he/she must apply and a statutory auditor in principle. The

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appointed directors then shall compose a loyal and faithful manner towards the
a board of directors meeting to appoint a company (chujitsu gimu).
representative director. Supervision of each
Directors who fail to fulfill their duties may
director by a board of directors meeting
be held accountable to the company for
is expected and execution of business by
directors shall be supervised by a statutory any resulting damages. In cases where
auditor. Since the execution of business by directors exhibit gross negligence or willful
the directors may not be directly supervised misconduct in performing their duties,
by the shareholders, supervision by a they can also be held liable to third parties
statutory auditor is required in principle or shareholders for any ensuing damages
in this structure; provided, however, that under the Companies Act.
a KK with all stock transfer restrictions is 7. What are the audit requirements in
not required to have a statutory auditor by corporate entities?
having an accounting advisor (kaikei sanyo).
A KK that has a board of directors meeting
A KK with a board of directors and a statutory auditor must prepare
meeting may choose to have 3 (three) financial statements and business reports
committees (a nominating committee, for each business year, as well as their
an audit committee, and a compensation supplementary statements, which shall
committee) or an audit and supervisory be audited by a statutory auditor and
committee, under certain conditions. The
approved by the board of directors
board of directors meeting of a KK with
meeting. The business report must be
these three committees delegates a large
reported in an annual shareholders
portion of business execution decisions to
meeting and the financial statements
executive officers (shikkoyaku), although
shall be subject to approval of an annual
the board must supervise them. A KK with
shareholders meeting.
these three committees must ensure that a
majority of the members in each committee Large companies (with stated capital
are outside directors, while it does not of JPY 500,000,000 or more or debts of
have a statutory auditor. A KK with an audit JPY 20,000,000,000 or more), companies
and supervisory committee does not have with a nominating committee, etc., and
executive officers (shikkoyaku), but has an companies with an audit and supervisory
audit and supervisory committee with a committee are required to be audited by an
majority of the members being outside accounting auditor (kaikei kansanin).
directors. Except for KKs with these three
committees or an audit and supervisory
committee, large public companies are D. Shareholder Rights
required to esablish a board of statutory
auditors that includes a full-time statutory 8. What are the privileges that can
auditor and outside statutory auditors as its be granted to shareholders? In
members. particular, is it possible to grant
voting privileges to shareholders for
Directors are obligated to carry out their appointment of board members?
responsibilities by exercising the same level
of caution as a prudent manager (zenkan In principle, resolutions at shareholders’
chui gimu), abiding by all applicable laws, meetings for the appointment or dismissal
regulations, and the provisions set out in of directors must be passed by a majority
the articles of incorporation and resolutions (or higher, if such is provided for in the
of shareholders’ meetings, and acting in articles of incorporation) of the votes of the

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shareholders present at the meeting where For a shareholder having 3% or more of the
the shareholders holding the majority of voting rights of all shareholders, or 3% or
the votes (or as low as one-third or more more of all issued shares
if such is provided for in the articles of
 Request for inspection or copying of
incorporation) of the shareholders entitled
accounting books.
to vote are present.
 Petition to the court for election of
However, a KK with all stock transfer an inspector who investigates the
restrictions may issue class shares by condition of the business and assets of
stipulating in its articles of incorporation the company.
that directors or statutory auditors may
be appointed at a general meeting of  Litigation for dismissal of officers.
class shareholders consisting of the class For a shareholder having 10% or more of
shareholders of that class of shares. the voting rights of all shareholders, or 10%
In practice, the right (if any) to nominate or more of all issued shares
directors and statutory auditors is not often  Request for dissolution of a company
created by issuing class shares but rather by (A shareholder may file a litigation for
only the shareholders’ agreement. dissolution of a company, if there are
imperative grounds. That is, in cases
9. Are there any specific statutory rights
when: a company faces an extreme
available to minority shareholders
difficulty in executing business and the
available in your jurisdiction?
company suffers or is likely to suffer
Among others, major statutory rights irreparable harm; or the management
for minority shareholders under the or disposition of property of a company
Companies Act include the following with is extremely unreasonable and puts the
certain other requirements: existence of the company at risk).

For a shareholder having 1% or more of the For a shareholder having one-third or more
voting rights of all shareholders of the voting rights of all the shareholders
 Petition to the court for appointment  Denial of the matters requiring a special
of an inspector who investigates the resolution of a shareholders meeting
convocation procedures and method of such as an amendment to articles
resolution. of incorporation and organizational
 Request for including certain matters restructuring.
in the purposes (agenda) of the 10. Is it possible to impose restrictions
shareholders meeting. on share transfers under the
 Request for notice of the general nature corporate documents (e.g., articles
of proposals. of association or its equivalent in
your jurisdiction) of a company
For shareholder having 3% or more of the incorporated in your jurisdiction?
voting rights of all shareholders
KKs have the option to impose restrictions
 Objections to partial exemption
on share transfers, requiring approval
from the liability of a director, etc. by at either a shareholders meeting or a
a resolution of a board of directors board of directors meeting (this would
meeting. be considered a KK with all stock transfer
 Request for convocation of a restrictions). These restrictions are valid
shareholders meeting. when they are included in the company’s

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articles of incorporation. Additionally, it is commencement of civil rehabilitation

required to register these restrictions in the procedures, a corporation, in principle,
commercial register. carries out its business and has the right to
manage and dispose of its assets.
11. Are there any specific concerns or
other considerations regarding the Corporate reorganization procedures are
composition, technical bankruptcy regulated by the Corporate Reorganization
and other insolvency cases in your Act. The main characteristics of corporate
jurisdiction? reorganization procedures are that they
apply only to KKs, and, in principle, the
Under Japanese law, the ‘liquidation right to manage and dispose of assets is
type’ insolvency procedure is mainly the vested in a trustee appointed by the court.
bankruptcy procedure. There are 2 (two) In addition, the procedures in corporate
types of ‘rehabilitation type’ insolvency reorganization proceedings are heavier
procedures: civil rehabilitation procedures than those in civil rehabilitation.
and corporate reorganization procedures.
In insolvency proceedings (bankruptcy,
In case of bankruptcy which is regulated civil rehabilitation, and corporate
by the Bankruptcy Law, the cause reorganization), under certain conditions
for commencement of bankruptcy after the commencement of proceedings,
proceedings for a corporation is being the trustee (supervisor or trustee in civil
unable to pay debts or insolvency, and rehabilitation proceedings) may deny the
the petitioners are the corporation (its effect of (i) acts that reduce the debtor’s
directors, etc. can also file a petition) or assets and (ii) payment or provision
their creditors. When the court makes of security that harm equality among
a decision to commence bankruptcy creditors, conducted by the debtor prior
proceedings, the right to manage and to the commencement of the procedures.
dispose of the assets belonging to the Also, the original state of the debtor’s
corporation is vested exclusively in the property can be restored. This right is called
bankruptcy trustee appointed by the court, the right of avoidance (Hininken), and its
who aims to convert the assets into cash purpose is to achieve fair distribution to
and to distribute it to creditors. When an creditors.
order of commencement of bankruptcy E. Acquisition
proceedings is made against a debtor
who is a corporation, the court may reach 12. Which methods are commonly used
an assessment decision on the rights to to acquire a company, e.g., share
seek damages based on the liability of the transfer, asset transfer, etc.?
directors. To acquire a company, both a share transfer
Civil rehabilitation procedures are (share deal) and a business transfer/
often used as restructuring-type legal corporate split (kaisha bunkatsu) (asset
bankruptcy proceedings and these are deal) are commonly used. However, asset
regulated by the Civil Rehabilitation Act. deals are sometimes structured as a
The main difference from bankruptcy combination of a corporate split to transfer
proceedings is that the cause for subject assets to another company and a
commencement of civil rehabilitation transfer of shares of such company.
proceedings is that the occurrence of the 13. What are the advantages and
cause for commencement of bankruptcy disadvantages of a share purchase
proceedings is sufficient. After the as opposed to other methods?

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In the case of a share purchase, under the meeting through a special resolution, the
principle of shareholder limited liability, same as a business transfer, subject to the
in principle, the acquirer will not incur a following conditions being met: (i) the
loss exceeding the amount invested in book value of the subsidiary shares exceeds
acquiring the stock. Further, in the case of one-fifth of the total assets of the transferor
a share purchase, there is only a change company; and (ii) on the effective date of
in the controlling shareholder of the the transfer, the transferor company does
target company, and in principle there is not hold a majority of the total number of
no change in the legal relationship of the voting rights of the subsidiary. In practice,
target company due to the transaction. if contracts prohibit a change in the
Accordingly, typically the transaction shareholder or provide it as grounds for
procedures (including those for business termination, it may be necessary to obtain
permits and licenses) are simpler than for the consent of the counter parties (third
other methods. A share purchase is also parties) to these contracts.
simpler in that there is no need to prepare
On the other hand, as for a business transfer
or keep legal disclosure documents or take
(asset deal), in principle, a special resolution
creditor protection procedures (a public
of a shareholders meeting is required to
gazette notice, and individual letters or
transfer all or an important part of the
another public notice).
business, or to accept the entire business of
On the other hand, unlike a business another company. The business transfer is
transfer, in which the buyer can only a collection of transactions in which rights
succeed to the rights and obligations and obligations are individually transferred
relating to the target business stipulated to the buyer. Accordingly, to transfer the
in the business transfer agreement in obligations, contracts and employees
principle, a share purchase agreement that constitute the target business, the
cannot eliminate latent liabilities of the individual consents of the parties to the
target company. contracts, creditors and employees are
required. Unlike a share transfer, in the
14. What are the approvals and case of a business transfer, as a general
consents typically required (e.g., rule, business permits and licenses held
corporate, regulatory, sector by the company cannot be transferred to
based and third-party approvals) the buyer. If there is a provision that allows
for private acquisitions in your succession of the permits and licenses
jurisdiction? in the laws and regulations governing
As for a share transfer, if the articles of the permits and licenses, it is necessary
incorporation of the target company to implement the procedures stipulated
stipulates stock transfer restrictions (a therein. If there is no provision to allow
KK with all stock transfer restrictions), a succession in these laws and regulations,
resolution to approve the transfer by the the buyer needs to obtain new permits and
approval body of the target company is licenses.
required. Typically, approval of the board As for both a share transfer and a business
of directors meeting of the seller or the transfer, a merger filing under competition
buyer is required for the execution of a law and a filing for FDI under the FEFTA may
share purchase as an important business
be required if certain conditions are met.
execution decision; provided, however,
that the transfer of subsidiary shares by In highly regulated sectors such as
a parent company requires the approval aviation, freight forwarding, radio waves,
of the transferor company’s shareholders broadcasting, banking, and insurance,

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there are various sector-specific regulations transfer, the same thresholds are applicable
(other than the FEFTA). Depending on the as those for statutory merger/demerger
highly regulated sectors involved, M&A below.
transactions may require approval from, or
(2) Business transfer
registration or notification to, regulatory
authorities, or if the percentage of voting (a) An acquirer company (on a
rights held by foreign investors exceeds consolidated basis) of a target business/
a certain threshold, the transaction may asset of a seller company has a
be disqualified from receiving business Japanese domestic turnover of more
permits. than JPY 20,000,000,000;

15. What are the regulatory (b) The target business/asset has a
competition law requirements Japanese domestic turnover of more
applicable to private acquisitions in than JPY 3,000,000,000 and falls into
your jurisdiction? any of the following (i) to (iii):

Regardless of whether a target company is (i) the seller company’s whole business;
private or public, if the following applicable (ii) the seller company’s material
thresholds are satisfied, then each of (1) business; or
share acquisition, (2) business transfer, and
(3) statutory merger/demerger require a (iii) whole or material part of the seller
prior clearance from the Japan Fair Trade company’s business-related fixed
Commission, the Japanese competition assets.
authority. (3) Statutory merger/demerger
Please note that the following is an outline (a) One party (on a consolidated basis) has
and that there are more detailed rules set a Japanese domestic turnover of more
out in the applicable laws. than JPY 20,000,000,000; and
(1) Share acquisition (b) At least one other party (on a
(a) The voting rights ratio of an acquirer consolidated basis) has a Japanese
company (on a consolidated basis) in a domestic turnover of more than JPY
target company newly becomes more 5,000,000,000.
than 20% or 50%; 16. Are there any specific rules
(b) The acquirer company (on a applicable for acquisition of public
consolidated basis) has a Japanese companies in your jurisdiction?
domestic turnover of more than JPY If an acquirer intends to acquire shares of
20,000,000,000; and a listed company such that its voting right
(c) The target company group (i.e., the ratio would exceed a certain threshold after
such transaction, such acquisition requires
target company and its subsidiaries, not
a tender offer. This type of prior restraint
including the companies which remain
rule is unique to Japan when compared to
under control of the seller company)
the tender offer rules of other countries,
has a Japanese domestic turnover of
which require a tender offer only after
more than JPY 5,000,000,000.
the completion of an acquisition which
In cases of collective share transfer, under has exceeded certain threshold. The most
which more than 2 (two) companies create important rule in practice is the one third
a common holding company by share rule, under which an acquirer must make a

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tender offer if it intends to (i) acquire shares A public offering or a secondary

through off-market trading or on-market distribution of securities requires securities
off-floor trading and (ii) its voting rights registration statements to the prime
ratio would exceed one-third as a result of minister.
such acquisition (the “One-Third Rule”). If a company that is required to submit a
In principle, Japanese tender offer securities report (i.e., a company that has
regulations regulate off-market trading, but a continuous disclosure obligation) issues
do not regulate the acquisition of newly new shares or disposes of treasury stock,
issued shares unless certain exceptions are it basically falls under the public offering,
present. The Companies Act, rather than and if the issue price is JPY 100,000,000 or
the FIEA, applies to the acquisition of newly more, a securities registration statement
issued shares that results in a shareholder must be filed. In the case of a company
holding a majority of voting rights. Under that does not have a continuous disclosure
the Companies Act, although issuance of obligation, it may not qualify as a public
new shares is generally allowed only with offering under certain conditions, such
approval of board of directors meeting of as if the number of persons receiving
solicitation is less than 50. The regulations
the issuing company, if the shareholders
similar to those for a public offering of
owning 10% or more of the voting power
securities apply to a secondary distribution
of the issuing company dissent from such
of securities.
acquisition, approval at a shareholders
meeting of the issuing company is required. As for a tender offer, public notice of
the commencement of a tender offer is
Soft laws including the Fair M&A Guidelines
required and a tender offer registration
and the Guidelines for Corporate Takeovers,
statement must be submitted to the prime
published by METI, may also be applicable minister.
to the acquisition of public companies.
Companies that are subject to continuous
The amendment to the FIEA, including disclosure obligations must submit an
revisions to the tender offer regulation, was extraordinary report to the Prime Minister
enacted on May 15, 2024. The amended law when certain events occur that have a
will come into effect within two years from significant impact on investment decisions,
the date of promulgation, but the current such as organizational restructuring.
law will apply to tender offers completed Additionally, listed companies must make
or initiated before the enforcement of timely disclosures in accordance with stock
the amended law. Currently, discussions exchange rules.
are underway to prepare government
ordinances for the implementation of the Even if a non-listed company undergoes
organizational restructuring such as a
amended law (See our answer to Question
merger, it is required under the Companies
30 below).
Act to comply with creditor objection
17. Is there a requirement to disclose procedures (public notice and individual
a deal, for instance to regulatory notice) and to prepare and maintain certain
authorities? Is it possible to keep a disclosure documents at its head office.
deal confidential?
If a transaction requires a merger control
In Japan, cases in which transactions must filing, an FDI filing or other sector-specific
be made public or disclosed to regulatory proceedings, the transaction needs to be
authorities include the following: disclosed to the regulatory authorities.

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On the other hand, there is no need to 19. What are the conditions precedent
disclose the names of shareholders in the in a typical acquisition document?
commercial register of a K.K. Is it common to have conditions to
closing such as no material adverse
Under the current system, the issuing change?
company and other shareholders can
identify nominee shareholders through It is customary to incorporate conditions
shareholder registers and annual reports. precedent, particularly when there’s a time
However, unless the large-volume gap between signing and closing. While the
shareholding reporting system applies parties often negotiate specific conditions
that reflect the outcome of the buyer’s
(i.e., more than 5% shareholding in a listed
due diligence on the target, we have seen
company), there is no mechanism for the
many acquisition contracts that include
issuing company or other shareholders to
certain conditions precedent including the
ascertain the individuals or entities with
following:
the authority to direct voting rights or
invest in the relevant shares. Recognizing  The accuracy of representations and
the significance of fostering constructive warranties at both the signing and
dialogue between companies and closing dates;
investors, discussions are underway at the  The absence of covenant breaches by
the Financial Services Agency (the “FSA”) the parties;
and other authorities to revise the system
 The third-party consents
concerning beneficial owners. The aim is
to enable issuing companies and other  The regulatory approvals; and
shareholders to more efficiently discern
 The approvals for the share transfer by
beneficial owners and the extent of their
the target company’s board of directors
shareholdings. meeting.
18. Can sellers be restricted from As mentioned above, in Japanese law
shopping around during a governed transactions, the conditions
negotiation process? Is it possible precedent are often not limited to third-
to include break fee or other party consents and regulatory approvals.
penalty clauses in acquisition We have seen certain transactions in which
documents to procure deal “no material adverse change” (“MAC”)
exclusivity? is included as a condition precedent.
However, we have also seen cases where
Shopping around during a negotiation
negotiations are made to remove the MAC
process may be desirable in public deals
clause, or transactions where the definition
for directors to fulfill the duty of care as a of the MAC is limited to certain objective
prudent manager, but is not mandatory. criteria.
Therefore, it is not prohibited to restrict
sellers from shopping around during a 20. What are the typical warranties
negotiation process. A break fee clause is and limitations in acquisition
a possible way to restrict the sellers from documents? Is it common to obtain
shopping, but if the amount of a break warranty insurance?
fee is too high, there is a risk that it will be The typical warranties are (i) fundamental
viewed as problematic from the perspective warranties (e.g., organization, power,
of duty of care as a prudent manager. capitalization, authority and no conflicts),

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(ii) tax warranties and (iii) general 22. What types of acquisition financing
warranties (e.g., financial statements, are available for potential buyers in
absence of material changes, compliance your jurisdiction? Can a company
with laws, permits, property, intellectual provide financial assistance to a
property, contracts, litigation, and labor). potential buyer of shares in the
target company?
It is common practice to impose certain
limitations on an indemnification liability In typical Japanese acquisition financing,
for breaches of the warranties, such as (i) the acquirer (sponsor) establishes an
survival period, cap, deductible and de- Special Purpose Company (“SPC”) in Japan
minimis. and the SPC receives equity capital from
the acquirer in the form of common stock,
Traditionally, warranty insurance was (ii) the SPC receives a senior loan from the
uncommon in Japan, but opportunities senior lender (financial institution), (iii) the
to use it have started to increase in recent SPC uses these funds raised to purchase the
years. shares of the target company and repay the
In particular, such opportunities include the target company’s existing loans. In certain
following transactions: deals, the SPC may receive mezzanine
loans from mezzanine lenders (financial
 Bidding project where the seller is a PE institutions or mezzanine funds).
fund and aims for a clean exit.
In Japan, it is not possible to
 Cases where the seller is an individual comprehensively set security interests on
and it is necessary to supplement the multiple types of assets or attain perfection
seller’s creditworthiness. against third parties in 1 (one) procedure.
Therefore, it is necessary to establish
 Cases where the seller is management
security interests for each type of asset.
and the buyer wants to avoid disputes
In acquisition financing, security interests
with the seller after closing, especially (pledges) are usually set on the shares
when management is being retained of the borrower (SPC) and other target
for a certain period of time. company group. Security interests would
 Bidding project where the bidder wants also be created in other important types of
to differentiate itself from other bidders assets.
by using warranty insurance. In Japan, no law prohibits a target company
The number of warranty insurance deals group from providing guarantees or
is increasing as Japanese insurance collateral (financial assistance) with
companies have started providing the respect to acquisition funds raised by the
service and procedures can now be acquirer for the benefit of the acquirer’s
completed in only the Japanese language creditors; provided, however, that in cases
with no English translation required. where the target company has remaining
shareholders other than the acquirer, such
21. Is there a requirement to set a financial assistance may result in a breach
minimum pricing for shares of a by directors of the target company group
target company in an acquisition? of the duty of care of a prudent manager
under the Companies Act.
There is no such requirement in general.
However, the consideration in a share 23. What are the formalities and
purchase agreement should be at least JPY procedures for share transfers and
1 (one) (not zero). how is a share transfer perfected?

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In order to transfer the shares of a KK For example, under the tax treaty between
issuing share certificates, it is necessary Japan and the United States, capital gains
to deliver the share certificates to the or losses arising from transfer of shares
transferee, and the delivery of share which falls under the “25-5 per cent Rule”
certificates is a requirement for the transfer are exempt from taxation in Japan.
of share ownership. Therefore, the seller
needs to physically deliver share certificates
F. Enforceability
at the closing. 25. Can acquisition documents be
executed in a foreign language?
A transfer of shares of a KK which does not
issue share certificates is completed with Yes. There are no specific language
the agreement of the parties, and the share requirements for the execution of share
transfer is perfected by entry of a change purchase agreements under Japanese law.
of holders in the shareholder register.
If the acquisition documents (e.g., those for
Therefore, at the closing, the seller is usually
organizational restructuring) are required
required to deliver “request for entry of a
for commercial registration, Japanese
change of holders in shareholders ledger”
originals or Japanese translations may be
(kabunushi meibo meigi kakikae seikyu sho)
required.
in connection with its shares duly executed
by the seller to enable buyer to reflect 26. Can acquisition documents be
the completion of the acquisition in the governed by a foreign law?
shareholders ledger of the target company
Yes. Acquisition documents can be
without involvement of seller.
governed by a foreign law with respect to
As discussed in our answer to Question obligatory effect of the contracts.
14 above, if stock transfer restrictions are
It should be noted, however, that even
stipulated in the articles of incorporation,
when a share purchase agreement
the transfer must also be approved by
stipulates that the governing law shall be
the target company’s board of directors
a non-Japanese law, it is likely that certain
meeting, etc.
aspects of a Japanese target company
24. Are there any incentives (such (including share transfer procedures,
as tax exemptions) available for establishment and perfection of collateral,
acquisitions in your jurisdiction? and mandatory regulations) will still be
governed by the Japanese law.
In principle, non-Japanese residents and
overseas corporations are not subject to 27. Are arbitration clauses legally
taxation in Japan with respect to the capital permissible or generally included in
gains or losses arising from the transfer acquisition documents?
of shares of Japanese corporations unless
Yes, arbitration clauses are legally
such capital gains or losses are attributable
permissible, and are sometimes included
to their permanent establishment.
in acquisition documents for cross-border
However, in cases where such transfer of transactions.
shares falls under the “25-5 per cent Rule”
28. Are there any specific formalities
or the “transfer of the shares of the real
for the execution of acquisition
estate-related corporation”, capital gains or
documents? Is it possible to
losses arising from such transfer of shares
remotely/digitally sign documents?
are subject to taxation unless this taxation
is exempted under applicable tax treaty. There are no specific formalities (e.g.,

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notary) for the execution of a share publication of a roster featuring companies

purchase agreement. In general, it is that have undertaken such measures. These
possible to remotely/digitally sign a share corporate governance reforms and other
purchase agreement. In that case, it is recent developments have required greater
desirable for the parties to stipulate the stock market discipline of listed companies,
rules on this in the “Counterparts” clause. such as using reasonable efforts to achieve
sustainable growth and enhancing capital
If documents required for commercial
efficiency.
registration are electronically executed, an
electronic signature in a certain format is In fact, we have recently seen more
required. transactions involving listed subsidiaries
G. Trends and Projections and affiliates (including acquisitions of
listed subsidiaries and affiliates by their
29. What are the main current trends in parent companies, management buyouts
M&A in your jurisdiction? and sales of shares of listed subsidiaries or
Traditionally, many listed shares in Japan affiliates to third parties), a growing trend
were cross-held by their business partners of shareholder activism and unsolicited
(mainly by other listed companies) who transactions entered into not only by
acted as loyal and management-friendly financial investors but also by strategic
shareholders. Also, domestic institutional companies. In 2024, the number of
investors (particularly banks, pension delisting cases due to M&A transactions
funds, insurance companies and other and intra-group reorganizations exceeded
financial institutions) were historically the number of initial public offerings.
passive with their votes in Japanese listed 30. Are any significant development
companies, rarely voting against the or change expected in the near
company’s proposals. Cross-shareholdings future in relation to M&A in your
and loyal shareholders, coupled with jurisdiction?
a lack of qualified outside directors in
the listed companies, result in less stock With Japan’s amended Corporate
market discipline and ineffective dialogue Governance Codes as a backdrop,
with minority shareholders, and cross- governance discipline especially for
shareholdings were criticized as having companies listed in the Prime Market
lower capital efficiency. will be required more than ever, and it is
likely that there will be more transactions
Recent corporate governance reforms involving listed subsidiaries or affiliates,
on Japan’s Stewardship Code, Japan’s including acquisitions of listed subsidiaries
Corporate Governance Code, rules for or affiliates by their parent companies,
interested party transactions such as the management buyouts and sales of shares
Fair M&A Guidelines, and the Guidelines of listed subsidiaries or affiliates to third
for Corporate Takeovers published by METI,
parties. In addition, shareholder activism
were taken to address these criticisms
will continue to be operational and the
and improve the creditworthiness of the
burgeoning trend in unsolicited deals by
Japanese stock market. In March 2023, the
strategic investors may continue.
Tokyo Stock Exchange (the “TSE”) issued
a directive, encouraging listed companies With the formulation of soft laws that
to adopt management strategies that encourage the formation of fair rules
consider the cost of capital and stock prices. regarding M&A transactions, corporate
In January 2024, the TSE commenced the awareness of ensuring fairness has

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increased, and the rate of opposition from regulatory authorities in issuing corrective
institutional investors to the introduction of action orders against such violations.
takeover defense measures has increased. The amendment to the FIEA, including
According to METI, it is expected that revisions to the tender offer regulation and
M&A transactions will be used more than the large-volume shareholding reporting
ever as a corporate strategy to address system, was enacted on May 15, 2024. The
today’s increasingly complex management amended law will come into effect within
issues, and on August 31, 2023, METI two years from the date of promulgation.
published the “Guidelines for Corporate Currently, discussions are underway to
Takeovers” focusing on how the parties prepare government ordinances for the
involved should behave in cases where implementation of the amended law. It
the evaluation of an acquisition proposal is advisable to stay vigilant for upcoming
is divided between the acquirer and the amendments to these governtment
target company. ordinances, as these policy changes
signal a commitment to adapt and refine
In fact, since the release of these guidelines,
the regulatory landscape in the realm of
we have seen several unsolicited acqusition
securities transactions.
proposals or competing bids targeting
Japanese companies from well-known In the context of delisting following an
corporations and private equity funds, MBO or the full acquisition of a listed
and similar proposals may increase in the subsidiary by its parent company, ensuring
future. that general shareholders receive fair
consideration is of paramount importance.
Additionally, the number of cases in
The Fair M&A Guidelines issued by
which activist proposals receive support
METI in June 2019 merely set forth best
from institutional investors is increasing.
practices and do not impose any legal
In the future, it is possible that there will
obligations. As of March 2025 (the date of
be an increase in transactions based on
this article), the TSE is reviewing the Code
the influence of activists (e.g., sale of the
of Corporate Conduct under the listing
target company itself or sale of non-core
rules to ensure a more effective framework
businesses).
for maintaining fairness in delisting
In December 2023, the FSA unveiled transactions. Specifically, the review
new policies aiming to revise the tender includes: (i) revising the requirements
offer regulation and the large-volume regarding the opinion from the special
shareholding reporting system. These committee affirming that the transaction is
changes are geared towards enhancing not detrimental to minority shareholders by
transparency and fairness in securities explicitly incorporating the considerations
transactions that significantly impact outlined in the Fair M&A Guidelines; and
corporate control. To achieve this goal, (ii) enhancing disclosure requirements
(i) the One-Third Rule is proposed to concerning the assumptions and conditions
extend to on-market on-floor trading underlying stock valuation.
and (ii) the threshold for the One-Third
Rule is set to be lowered from one-third
to 30%. Additionally, the regulatory
authorities are set to strengthen their
response to violations of the large-volume
shareholding reporting system. A legal
framework will be developed to facilitate

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JORDAN
HAMMOURI & PARTNERS

Tariq Hammouri Ahmed Khalifeh Yotta Pantoula-Bulmer Rozana Al Hroob Eyas AlKiswani
Managing Head of the Head of the Associate at the Associate at the
Partner Corporate Dept. International Dept. International Dept. Corporate Dept.
tariq@ ahmed.k@ yotta.b@ rozana.h@ eyas.k@
hammourilaw.com hammourilaw.com hammourilaw.com hammourilaw.com hammourilaw.com

A. General • The Banking Law No. 28 of 2000 and its

amendment.
1. What is the main legal framework
applicable to companies in your 2. What are the most common types
jurisdiction? of corporate entities (e.g., joint
stock companies, limited liability
The main legal framework applicable to companies, etc.) used in your
companies in the Hashemite Kingdom of jurisdiction? What are the main
Jordan (hereinafter referred to as “Jordan”) differences between them (including
includes the following legislations: but not limited to with regard to the
• The Jordanian Companies Law No. 22 of shareholders’ liability)?
1997 and its amendments (hereinafter The most common types of corporate
referred to as the “Companies Law”); entities used in Jordan are:
• The Companies Regulation No 77 of • A Joint Partnership Company: This
2008; type of company consists of 2 (two)
• The Companies Liquidation Regulation types of shareholders; The first type is
the general shareholders, who manage
No.6 of 2021;
the company and are also jointly and
• The Insolvency Law No. 21 of 2018; severally liable for all the company’s
debts and liabilities with their private
• The Insolvency Regulation No. 8 of
assets. The second type of shareholders
2019;
in joint partnerships is the limited
• The Regulating Insurance Activities Law shareholders, who contribute to the
No. 12 of 2021, and capital of the company without having

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the right to manage the company • A Foreign Operating Company: This

or to realize its operations and the type of company is a company or an
liability of each one of them towards entity which is registered outside
the company’s debts and liabilities is Jordan, the headquarters of which are
limited to their share in the capital of in another country and the nationality
the company. of which is considered non-Jordanian.
In terms of its nature, it shall be divided
• A Limited Liability Company: This
into 2 (two) types:
type of company has only 1 (one) type
of shareholder. The company’s liability o Companies operating for a limited
shall be considered independent period, which are awarded tenders
from the liability of every shareholder in order for them to realize their
in it. The company’s assets and work in Jordan for a limited period
property shall be liable for its debts of time. The registration thereof
and obligations. The liability of any shall cease upon the completion of
shareholder therein for these debts, such work, unless the said company
obligations and losses is limited to their obtains new contracts, in which
shares in the company. case its registration shall extend to
cover the execution of such work.
• A Public Shareholding Company: This Its registration shall be terminated
type of company has only 1 (one) type after completion of all its work
of shareholder. The financial liability in Jordan and after its rights and
of the public shareholding company obligations are settled.
is deemed independent from the
o Companies operating permanently
financial liability of each shareholder
in Jordan under license by the
in the company. The company shall,
competent official authorities in
with its assets and properties, be liable
Jordan.
for its debts and obligations and the
shareholders shall not be liable before • A Foreign Non – Operating Company:
the company for any such debts and This type of company is a company
obligations, except in proportion of the or an entity which has its regional
shares they own in the company. or representative office in Jordan for
operations that it conducts outside
• A Private Shareholding Company: Jordan for the purpose of using
This type of company has only 1 (one) such a regional or representative
type of shareholder. The financial office for managing its operations
liability of the public shareholding and for coordinating them with
company is deemed independent its headquarters. The company is
from the financial liability of each prohibited from carrying out any
shareholder in the company. The business or commercial activity inside
company shall, with its assets and Jordan, including the operations of
properties, be liable for its debts and commercial agents and middlemen/
obligations and the shareholders shall intermediaries. Otherwise, the company
not be liable before the company for shall be subject to cancellation of its
such debts and obligations, except in registration, and it will be responsible
proportion of the shares they own in for compensation of any loss or damage
the company. it may have caused to others.

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• An Exempt Company: This type of the financial/stock market in return for

company is a company that is either obtaining returns when selling their
a public shareholding company, a contributions or shares in the capital of
limited liability company or a private the invested company.
shareholding company, which is
In conclusion:
registered in Jordan and carries out
its operations outside of Jordan. The Out of the various corporate entities that
company is prohibited from offering its can be registered in Jordan, the most
shares for public subscription in Jordan. common types used in Jordan are:
• A Holding Company: This type of • The limited liability company (where
company is a public shareholding shareholders are only liable in the
company, which has financial and amount of their shares),
administrative control over 1 (one)
or more companies, called subsidiary • The public shareholding company
companies, in one of the following (where shareholders are only liable in
methods: the amount of their shares),

o To acquire more than one half of the • The private shareholding Company
company’s share capital and/or (where shareholders are only liable in
the amount of their shares),
o To have control over the formation
of its Board of Directors. • The foreign operating company (where
the company does operate within
The company is prohibited from Jordan, but is a foreign entity registered
acquiring any stocks or shares outside of Jordan, with headquarters
in joint partnerships and the outside of Jordan), and
subsidiary company shall be
prohibited from acquiring any • The foreign non-operating company
stocks or shares in the holding (where the company does not operate
company. The holding company within Jordan).
shall appoint its representatives B. Foreign Investment
in the Boards of Directors of the
subsidiary company in proportion 3. Are there any restrictions on foreign
to its shareholding therein. It may investors incorporating or acquiring
not participate in the election the shares of a company in your
of the remaining members of jurisdiction?
the board of directors or the
Restrictions on Foreign Investments in
management committee, as the
Jordan: Pursuant to the legislations that
case may be.
govern foreign investments, restrictions
• Venture Capital Company: This are imposed on foreign investment by
type of company is a company that is means of “closed” sectors in which it is
established with the intention of direct not allowed for a foreign investor to own
investment or establishing funds to fully or contribute in whole or in part to
contribute and invest in the capital of it1. Examples of those “closed” sectors in
companies with high growth potential, Jordan include, but are not limited to,
the shares of which are not listed in bakeries of all kinds, trade in weapons

1 Article 13 of the Investment Environmental Governance Regulations No. 7 for the year 2023

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and investigation and security services. In facilities in Jordanian Dinar or any other
addition, there are some sectors in which foreign currency to such persons and
the percentage of the foreign investor entities provided that, the entity must be
contribution shall not exceed 50% of registered in the free zone, or development
the total capital of the company, such or special areas in Jordan in accordance
as engineering consulting and services, with the applicable laws in force,
construction and related services and food allowing credit facilities for the purposes
and beverages services, except for tourist of exporting goods outside of Jordan,
restaurants and what is provided in hotels without such goods passing through
and motels. Jordanian territories, provided all necessary
actions must be taken to ensure cash
4. Are there any foreign exchange
restrictions or conditions applicable flow to the customer bank and to agent
to companies such as restrictions to bank in syndicated loans is undisturbed,
foreign currency shareholder loans? allowing indirect credit facilities among
banks, allowing indirect credit facilitation
In relation to merger and acquisition that contains “Performance Related
and shareholders loan, the parties have Contingencies”, as set out in capital
the right to agree on the currency they governance regulations pursuant to Basel
would like to pay in. For share capital Framework III No (67/2016), and other
of companies, shares must be valued exceptions.
and divided in JOD (Jordanian Dinars)
currency. However, there is nothing to 5. Are there any specific considerations
prevent any person from repaying their for employment of foreign
loans in domestic currency or in foreign employees in companies
currency (it depends on the agreement incorporated in your jurisdiction?
between the borrower and the lender). Conditions for hiring foreign labour: In the
On a different vein, and in relation to non- Jordanian Labor Law No. 8 of 1996 and its
operating entities and persons who do amendments, foreign labour is regulated by
not carry on business in Jordan wishing to Article 12, that states that no non-Jordanian
obtain loans from banks in Jordan, under worker is authorized to work except those
Article 3 of Direct Facilitation of Foreign who have received the approval of the
Currency and Limitation on Granting Minister of Labour. It is also conditional
Credit Facilitation to Non-Operating that the work the foreign employee will
Businesses in Jordan and/or Obtaining perform in Jordan entails an experience
Funds to carry on Businesses outside and qualification that are not available in
Jordan Regulations No. 2 for the year 2021 Jordanian workers or that the amount of
issued by the Central Bank of Jordan, qualified Jordanian workers with a specific
banks in Jordan are not allowed to grant, expertise does not meet the demand in the
whether directly or indirectly, any credit market for that expertise. However, should
facilities in Jordanian Dinar or in any other there be a supply of Jordanian experts,
foreign currency to persons (including
technicians, and workers who met the
Exempted Companies, Companies, Non-
criteria, they will be given the priority for
Operating Foreign Entities) who do not
the employment.
carry on businesses in Jordan and/or to
businesses who are operating outside of • Required Permit for Hiring Foreign
Jordan. However, the same Article, 3/B, has Labor: Any non-Jordanian worker
provided exceptions to those restrictions, (with the exception of the children
most notably to mention; allowing credit of Jordanian women married to non-

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Jordanian men) is required to obtain an her guardian’s) income necessitates

employment permit from the Minister an exemption. It is also provisional
of Labour before his/her employment on the duties of the foreign worker
in Jordan. The duration of this permit being limited to aiding the disabled
is limited to 1 (one) year only, but is individual.
subject to renewal. Should the permit
• Restrictions Specific to Foreign Non-
be renewed, then its new duration
Operating Companies: Pursuant to
will be calculated from the expiry
Article 249 of the Companies Law, the
date of the last employment permit of
number of Jordanian employees in
the foreign worker. The employment
a foreign non-operating company in
permit (and any renewal) for each
Jordan should not be less than half of
non-Jordanian worker is also subject
the overall number of the company’s
to a monetary fee to be paid by the
employees.
employer to the Ministry of Labour.
The amount of this monetary fee is C. Corporate Governance
determined in accordance with the
6. What are the standard management
Instructions for The Conditions and
structures (e.g., general assembly,
Terms of Use and Employment of
board of directors, etc.) in a corporate
Non-Jordanian Workers of 2012 and its
entity governed in your jurisdiction
amendments issued for this purpose.
and the key liability issues relating
In addition to the aforementioned
to these (e.g., liability of the board
monetary fee, an additional amount will
members and managers)?
also need to be paid by the employer
to the Ministry of Labour for each The standard management structures for
employment permit issued or renewed corporate entities in Jordan are the general
by the Ministry (and in accordance with assembly (both the ordinary general
the Instructions for The Conditions assembly and the extraordinary general
and Terms Of Use And Employment Of assembly) and the board of directors.
Non-Jordanian Workers of 2012 and its
The key lability issues relating to the
amendments issued for this purpose),
management structure are as follows:
which shall be allocated to the technical
and vocational education, training and • On the matter of the violation of
learning fund. company by-laws by the chairman and
the members of the board of directors:
• Exemption For Hiring Foreign
Domestic Helpers: An employer with o Pursuant to Article 157 of the
severe disabilities (or his/her guardian) Companies Law, the chairman
can be exempt from paying the fees and the members of the board of
for hiring foreign labour for assistance directors shall be held accountable
and from additional amounts for 1 towards the company, its
(one) foreign worker via the Minister shareholders and other parties
of Labour’s decision by way of a for every violation of the laws
recommendation from the Ministry of and regulations in force and/or of
Social Development. This is conditional the company’s memorandum of
on the disabled individual being in association and/or for any error in
dire need for assistance from others to the management of the company
meet his/her daily life requirements, that was committed by any or all of
and that the level of his/her (or his/ them. Should the general assembly

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consent to absolving the board of that information was acquired in their

directors from its responsibility, official capacity in the company, or as a
this shall not prevent legal recourse result of performing any business for or
being taken against the chairman with the company. Should any of them
and the board of directors. be in breach of this obligation, then
they are at the risk for dismissal and
o The liability stipulated above shall
being claimed for compensation for the
be either personal (borne by 1 (one)
damage/s that has been incurred on the
or more members of the board of
company. Information permitted to be
directors) or collective (borne by the
published in accordance with laws and
chairman and the members of the
board of directors) and in the case regulations in effect shall be excluded
of the latter, they shall be equally from the said obligation. Noting that
and jointly liable for compensating should the general assembly consent to
the damage/s that resulted from releasing the chairman and members
the aforementioned violation or of the board of directors from their
error in the management of the responsibility, this shall not absolve
company. Should a member of the them from liability.
board of directors prove that they • On the matter of the responsibility
objected to the decision relating of the company’s chairman, board of
to the violation or error in the directors’ members, for imprudence
management of the company in the and negligence in the management of
minutes of meeting for the meeting, the company: Pursuant to Article 159
that board member shall not be of the Companies Law, the company’s
liable for the above-mentioned chairman and board of directors’
compensation. However, in all members shall be equally and jointly
cases, no claim relating to this responsible towards shareholders for
responsibility can be raised after any imprudence or negligence in the
the lapse of 5 (five) years from management of the company. In the
the date that of the general event of the liquidation of the company
assembly meeting during which and the appearance of a deficit in its
the company’s annual balance assets in a manner that renders the
sheet and its final accounts were company unable to meet its obligations
approved. and should the reason for such a deficit
be the imprudence or negligence of the
• On the matter of the liability of the
chairman and members of the board
company’s chairman, board of directors’
of directors or its general manager or
members, general manager and its
auditors, the court shall have the right
employees in relation to disclosing
to hold any of the previously mentioned
the company’s secrets: Pursuant to
individuals liable for the debts of the
Article 158 of the Companies Law,
company, in full or in part, as the case
the company’s chairman, members
may be. The court shall determine the
of the board of directors, its general
amounts that those individuals are
manager or any of its employees
liable for and whether they are jointly
shall be prohibited from disclosing
liable in the loss or not.
to any shareholder in the company
or to another party any information • On the matter of the right to file for
or data related to the company and court action: Pursuant to Article 160
considered of a confidential nature; if of the of the Companies Law, the

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Companies Controller at the Ministry • Pursuant to Article 192 of the

of Industry, Trade & Supply (hereinafter Companies Law, companies registered
referred to as the “CCD”), the company in Jordan must appoint an auditor
and any shareholder shall have the right taking into consideration the following:
to file a case with the court pursuant to
o The general assembly of a public
the provisions of the abovementioned
shareholding company, a limited
Articles 157, 158 and 159.
liability company and a private
• On the matter of the objection of shareholding company shall elect
the board of directors’ chairman 1 (one) or more licensed auditors
and members to the discharge of from amongst the licensed
responsibility issued by the company’s auditors in Jordan for 1 (one) year,
general assembly: Pursuant to Article renewable and shall determine
161, the decision issued by the their remuneration or authorize
general assembly on the discharge of the board of directors to determine
responsibility shall not be considered as such remuneration. The company
evidence except after the presentation shall inform the elected auditor by
of the company’s annual accounts and writing thereof within 14 days from
auditors’ report to the general assembly. the date of his/her election.
This discharge of responsibility shall
only include issues which the general
assembly was made aware of/was o If the company’s general assembly
informed of. fails to elect an auditor, or if the
It should be noted that public shareholding auditor who has been elected
companies in Jordan are subject to apologized or declined to carry out
corporate governance regulations the work for any reason whatsoever,
that have been issued, however; while or in case of death, the board of
limited liability companies and private directors should recommend to the
shareholding companies are also subject CCD at least 3 (three) auditors to
to corporate governance guidelines and choose from within 14 days from
regulations, those have not been issued/ the date of the vacancy of such
implemented as of yet. It should also be post.
noted that, pursuant to Article 89 bis of the • Pursuant to Article 193 of the
Companies Law, any private shareholding Companies Law, the auditor’s duties are
company with an issued share capital that as follows:
exceeds 500,000 Jordanian Dinars is also
subject to the provisions of Article 151 of o To monitor the company’s
the Companies Law that states that they operations.
are subject to the corporate governance
o To audit its accounts in accordance
regulations of public shareholding
with recognized auditing rules,
companies.
auditing profession principles and
7. What are the audit requirements in scientific and technical standards.
corporate entities?
o To revise the financial and
In accordance with Articles 192 – 203 of the administrative by-laws of the
Companies Law, a very brief and general company and its internal financial
overview of the most important audit controls and to ensure their
requirements, is as follows: suitability for the company’s

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business and safeguarding of its express his/her opinion regarding

assets. the company’s financial position,
results of its operations and cash flow
o To perform verification of the
in accordance with internationally
company’s assets and its ownership
recognized auditing rules.
thereof and to ascertain the legality
and correctness of the company’s iv- That the financial statements included
obligations. in the board of director’s report
addressed to the general assembly
o To review the board of directors’
comply with the company’s records and
decisions and instructions issued by
registers.
the company, and any statements
which their work requires their v- Any violations of the provisions of
acquirement and verification. the Companies Law or the company’s
o To carry out any other duties the memorandum of association that have
auditor must perform in accordance taken place during the year in question
with the Jordanian Companies Law, and which have had a material effect on
the Auditing Profession Law No. the results of the company’s operations
73 of 2003 and other regulations and its financial position and whether
related thereto. any of these violations still exist to the
extent of the limits of the information
o To present a written report available to him/her, or that he/she
addressed to the general assembly. should know by virtue of his/her
The auditors or the person professional duties.
delegated by them shall recite the
report before the General Assembly. o Pursuant to Article 198, the auditor’s
In accordance with Article 195 of attendance of a general assembly
the Companies Law, the content of meeting shall be via an invitation
this report includes the following: sent to the auditor alongside a copy
of the reports and statements sent
i- That the auditor has obtained by the board of directors and the
the information, statements and auditor or his/her representative
clarifications he/she deemed necessary shall attend that meeting.
to perform his work.
o Pursuant to Article 200, should
ii- That the company maintains organized the auditor become aware of
accounts, registers and documents. any violation by the company of
The company’s financial statements the provisions of the law and/or
must be prepared in accordance with the company’s memorandum of
internationally recognized accounting association and/or any significant
and auditing principles which can financial issues, which may
justly show the financial position of negatively impact the company’s
the company, its cash flow, and that
financial or administrative position,
its balance sheet and profit and loss
they should immediately notify the
account confirm with the records and
chairman of the board of directors,
books.
the CCD, the Financial Instruments
iii- That the auditing procedures carried Commission and the Market for
out by him/her for the company’s Financial Instruments in writing as
accounts form, in his/her opinion, soon as they discover (or become
a sufficient reasonable basis to aware of ) those matter/s.

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D. Shareholder Rights In a private shareholding company, it is

allowed to have in the AoA privileges
8. What are the privileges that can allocated to a certain class of shareholders;
be granted to shareholders? In For example, a certain class of shareholders
particular, is it possible to grant
will have the privilege to appoint directors
voting privileges to shareholders for
in the company, but also among such class
appointment of board members?
of shareholders, still the percentage of
Under Jordanian law, there are certain passing special resolution by at least 75%
privileges that could be granted to of the shareholders’ holding shares in a
shareholders in a company depending company must be also observed.
on the type of company. For example,
9. Are there any specific statutory rights
shareholders could have pre-emptive rights
(first refusal), which will give the right to available to minority shareholders
shareholders to buy another shareholder’s available in your jurisdiction?
share in a company if such shareholder In Jordan, there are many rights for
is offering their shares for sale. In private minority shareholders. For specific minority
shareholding companies, another example rights, we could mention the following:
of shareholders’ rights is higher value of
dividends, by creating more than 1 (one) • Under Article 65/B and 67 of the
share classes and each class would have a Companies Law for limited liability
different value of dividend distributed to its companies, Article 77 bis, Article 79/B
holder. Also, the right for first buyers of new bis for Private Shareholding Companies,
allotted shares of the company, and others. Article 175/A, B for public shareholding
A filed Articles of Association (“AoA”) of a companies, all special resolutions
company in Jordan is the document that must be passed by at least 75% of
will apply and take precedence over any the extraordinary general assembly,
other agreement or document signed including resolutions on amending
between shareholders. AoA must not Memorandum and AoA, appointment
contradict the Companies Law. Agreeing and dismissal of directors (unless in
on certain shareholders to appoint board private shareholding companies if the
of directors’ members is not an action director was appointed by a specific
that is in conformity with the Companies class then this class would dismiss
Law since this is considered one of the said director), selling the company’s
company’s powers and authorities, to be assets, merging and acquiring 50%
implemented through its general assembly. or over of another company’s shares,
If one shareholder in a company holds a capital appreciation and depreciation,
share of 75% or more, then said shareholder resolution to dissolve the company, and
will be able to pass a special resolution anything else that relates to the general
alone, which consequently means that assembly of the company.
such shareholder can alone appoint the
board of directors. One way to ensure all • 25% of the shareholders of the
shareholders are involved in passing special company may request the company to
resolutions is by increasing the percentage convene a general assembly meeting,
of passing special resolutions from 75% to and 15% of the shareholders may
100%. However, lowering the percentage of request to the company controller
passing special resolution to become below to compel the company to convene
75% is not allowed. general assembly meeting.

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• In public shareholding companies, and shareholders have the right to review

in limited liability companies, under the company books and documents
Article 107 of the Companies Law, related to their shares for whatever
shareholders who hold at least 20% of reason, and have the right to review
the company’s shares have the right all company’s books and documents
to object in the first general assembly generally for a reasonable reason.
meeting on the establishment expenses Shareholders also have the right to
of the company. Such objection should request a copy of such books and
be submitted to the company controller documents archived at the company
who will try to settle such objection. If in exchange of reasonable fees. It
such was not settled, the shareholders is important to note that this also
representing 20% of the shares may applies to other types of companies
bring this objection to the court and as the general rule is if there is no
wait for a court decision on this matter. special provision provided under the
During this time, the objection being Companies Law for a certain company,
heard at court will not affect the then the provisions of the Public
company’s business and dealings. Shareholding Companies will fill the
• Under Article 274 and 275 of gaps and apply. This is also applicable
Companies Law, the right for every on limited liability companies pursuant
shareholder to review the public and to Article 76, which states if there
private documents of the company is no special provision for limited
is stipulated, and every shareholder liability companies in the Companies
has the right to request a certified Law, then the provisions of the Public
copy of such documents. In addition, Shareholding Companies will apply.
shareholders holding at least 10% of the Accordingly, and pursuant to Article
company’s shares or four directors of 144 of the Companies Law, each
the company, in a public shareholding shareholder is entitled to receive by
company, a private shareholding the company board of directors an
company, a limited liability company invitation to attend a general meeting
can request the company controller to of the company. Further, attached with
inspect the company’s books, deals and the invitation would be the company
documents. If the Company Controller financial accounts, balance sheets,
accepts that there is something that auditor report and additional data
needs to be inspected, the Company about the company.
Controller will appoint an expert to • All in-kind contribution shareholders
review the company’s documents and have the right in the extraordinary
eventually request for the company
general assembly meeting of their
to re-comply with certain failures or
company to object to the resolution
otherwise the company would be
which values their in-kind capital
referred to the court for the court to
contribution before the competent
decide on the appropriate remedy for
authority in Jordan within 15 days from
the company’s failures in its conducting
the date of said extraordinary meeting,
business, after inspection as explained
provided however, such shareholders
above.
have noted their objections on the
• Under Article 98/D of Companies Law meeting minutes of said meeting.
and reference to public shareholding Noting that such objections may not
companies, it is stated that all affect the operation of the company.

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10. Is it possible to impose restrictions on the matter and appoint a qualified

on share transfers under the insolvency practitioner to liquidate the
corporate documents (e.g., Articles company. Creditors should register their
of Association or its equivalent in debts with the qualified insolvency
your jurisdiction) of a company practitioner. Liquidation under the
incorporated in your jurisdiction? Companies Law, could be by the company
itself as a voluntary liquidation by passing a
Yes, it is possible to include restrictions
special resolution, or could be involuntary
on share transfers under the duly filed
liquidation in certain instances such as if
AoA of the company as the AoA always
the company has made losses exceeding
take precedent over any other document
in the event of disparities among such three quarters of its share capital Article
documents. Shareholders could include 75/B of Companies Law. Another concern
pre-emptive rights (right of first refusal) to note is that if the company is subject
and also, they could include right to first to insolvency or liquidation proceedings,
subscribers, each in accordance with the creditors might wait for lengthy period
shareholding percentage, in the event of of time before their debt can be paid off,
the company allotting new shares. especially if they are not secured creditors.

11. Are there any specific concerns or In the context of a merger and acquisition,
other considerations regarding the companies must have in some cases
composition, technical bankruptcy a minimum share capital, and if such
and other insolvency cases in your company failed for example to meet this
jurisdiction? minimum share capital requirement,
this might be considered by the relevant
Liquidation occurs when the company is authority as a material violation of the
dissolved either voluntary or involuntary. Companies Law, and therefore pursuant to
usually because it is unable to carry on its Article 59/B and Article 266, the relevant
business. There are certain considerations authority could have the right to strike off
that should be noted in this regard, the company’s registration.
especially with the new amendments
of the Companies Law No. 20 of 2023 The process of bankruptcy might be quite
that came into force in November 2023. lengthy, especially if the company has been
According to the amendments on the conducting business and has wide scope
Companies Law, liquidation generally will of dealings. For example, in the process
be more connected to the Insolvency Law of winding up a company, the liquidator
No. 21 of 2018. Certain considerations would be required to obtain clearance
to note regarding insolvency is that letters from different governmental entities
although the Insolvency Law requires in Jordan such as the tax department,
detailed documents and the relevant the customs department, the social
authority to inspect the company situation, security corporation, the companies
the company might file a fraudulent control department and the tradenames
insolvency application to evade its liability. department at the Ministry of Industry,
Insolvency is an application submitted Trade & Supply, and others, which such
to the competent court by the relevant process of obtaining clearance letters might
authority or by an individual or a company be time and effort consuming.
to declare that they are unable to pay their
debts anymore. The court will look at the
submitted evidence and take a decision

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E. Acquisition to the company. The remaining

shares in the company would be
12. Which methods are commonly used silent shares and not those of a
to acquire a company, e.g., share special nature.
transfer, asset transfer, etc.?
o Converting debts into shares by
• The methods used in Jordan for the full issuing loan stocks that are capable
acquisition of a company are as follows: of being converted into shares
o A share transfer by way of a share in the company in the event that
transfer deed (with the number the debt has not been paid on its
of shares being the total amount specified period. This is conditional
of shares in the company), using on meeting the criteria relevant
a template/pre-set text which is to such a procedure such as the
provided by the CCD. approval of the owner of the loan
stock/s to having the loan stock/s
o A merger of 2 (two) or more
being converted into shares in the
companies in a manner where
company
the legal personality of the first
company remains while the legal 13. What are the advantages and
personality of the other company/ disadvantages of a share purchase
ies is merged into that of the first as opposed to other methods?
company pursuant to Article 222/A
of the Companies Law. There are certain ways in which ownership
of shares could be changed. The most
• The method used in Jordan for a partial important method is by means of a shares
acquisition of a company is as follows: purchase, which is filed at the CCD. The
o A share transfer by way of a share main advantage of share purchase is that
transfer deed (with the number of there no additional formalities to execute
shares not being the total amount the transfer deeds, and the agreement
of shares in the company), using between both the purchaser and the seller
a template/pre-set text which is of shares, as it is relatively easy way to
provided by the CCD. sell shares. In addition, in the buyer and
seller agreement for the sale of shares, the
• There are also methods of ownership parties can include the sale of the goodwill
of companies in Jordan that are not of the acquired company. However, the
conditional on the ownership of all disadvantage of this is the goodwill of the
shares, but rather on the acquisition acquired company value might not be
of control within the company via the reflected in the share’s sale value.
acquisition of shares. These methods
are as follows: 14. What are the approvals and
consents typically required (e.g.,
o Issuing shares of a special nature (in corporate, regulatory, sector
private shareholding companies) based and third-party approvals)
that provide its owner with the
for private acquisitions in your
right to attend general assembly
jurisdiction?
meetings, run for and appoint the
board of directors as well as other The approvals and consents typically
features such as the right to take required for a private acquisition in Jordan
action and make decisions related can be summarized as follows:

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• In the event of a full acquisition, there is agreed upon to the seller company;
no requirement to obtain the approval the amount will be deposited in
of any partners or shareholders, as there a special account in order to be
are none. distributed among shareholders
registered with it on the date of
• In the event of a partial acquisition
the general assembly issuing the
of a public shareholding company or
decision to sell their shares;
of a private shareholding company,
there is no requirement to obtain the o the company of which the shares
approval of any shareholders, unless have become acquired by new
it is stated otherwise in the AoA and shareholders shall invite the general
memorandum of association. assembly to realize the necessary
• In the event of a partial acquisition of amendments to its Articles and
a limited liability company, there is a memorandum of association and to
requirement to obtain the approvals of elect a new board of directors.
partners or shareholders. 15. What are the regulatory
Steps for Acquiring a Company in Jordan: competition law requirements
A company may acquire another company applicable to private acquisitions in
(regardless of its type) in Jordan by your jurisdiction?
following these procedures: The regulatory competition law
o a decision is issued by the requirements in Jordan applicable to
extraordinary general assembly of private acquisitions/business combinations
the buyer company approving the are primarily related to antitrust acts
ownership of another company’s through relevant laws and legislative
shareholder shares, if the ownership instruments. In the event that a transaction
of shares is over 50% or in the case is considered to fall under the scope of the
of 100% ownership of shares; competition law, then a complaint can be
referred to the public prosecutor who will
o a decision is issued by the then file a claim at the court of first instance
extraordinary general assembly of with the Ministry of Industry, Trade &
the seller company approving the Supply as the claimant (pursuant to Articles
selling of its shareholders’ shares to 16 & 17 of the Jordanian Competition Law
another company; No. 33 of 2004 and its amendments),
o completion of the stipulated Such relevant laws are:
approval, registration and
publication procedures to transfer • the Competition Law No. 33 of 2004
the shares of the shareholders of and its amendments that is read with
the company that decided to sell the Amending Law to the Competition
to the acquirer company. That Law No. 12 of 2023;
ownership shall not be considered
• the Companies Law;
to have reached closure until its
registration and authentication are • the Medicines and Pharmacy Law No 12
completed, in accordance with the of 2013 and its amendments;
provisions of the Companies Law;
• the Instructions for Rules to Encourage
o the buyer company shall pay the Competition Among Investors in The
value of the shares that has been Civil Aviation Sector No. 2 of 2007.

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16. Are there any specific rules change of ownership of the company
applicable for acquisition of public result in changes in privileges, as
companies in your jurisdiction? elaborated in article 26/A of the
Regulating Insurance Activities Law.
As it is also stated in the answer to
Question 17 below, in the case of a • It is prohibited for shareholders or for
takeover of a public company listed shareholders whose shares are affected
on the Amman Stock Exchange, a bid to dispose of those shares or of their
is made public in 2 (two) scenarios, ownership (whether partially or fully)
namely a public offer and a public without the prior written consent of the
takeover offer. A public offer is “an Central Bank of Jordan as elaborated
offer for the sale of any security to in article 26/D/2 of the Regulating
more than 30 persons of the public, Insurance Activities Law.
including public issuance and public 17. Is there a requirement to disclose
subscription”, whereas the public a deal, for instance to regulatory
takeover offer is when a bid to authorities? Is it possible to keep a
purchase exceeds the 40% threshold. deal confidential?
Both scenarios require a prospectus,
as previously elaborated, to be filed • Requirement to Disclose a Deal/Time
before the competent authority, and of Disclosing a Deal: In our experience
must be addressed to all owners of a deal is required to be disclosed when
such securities. definitive agreements are signed,
whereby the disclosure of the deal shall
With regard to the merger of affect many rights and obligations, such
companies, an application must be as the employment contracts and the
submitted to the companies’ general lease contracts.
controller however, it will only be
referred to the Minister of Industry, • Market Practice on Timing/The Right
Trade, and Supply if the merger Time of Disclosure: As per market
pertains to a public shareholding practice, the disclosure of the legal
company or if it will result in one, as requirements will take place prior to
stated in Article 227 of the Companies any other disclosure in order to proceed
Law. Furthermore, Article 226 of the with a due diligence. That will enable
Companies Law states that the board the buyer to conduct a study on the
of directors must notify the Controller, company’s contracts, agreements and
the Commission, the Market, and the financial matters of the company to be
Depository Centre within 10 (ten) days merged, for the purposes of evaluating
of the date of issuance of the merger the acquisition process of the company
decision. and determining whether or not to
proceed with the transaction.
In accordance with the Regulating
• Making a Bid Public: In the case of a
Insurance Activities Law No.12 of 2021
takeover of a company listed on the
(“Regulating Insurance Activities
Amman Stock Exchange, a bid is made
Law”), there are certain conditions for
public in 2 (two) scenarios, namely a
the acquisition of public companies,
Public Offer and a Public Takeover Offer.
such as but not limited to:
A Public offer is “an offer for the sale of
• Obtaining the prior written consent of any security to more than thirty persons
the Central Bank of Jordan should the of the public, including public issuance

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and public subscription”, whereas the finally, a preliminary evaluation of the

public takeover offer is when a bid to assets and liabilities at market value, as
purchase exceeds the 40% threshold. per Article 225 of the Companies Law.
Both scenarios require a prospectus,
• Transaction Documents: Parties
as previously mentioned, to be filed
must produce their audited financial
before the competent authority, and
statements in full, in accordance with
must be addressed to all owners of such
Article 225 of the Companies Law.
securities.
18. Can sellers be restricted from
• Disclosure of Mergers: With regard
shopping around during a
to the merger of companies, an
application must be submitted to negotiation process? Is it possible
the companies’ general controller; to include break fee or other
however, it will only be referred to the penalty clauses in acquisition
Minister of Industry, Trade, and Supply documents to procure deal
if the merger pertains to a public exclusivity?
shareholding company or will result Standstills or Exclusivity: The Jordanian
in one, as stated in Article 227 of the law and legal framework do not negate
Companies Law. Furthermore, Article the existence of standstills or exclusivity
226 of the Companies Law states that agreements; hence, they are permissible.
the board of directors must notify the Furthermore, as seen in various deals,
controller, the Commission, the Market, exclusivity agreements are used in practice.
and the Depository Centre within 10 Break fees and penalty provisions are not
(ten) days of the date of issuing the accepted in practice as an acquisition is
merger decision. only considered to have value when it is
• Type of Disclosure Required: When registered at the CCD and the CCD does
2 (two) companies have decided to not register the intent/promise of an
combine their businesses, also known acquisition, it registers only the acquisition
as a merger under the Companies Law, itself.
the requirements of the application are 19. What are the conditions precedent
set out in Article 225 of the Companies in a typical acquisition document?
Law. Those requirements shall include Is it common to have conditions to
the decision of the general assembly of closing such as no material adverse
each company approving the merger change?
and the terms set out in the merger
agreement. Common Conditions for a Takeover Offer
in Jordan: The Jordanian regulator did not
• Producing Financial Statements: restrict the use of offer conditions, which
The Corporate Governance Code for is subject to the mutual agreement of the
Shareholding Companies states that parties. However, based on our experience,
produced financial statements must there are some common conditions for a
be prepared in accordance with the
takeover offer, as follows:
International Financial Reporting
Standards (IFRS). Each company • the offered price;
wishing to merge must submit audited
• the type of consideration (cash or
financial statements of the last 2 (two)
shares);
fiscal years, in addition to an audited
financial position statement, and, • the number of target shares;

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• the minimum quota for shareholder For warranty insurance, usually the
approval; documents for the process of merger and
acquisition is held by an escrow who would
• the condition that no event has
be a law firm in Jordan, and the law firm
occurred or will occur between the
will not release any documents to the other
announcement of the offer or the
party unless if it is in accordance with the
signing of a merger agreement and the
steps agreed between the parties, and
time at which the bidder is to purchase
until the completion of the transaction
the shares or complete the transaction
and the deliveries of certain documents.
that might have a negative impact on In practice, to the best of our knowledge,
the purchased shares; there is nothing in a merger or acquisition
• the condition that the company must deal that requires to obtain a warranty
comply with its representations, insurance, although there is nothing under
guarantees, warranties, or conditions in the Jordanian laws that prohibits that.
the merger agreement; 21. Is there a requirement to set a
• the condition that all required minimum pricing for shares of a
regulatory approvals must be obtained target company in an acquisition?
for the merger to be completed. Minimum Acceptance Conditions: There
20. What are the typical warranties are no minimum acceptance conditions
and limitations in acquisition (i.e., the relevant control thresholds) for
documents? Is it common to obtain tender offers under Jordanian law. That
warranty insurance? leaves the minimum requirements open
to the interpretation of the will of both
There are many warranties and limitations parties, which allows for flexibility of offer
usually included in the acquisition conditions, as well as the enforcement of
documents, such as a warranty from the the will of both parties to its utmost extent.
buyer of shares that they are the true
beneficiary of the transaction (and not 22. What types of acquisition financing
someone else), warranties that the parties are available for potential buyers in
entered into the transaction with their your jurisdiction? Can a company
legal representative and have the power provide financial assistance to a
to oblige, warranty to complete the potential buyer of shares in the
transaction on the specific dates agreed target company?
upon, warranty to obtain all approvals or Requirement to Obtain Financing: The
waivers for any rights such as pre-emption legal framework governing this area of
right or any other right to ensure the law does not impose an obligation on the
completion of the transaction, warranty bidder to obtain proof of financing prior
to the marketability of the shares and that to the merger agreement; however, the
they are free from any encumbrances. law does not prohibit including such an
Usually, limitation would be in the arrangement. Therefore, parties can opt to
indemnity provisions, in that the amount add an obligation to obtain financing.
payable for any breach of warranties would
23. What are the formalities and
be limited to cover actual loss, warranty to
procedures for share transfers and
duly execute and file documents before any
how is a share transfer perfected?
filing of the merger or acquisition at the
relevant authority. In accordance with Article 222/B of the

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Companies Law, and in the context of be published on a daily newspaper in

acquisition, share transfer in the case of accordance with the Companies Law.
acquisition is usually executed by means
Thereafter documents must be filed
of a form of transfer deed issued by the
preferably by the lawyers who verified the
relevant authority in Jordan (“Company
parties’ signature on the transfer deeds at
Control Department”), or the specific form
the Company Control Department, and
prescribed in the company’s AoA , if there
stamp duty and fees would be paid to the
was one prescribed. This form of transfer
Company Control Department. At the end,
deed contains the name of the acquirer
and following filing of such documents,
(buyer) and of the acquired company
the parties usually request from the
(seller), the value paid for each share and
Company Control Department to issue a
the signature of both of the parties to it,
certificate of “To Whom it May Concern”
with a qualified lawyer in Jordan to verify
to reflect the new shareholders and their
that signature was made before them
shares. After completion of the transaction,
and in their presence. Further, 2 (two)
the seller company must convene an
extraordinary general assembly resolutions
extraordinary general assembly to amend
are required to be passed by both the
its Memorandum and AoA to reflect the
acquirer and the acquired company
new change, and to appoint new board of
resolving to approve the acquisition. That a
directors.
special resolution is passed by the acquirer
to acquire the acquired company, and a 24. Are there any incentives (such
special resolution passed by the acquired as tax exemptions) available for
company to approve the acquisition. In acquisitions in your jurisdiction?
the case of any pre-emption rights for
Article 224 of the Companies Law has
shareholders, either a waiver document
provided an exemption for the merged
from such shareholders is required to be
company, and their shareholders from all
made available or to follow the process
tax and fees including shares ownership
prescribed under the Companies Law,
transfer fees related to the merger. It
or AoA usually being notifying the
states that, the merger company, along
shareholders of the deal. If the shareholders
with its shareholders or partners therein,
of the company within a period of time
and the merging company (the company
stated in the offer for the sale of shares
resulting from the merger) along with its
did make an offer to buy the proposed
shareholders or partners therein, shall be
shares for the same price offered, then each
exempt from all taxes and fees, including
shareholder could acquire the proposed
the title transfer fees caused by the merger
sale shares in proportionate percentage
or any fees that arose as a result of it”.
to their share amount, which they hold
However, for acquisition, upon buying
in the company. If no shareholder made
shares of another company and filing the
an offer to buy the proposed shares, then
shares ownership transfer deeds at the
the seller shareholder may proceed to sell
Company Control Department, fees and
their shares to third parties. The buyer will
stamp duty for such transaction will be
transfer or pay the amount of purchased
payable. In addition, there are some tax
shares to the seller on the date that the
benefits for companies which hold certain
seller extraordinary general assembly
percentage of shares in other companies2.
resolution of selling shares was passed,
and then the new shares purchase would

2 Please note that Hammouri & Partners Attorneys at-Law only provides generic comments on taxation regime in Jordan.

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F. Enforceability • the 2023 amendments made to the

Companies Law No. 20 of 2023
25. Can acquisition documents be
executed in a foreign language? • the 2019 amendments made to the
insolvency framework accompanied by
No, in order to submit the acquisition the licensing of insolvency practitioners
documents at the CCD, they must be in Jordan;
submitted at the CCD in Arabic or be in a
foreign language, but accompanied by an • the commencement of digitization of
official translation in Arabic. the judicial services in Jordan;

26. Can acquisition documents be • the new Personal Data Protection Law
governed by a foreign law? No. 24 of 2023;

No, the acquisition documents must be • mergers of banks and/or financial

subject to Jordanian law. institutions consolidations;

27. Are arbitration clauses legally • changes in the investment framework

permissible or generally included in and relevant regulations in the year
acquisition documents? 2023;

There is nothing under the laws of Jordan • increase in the set-up of small- and
to prohibit or invalidate any arbitration medium-sized enterprises (“SME”), and
agreement in the course of merger and projected consolidation of SMEs;
acquisition. The parties are free to agree on • increase of e-commerce and
the method of resolving any dispute related technology services;
to their transaction including agreeing on
arbitration, therefore it is permissible and • energy related projects and
generally included, provided it is drafted acquisitions;
in clear way and in accordance with the
• updated labour law rules to take in
applicable law and acceptable practice in
consideration remote and/or hybrid
Jordan.
work arrangements.
28. Are there any specific formalities
30. Are any significant development
for the execution of acquisition
or change expected in the near
documents? Is it possible to
future in relation to M&A in your
remotely/digitally sign documents?
jurisdiction?
Remotely/digitally signing documents is
The aforementioned trends may be
permitted under Jordanian legislation, but
considered as driving factors that are
is not widely used in practice in Jordan.
expected to assist in moving forward with
G. Trends and Projections M&A deals in Jordan; as distressed business
will have a clearer legal framework to
29. What are the main current trends in
come out of an adverse financial situation,
M&A in your jurisdiction?
investors will be more motivated to
Some current (2024) top trends in Jordan consider deal-making in Jordan due to
can be summarised as follows: the digitalization of the relevant company
services and the court proceedings.
• the commencement of digitization of
the services offered by the CCD, at the At the domestic level, undoubtedly the
Ministry of Industry, Trade and Supply; surge of e-commerce transactions in Jordan

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which became more evident following the

pandemic is anticipated that it will create
more employment opportunities, more
corporate set-ups and possibly mergers in
the domestic market.
On the factors that will contribute and
encourage more M&A deals in Jordan, it is
considered that:
• the changes towards digitization of
key sectors in Jordan will hopefully
ease formalities and thus attract more
foreign investment and merger interest
from foreign companies in Jordan;
such examples include the digitization
of the CCD, the digitization of the
court system, the digitization of the
healthcare sector in Jordan and other.

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KAZAKHSTAN
GRATA

Igor Lukin
Partner
[email protected]

A. General cases, the basic legal features are similar.

In particular, each corporate form has a
1. What is the main legal framework separate legal personality and shareholders
applicable to companies in your enjoy limited liability.
jurisdiction?
The main difference between the JSC and
The main legal framework applicable to LLP is that the JSC is a complex and strictly
companies in Kazakhstan includes the regulated corporate form. For example,
following legal acts:
the minimum authorized capital of the
- Civil Code; JSC must be approx. USD 400,000. Also,
- Law on Limited and Additional Liability there are rigorous legal requirements to
Partnerships; and incorporation, governance, accounting,
audit and public disclosure in the JSC. On
- Law on Joint Stock Companies.
the contrary, the LLP is a fairly simple and
2. What are the most common types flexible corporate form. In general, the
of corporate entities (e.g., joint LLP is the most popular corporate form of
stock companies, limited liability doing business in Kazakhstan. Noteworthy
companies, etc.) used in your that curtain business can only be organised
jurisdiction? What are the main as JSCs (e.g., banks, insurance, and regular
differences between them (including passenger air travel).
but not limited to with regard to the
shareholders’ liability)? B. Foreign Investment
Under Kazakhstan law, the most common 3. Are there any restrictions on foreign
forms of corporate entities are the joint- investors incorporating or acquiring
stock company (“JSC”) and the limited the shares of a company in your
liability partnership (“LLP”). In both jurisdiction?

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In general, there are no restrictions on Shareholder) and the General Director.

foreign investors incorporating or acquiring Instead of the General Director, the
the shares of a company in Kazakhstan. Management Board can be appointed. In
However, there are a few exceptions. For addition, the shareholders may decide to
instance, a foreign person cannot own, create a Supervisory Board and/or Audit
directly or indirectly, more than 20% of Committee.
shares in a local company that owns mass
The standard management structure in
media.
JSCs is the General Assembly (or the Sole
4. Are there any foreign exchange Shareholder), the Board of Directors, and
restrictions or conditions applicable the General Director. Instead of the General
to companies such as restrictions to Director, the Management Board can be
foreign currency shareholder loans? appointed (in some cases, e.g., banks, the
In general, any transaction between a Management Board is a must). In addition,
foreign shareholder and a local company the shareholders may decide to create an
in excess of USD 500,000 (an equivalent Audit Committee.
in any other currency) is subject to a As a general rule, board members and
currency control regime which implies a managers shall be liable for the company’s
prior registration with the National Bank of losses that occurred as a result of their
Kazakhstan. Noteworthy that the dividend improper actions/omissions and can be
distribution is exempted from the currency obliged to compensate such losses. Board
control requirements. members and managers of JSCs enjoy
5. Are there any specific considerations the business judgment rule (which is not
for employment of foreign available for board members and managers
employees in companies of LLPs).
incorporated in your jurisdiction? 7. What are the audit requirements in
Normally, a foreign employee would need corporate entities?
a work permit in order to be employed In general, the LLPs are not required to
by a local company. In addition, the visa obtain an external auditor’s report in
and local content requirements shall relation to their financial statements. Only
apply. Certain categories of employees are certain types of LLPs (subsoil users, airlines,
exempted from the obligation to obtain developers, etc.) are obliged to conduct
a work permit (e.g., General Directors an external audit of their annual financial
of companies wholly owned by foreign statements.
shareholders).
All JSCs must conduct an external audit of
C. Corporate Governance their annual financial statements.
6. What are the standard management
D. Shareholder Rights
structures (e.g., general assembly,
board of directors, etc.) in a corporate 8. What are the privileges that can
entity governed in your jurisdiction be granted to shareholders? In
and the key liability issues relating particular, is it possible to grant
to these (e.g., liability of the board voting privileges to shareholders for
members and managers)? appointment of board members?
The standard management structure in In general, no specific privileges can
LLPs is the General Assembly (or the Sole be granted to shareholders. However, a

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shareholder of the LLP may be granted an There are no specific concerns or other
increased number of votes in relation to considerations regarding the composition,
certain matters discussed at the General technical bankruptcy and other insolvency
Assembly resulting in the ability of such cases in Kazakhstan.
shareholder to cause the General Assembly
to take a decision on such matter even if
E. Acquisition
other shareholders vote against it. Also, a 12. Which methods are commonly used
shareholder of the JSC can be granted a to acquire a company, e.g., share
“golden share” that gives the right to veto transfer, asset transfer, etc.?
decisions of the General Assembly, Board of
In Kazakhstan, share transfer and asset
Directors, or General Director (Management
transfer are commonly used to acquire a
Board).
company.
9. Are there any specific statutory rights
13. What are the advantages and
available to minority shareholders
disadvantages of a share purchase
available in your jurisdiction?
as opposed to other methods?
Yes, there are specific statutory rights The main advantage of a share purchase
available to minority shareholders in is that the company is acquired as a whole
Kazakhstan. For instance, a shareholder that (including the team, contracts, assets,
owns (or shareholders that in aggregate reputation and licenses). The key potential
own) at least 5% of the votes are entitled to disadvantage is that certain historical legal
include items to the agenda of the General risks may be attached to the company.
Assembly. In addition, any shareholder
of the LLP, notwithstanding the votes 14. What are the approvals and
owned, or a shareholder of the JSC that consents typically required (e.g.,
owns at least 10% of votes, may appoint corporate, regulatory, sector
(at their own expense) an external audit based and third-party approvals)
of the company. Also, any shareholder has for private acquisitions in your
the right to challenge the decisions of the jurisdiction?
governing bodies in court. Corporate approvals of the parties to the
10. Is it possible to impose restrictions transaction are typically required. If the
on share transfers under the certain thresholds are exceeded a merger
corporate documents (e.g., articles clearance requirement may be triggered.
of association or its equivalent in Also, there are a few sector-based approvals
your jurisdiction) of a company for example permits for acquisition of
incorporated in your jurisdiction? shares in subsoil users or banks.
15. What are the regulatory
It is possible to impose restrictions on share
competition law requirements
transfers under the corporate documents of
applicable to private acquisitions in
the LLP. The restrictions on share transfers
your jurisdiction?
in JSCs are controversial as such concept is
not expressly recognized by the law. If more than 50% of voting shares are being
acquired, the prior merger clearance is
11. Are there any specific concerns or
required if any of the following exceeds
other considerations regarding the
approx. USD 80,000,000:
composition, technical bankruptcy
and other insolvency cases in your - global assets of the acquirer’s group and
jurisdiction? the target;

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- global turnover (for the previous year) of is also quite common condition precedent.
the acquirer’s group and the target. Another widely met condition precedent
is the completion of the due diligence
16. Are there any specific rules
exercise to the satisfaction of the acquirer.
applicable for acquisition of public
companies in your jurisdiction? 20. What are the typical warranties
and limitations in acquisition
There are no specific rules applicable
documents? Is it common to obtain
for acquisition of public companies in
warranty insurance?
Kazakhstan.
In Kazakhstan, warranties and limitations
17. Is there a requirement to disclose
used in acquisition documents are quite
a deal, for instance to regulatory
authorities? Is it possible to keep a standard (i.e., those normally used in
deal confidential? English law governed acquisitions). It is not
common to obtain warranty insurance.
There is no requirement to disclose deals
in relation to shares of LLPs, save for the 21. Is there a requirement to set a
disclosure for the purposes of obtaining minimum pricing for shares of a
regulatory permits, if applicable. target company in an acquisition?

As for JSCs, details of any “major” There is no such requirement.

transactions must be disclosed on the 22. What types of acquisition financing
website of the Financial Reporting are available for potential buyers in
Depository. your jurisdiction? Can a company
18. Can sellers be restricted from provide financial assistance to a
shopping around during a potential buyer of shares in the
negotiation process? Is it possible target company?
to include break fee or other This matter is not regulated by the law.
penalty clauses in acquisition As a result, a wide range of acquisition
documents to procure deal financing are available for potential buyers
exclusivity? in Kazakhstan. In particular, a company can
In general, it is not prohibited to restrict provide financial assistance to a potential
a seller from shopping around during a buyer of the shares.
negotiation process and include break 23. What are the formalities and
fee or other penalty clauses in acquisition procedures for share transfers and
documents to procure deal exclusivity. how is a share transfer perfected?
However, such concept is not expressly
recognized by the law and its enforcement The transfer of shares in an LLP is subject
may be problematic. to registration with the State Corporation
“Government for Citizens” NJSC or with
19. What are the conditions precedent
Central Securities Depository if the registers
in a typical acquisition document?
of shares of the LLP are maintained by
Is it common to have conditions to
Central Securities Depository.
closing such as no material adverse
change? The transfer of shares in a JSC is subject
to registration with Central Securities
The most common condition precedent is
Depository.
obtaining all applicable approvals, consents
and waivers. No material adverse change

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24. Are there any incentives (such 28. Are there any specific formalities
as tax exemptions) available for for the execution of acquisition
acquisitions in your jurisdiction? documents? Is it possible to
remotely/digitally sign documents?
There are no incentives available for
acquisitions per se. However, certain taxes, Yes, it is possible to remotely/digitally sign
customs and other incentives apply to acquisition documents.
investment projects related to the creation
of new or renovation of existing production G. Trends and Projections
facilities as well as the implementation of 29. What are the main current trends in
projects in special economic zones. M&A in your jurisdiction?
F. Enforceability The main current trend in M&A in
25. Can acquisition documents be Kazakhstan is the acquisition of local
executed in a foreign language? startups by major local and foreign market
players.
Yes, acquisition documents can be
executed in a foreign language. 30. Are any significant development
or change expected in the near
26. Can acquisition documents be future in relation to M&A in your
governed by a foreign law? jurisdiction?
The acquisition documents must be To the best of our knowledge, no significant
governed by Kazakhstan law. developments or changes are expected
27. Are arbitration clauses legally in the near future in relation to M&A in
permissible or generally included in Kazakhstan.
acquisition documents?
Yes, arbitration clauses are legally
permissible and are often included in
acquisition documents.

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KYRGYZSTAN
GRATA

Tamirlan Muktarov
Senior Associate
[email protected]

A. General • Regulation on the procedure for state

registration of legal entities, branches
1. What is the main legal framework (representative offices) (approved
applicable to companies in your by the Resolution of the Cabinet of
jurisdiction? Ministers of the Kyrgyz Republic dated
The legal framework applicable to 31 March 2023 No. 178);
companies in the Kyrgyz Republic is based • The Law of the Kyrgyz Republic “On
on the Constitution of the Kyrgyz Republic Licensing and Permit System in the
that enables and consists of the following Kyrgyz Republic” dated 19 October
normative legal acts: 2013, No. 195.
• Civil Code of the Kyrgyz Republic (Part Aside from the above, there are many other
1) dated 8 May 1996, No. 15; legal acts that differ in scope and their
• Civil Code of the Kyrgyz Republic (Part application depending on the specific types
2) dated 5 January 1998, No. 1; of activity a company carries out in the
Kyrgyz Republic.
• Tax Code of the Kyrgyz Republic dated
18 January 2022, No. 3; 2. What are the most common types
of corporate entities (e.g., joint
• The Law of the Kyrgyz Republic “On
stock companies, limited liability
business partnerships and companies”
companies, etc.) used in your
dated 15 November 1996, No. 60;
jurisdiction? What are the main
• The Law of the Kyrgyz Republic “On differences between them (including
Joint Stock Companies” dated 27 March but not limited to with regard to the
2003, No. 64; shareholders’ liability)?

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The current legislation of the Kyrgyz company (open or closed types). While
Republic provides for different legal forms not considered a legal entity, some foreign
of legal entities. The most common types of companies tend to carry out their business
legal entities in the Kyrgyz Republic include activities via branch or representative
a limited liability company and a joint stock offices.

Limited liability Joint Stock Company Branch Office

company (“LLC”) (“JSC”)
Definition LLC is a legal entity JSC is a legal entity that Branch Office is a
founded by one or more carries out its activities separate subdivision of
individuals or legal for the purpose of a foreign or local legal
entities, the authorized making a profit and entity, performing all
capital of which is raising funds by issuing or part of its functions,
divided into shares of the and placing shares. including the function of
sizes determined by the JSCs are divided into two a representative office.
constituent documents. types: Open JSC (OJSC)
and Closed JSC (CJSC).
Liability of Participants in a limited Shareholders are not Branches are not
shareholders liability company are not liable for the obligations considered legal entities.
liable for its obligations of the company and The founding legal entity
and bear the risk of losses bear the risk of losses bears responsibility
associated with the associated with its for the activities of the
activities of the company activities, within the branch office.
to the extent of the value value of their shares.
of their contributions.
Main features The number of OJSC has the right to Branches are endowed
participants in the LLC conduct a public offering with property by the
should not be more of shares issued by OJSC, legal entity that created
than thirty. Otherwise, to carry out their free them and act on the basis
such an LLC is subject sale, taking into account of approved regulations,
to transformation into the requirements of the while directors of a
a joint-stock company law. The charter cannot branch are appointed by
within a year, and after provide for provisions a legal entity and act on
the expiration of this restricting the free sale the basis of its power of
period of liquidation in of shares. The number attorney.
a judicial proceeding, of shareholders is not
if the number of its limited.
participants does CJSC is not entitled
not decrease to the to conduct a public
established limit. offering of issued shares,
The general rule otherwise offer them for
applicable to all LLCs purchase to an unlimited
is that a company number of persons. The
cannot have as its sole number of shareholders
participant another legal must not exceed 50.
entity consisting of one
person.

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B. Foreign Investment national currency in an amount equivalent

to the amount in foreign currency. The
3. Are there any restrictions on foreign amount of payment of a monetary
investors incorporating or acquiring obligation in KGS is determined at the
the shares of a company in your official exchange rate of the relevant
jurisdiction? currency on the payment date unless
a different rate or another date of its
As a general rule, foreign investors enjoy
determination is established by law or by
the same national treatment applied to
the agreement of the parties.
individuals and legal entities of the Kyrgyz
Republic. That said, there might be certain 5. Are there any specific considerations
restrictions applied to foreign investors for the employment of foreign
in terms of the types of activity they plan employees in companies
to carry out in the Kyrgyz Republic. For incorporated in your jurisdiction?
instance, banking legislation requires
Foreign citizens have the right to carry out
obtaining a permit for the acquisition of
labor activities in the territory of the Kyrgyz
shares in microfinance organizations and
Republic only on the basis of a work permit.
commercial banks of the Kyrgyz Republic.
Accordingly, employers in the Kyrgyz
While not exclusive to foreign investors,
Republic have the right to employ foreign
a foreign or local investor has to obtain
citizens on the basis of the received quota
consent from the merger authorities
for attracting foreign labor. In addition,
in order to proceed with the merger or
there are separate requirements for the
accession of a legal entity. Other restrictions
work visa, registration at the place of
might be applied but in order to determine
residence, etc.
specific restrictions, each case should be
reviewed separately. The Kyrgyz Republic is a full member of the
Eurasian Economic Union (“EAEU”) which
4. Are there any foreign exchange
consists of the following states: Kyrgyzstan,
restrictions or conditions applicable
Kazakhstan, Russia, Belarus, and Armenia.
to companies such as restrictions to
By virtue of the Treaty on Accession to
foreign currency shareholder loans?
the EAEU ratified by the Kyrgyz Republic,
There are presently no significant foreign citizens of the EAEU member states are
exchange restrictions. If a company borrows exempted from obtaining a permit to work
a loan in a foreign currency and such loan in the Kyrgyz Republic, while employers
agreement is governed by foreign law, can employ foreign citizens of the EAEU
no restrictions shall apply as there is no member states without obtaining a quota
requirement to register the loan agreement for attracting foreign labor.
and/or notify the authorities. That said, if
the loan agreement is made in accordance
C. Corporate Governance
with and governed by Kyrgyz laws, it shall 6. What are the standard management
be notarized in case the principal amount structures (e.g., general assembly,
exceeds KGS 50,000 (fifty thousand soms) board of directors, etc.) in a corporate
(approximately USD 580). entity governed in your jurisdiction
and the key liability issues relating
As a general rule, Kyrgyz laws provide that
to these (e.g., liability of the board
a monetary obligation must be expressed
members and managers)?
and paid in the national currency – Kyrgyz
soms (“KGS”). Normally, however, parties LLCs normally have the following governing
may provide that payment is made in bodies: general meeting of shareholders,

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and collective (management board) or sole company is determined by the charter of

(director) executive body. The supreme the company.
governing body of an LLC is the general
At the request of any shareholder, an
meeting of shareholders.
audit of the company’s annual financial
The executive body (collective or sole) statements may be carried out with the
is created to carry out the current involvement of a professional auditor
management of its activities and is who is not related to the company or its
accountable to the general meeting of its participants (external audit).
shareholders. Their liability is regulated The general meeting of shareholders
by the internal by-laws or charter of a
has the right to form an audit committee
company.
in order to control the activities of the
The establishment of the board of directors executive body of the company. Audits of
is optional in LLCs and may be established the financial and economic activities of
upon a decision of the general meeting the executive body are carried out in the
of shareholders. Only an individual may manner prescribed by the general meeting
be a member of the board of directors. A of shareholders.
member of the board of directors cannot
simultaneously be a member of the As stated previously, there are separate
executive body (collective or sole). requirements for audits in certain types
of companies. For instance, in the
Shareholders bear a limited liability
banking sector, banks and microfinance
proportional to their shares in the
authorized capital and a general meeting organizations are required to undergo
of shareholders has exclusive competence audits periodically and there are official
over certain matters (e.g., reorganization positions within such companies that are
or liquidation of a legal entity, increase in charge of compliance with the audit
or decrease of charter capital, etc.). While requirements of the National Bank of the
there is normally no special liability of other Kyrgyz Republic.
governing bodies (as it is often determined
in line with the internal by-laws, charter,
D. Shareholder Rights
or other internal documents), the board 8. What are the privileges that can
of directors and executive body do have be granted to shareholders? In
their own competence over certain matters particular, is it possible to grant
and they bear liability according to the voting privileges to shareholders for
general provisions of the law and internal appointment of board members?
documents of a legal entity.
The general meeting of shareholders is
As the position of a director on the board
the supreme governing body of a LLC.
of directors or executive body entails
The appointment of the board of directors
employment, individuals representing
the governing bodies bear material and falls under the exclusive competence of
disciplinary liability in accordance with the the general meeting of shareholders. In
concluded employment contract. addition to the statutory rights of the
general meeting of shareholders, their
7. What are the audit requirements in competence might be extended over other
corporate entities? matters in accordance with the internal
The procedure for conducting an audit documents (charter, by-laws, foundation
of the activities and reporting of the agreement, etc.).

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9. Are there any specific statutory rights from that, there are no significant concerns
available to minority shareholders or other considerations on the above,
available in your jurisdiction? however, each case should be considered
separately due to various factors and
While the majority of foreign states
conditions pertaining thereto.
have provided special statutory rights to
minority shareholders, there are currently E. Acquisition
no special statutory rights available to 12. Which methods are commonly used
minorities in the Kyrgyz Republic. to acquire a company, e.g., share
10. Is it possible to impose restrictions transfer, asset transfer, etc.?
on share transfers under the The most common method of acquiring
corporate documents (e.g., articles a company in the Kyrgyz Republic is the
of association or its equivalent in acquisition through the share purchase
your jurisdiction) of a company agreement in the authorized capital of a
incorporated in your jurisdiction? company ( “SPA”). By acquiring a share in
According to the general rule, the the authorized capital of an LLC, buyers
shareholder of the LLC has the statutory (individuals or legal entities) become the
right to withdraw from the company at new shareholders of the company.
any time, regardless of the consent of The acquisition is also possible via the
other shareholders. The withdrawal must reorganization of a legal entity (merger,
be declared by the participant at least one accession, division). Under this procedure,
month before the actual withdrawal from one of the legal entities in this process
the LLC unless other terms are provided by ceases to exist and transfers all the rights
the constituent documents. and obligations to another (surviving) legal
In the event of the alienation of their shares entity.
by one of the shareholders, the remaining While not common, it is possible to
shareholders have the pre-emptive right to
foreclose on the pledged shares of a legal
purchase the share of the participant in full
entity thus becoming a shareholder.
or in part in proportion to the size of their
shares in the authorized capital of the LLC, Asset transfer is not considered “acquisition”
unless the charter of the LLC or agreement under the current Kyrgyz laws as it does not
of its participants provides for a different entail subsequent registration of changes
procedure for exercising this right. Other to the shareholding structure of a company.
restrictions in relation to the share transfer Therefore, it is not a common method
are generally prohibited. to acquire a company but can be a good
method to obtain an acting business.
11. Are there any specific concerns or
other considerations regarding the 13. What are the advantages and
composition, technical bankruptcy, disadvantages of a share purchase
and other insolvency cases in your as opposed to other methods?
jurisdiction?
The main advantage of a share purchase
The current legal framework does not is to gain control over the company and
define technical bankruptcy as normally it benefit from participation, namely from
happens in cases where either the general the potential for dividends, ease of share
meeting of creditors’ claims the formal transfer, and statutory ownership rights.
bankruptcy of the debtor or the bankruptcy Other methods involve the acquisition
(insolvency) is made in the courts. Aside of assets that do not grant direct control

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over the company, thus limiting potential on competition in relation to private

options and benefits from being a acquisitions indicates that the purchase by
shareholder. any legal entity or citizen of a controlling
stake (shares in the authorized capital) of
The disadvantage of a share purchase an economic entity occupying a dominant
includes certain restrictions and/or position is carried out with the prior
mandatory requirements. For instance, a consent of the antimonopoly body.
change in shareholding structure requires
the company to undergo the so-called “re- The dominant position is the position of
registration” procedure that might take up one or several legal entities in the market
to one month and requires communication of a certain product, which provides them
with the state authorities. As mentioned with the opportunity to exert a decisive
before, in specific sectors, like the banking influence on the general conditions for the
sector, a share purchase entails obtaining circulation of goods in the relevant market
consent from authorized state bodies (e.g., and (or) eliminate other legal entities from
the National Bank, State Antimonopoly this market, and (or) impede access to this
Service, etc.). market for other legal entities.

14. What are the approvals and 16. Are there any specific rules
consents typically required (e.g., applicable for acquisition of public
corporate, regulatory, sector companies in your jurisdiction?
based and third-party approvals) Public companies (if open joint stock
for private acquisitions in your companies that are listed) have specific
jurisdiction? rules applicable to them in terms of listing
Normally external approvals and/or shares and their subsequent sale and/or
consents are not required in typical purchase via the stock exchange. Public
corporate acquisitions unless the companies are typically listed at the Kyrgyz
acquisition is made in relation to the Stock Exchange and this stock exchange
specific sector. Internal corporate has its own rules and regulations pertaining
authorizations are often required and made to how it operates and how the listed
(in accordance with internal documents) companies proceed with the trading of
to proceed with the execution of share shares.
purchase. As commercial banks can only be joint
As mentioned before, the acquisition of stock companies (either open or closed
shares in credit and financial institutions ones), any individual or legal entity
requires consent from the National Bank. intending to acquire shares in the
Reorganization of legal entities requires authorized capital of a bank (including the
acquisition of the threshold participation
consent from the State Antimonopoly
in the authorized capital of the bank,
Service. Changes in the shareholding
including significant participation and
structures of mining companies might
control; inheritance or restoration of
require notifications to the relevant
ownership of them; additional acquisition
authorized state body.
of shares) must obtain written permission
15. What are the regulatory from the National Bank.
competition law requirements
In general, joint stock companies are also
applicable to private acquisitions in
obliged to register their emissions, be it a
your jurisdiction?
founding emission or a new emission of
The legislation of the Kyrgyz Republic shares, with the State Financial Service.

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There are separate regulations on the period, certain terms and conditions of the
securities market and open joint stock preliminary agreement can be established
companies have to comply therewith that would allow controlling the parties
especially since most of the financial in one way or another. It is important
services require a relevant license. to note that complete restriction is not
possible as it would constitute a breach of
17. Is there a requirement to disclose
constitutional and other statutory rights
a deal, for instance to regulatory
granted by the Kyrgyz laws.
authorities? Is it possible to keep a
deal confidential? Notwithstanding the above, Kyrgyz laws
do provide the concept of “contractual
Traditional acquisition via share
freedom” that implies that parties are free
transfer that results in a change of the
to enter into any agreement allowed by
shareholding structure requires the
the laws and agree upon any conditions of
previously mentioned re-registration
the agreement that are explicitly allowed
procedure (registration of changes on
or otherwise not restricted by the relevant
the shareholding). One of the required
regulations. Under this concept, parties
documents that has to be submitted to
are generally allowed to express their
the authorities is a SPA. This constitutes a
intentions, including the imposition of
general requirement to disclose a deal.
sanctions on the party in default.
For example, if a share transfer concerns the
19. What are the conditions precedent
banking sector, the deal has to be disclosed
in a typical acquisition document?
to the National Bank. If the acquisition
Is it common to have conditions to
concerns the competition market, the
closing such as no material adverse
deal has to be accordingly disclosed to
change?
the competition authorities. There are
some other specific cases where the deal Due to various factors and conditions, it
has to be disclosed, however, unless there is not entirely possible to come up with
are direct sanctions for the failure to an exhaustive list of conditions precedent
disclose the deal, some companies tend (“CP”) used in a typical acquisition
to not disclose the deal in order to keep it document. Normally, it depends on the
confidential. sector, on the scope of activities of the
target company, its assets, and other
18. Can sellers be restricted from
circumstances. A company willing to
shopping around during a
proceed with the acquisition of a target
negotiation process? Is it possible
company is most likely to include the CPs
to include break fee or other
concerning the following:
penalty clauses in acquisition
documents to procure deal (1) Regulatory approvals (where
exclusivity? necessary);
Unless there is an agreement in place (2) Third-party consents (e.g., current
between the parties, sellers cannot be creditors of the target company);
restricted from offering their shares to third
(3) Due diligence of the target company
parties. That said, the current laws allow
(including legal, financial, and/or tax
for a mechanism of preliminary agreement
DD);
whereby the subject matter is that the
parties will execute the primary agreement (4) Representation, warranties, and
sometime in the future. During that covenants (common negative

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covenants might not be enforceable There are no requirements to set minimum

in the Kyrgyz Republic due to pricing for shares of a target company in
contradiction with the statutory acquisition as this is decided by parties to
provisions of the law); an acquisition at their own discretion. It is
(5) Other miscellaneous CPs at the common to set the minimum price as the
discretion of a potential purchaser. nominal value of shares that are purchased
in the charter capital of a target company.
It is common to have conditions to closing
such as above and others, including no 22. What types of acquisition financing
material adverse change. However, such are available for potential buyers in
CPs are commonly used in transactions your jurisdiction? Can a company
with local parties governed by foreign law, provide financial assistance to a
and local transactions do not always have potential buyer of shares in the
the majority of the above CPs as not all of target company?
them can be enforced under the Kyrgyz
There are no specific acquisition financing
laws.
instruments in the Kyrgyz Republic aside
20. What are the typical warranties from general financing instruments, such
and limitations in acquisition as loan facilities. There are no restrictions
documents? Is it common to obtain pertaining to the designation of loan
warranty insurance? facilities and those can be used to finance
It is common to include warranties and the acquisition. That said, please refer to
limitations pertaining to the change of the above answers on the notarization of
control, the absence of any encumbrances loan agreements and the general currency
over the target company’s assets, and the restrictions.
absence of ongoing or potential disputes 23. What are the formalities and
and/or litigations. There can be other procedures for share transfers and
warranties and limitations, but not all of how is a share transfer perfected?
them can be used and enforced under the
Kyrgyz laws. Common negative covenants To proceed with the acquisition of a
that would restrict shareholders from company through SPA, it is necessary to
making decisions on alienating shares to conclude a share purchase agreement
third parties, cannot be enforced as some in writing between the withdrawing
of the shareholders’ rights are statutory in participant and the buyer of the shares.
nature and cannot be overthrown by any The signature of the individual alienating
contractual limitations. the share must be certified by a notary. The
The insurance market has been steadily representative of the legal entity alienating
developing in recent decades, however, not the share must seal the agreement or
many insurance instruments are available certify their signature in a notarial form.
in the Kyrgyz Republic due to the size of the Representatives acting on the basis of
market and market practices. With that in power of attorney (from alienating and/
mind, warranty insurances are not common or receiving party) can carry out the
and only a handful of insurance agencies perfection of SPA and sign it on behalf
can consider rendering such services.
of parties in the Kyrgyz Republic. This
21. Is there a requirement to set a is commonly used to abstain from
minimum pricing for shares of a notarization and legalization (apostille)
target company in an acquisition? procedures outside of Kyrgyzstan.

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After the deal’s closure, the new 26. Can acquisition documents be
shareholder is required to adopt a governed by a foreign law?
corporate decision to re-register the
acquired company. For the purpose of re- Yes, acquisition documents can be made in
registration, the following documents must accordance with and governed by foreign
be submitted to the authorized state body: laws. It should be noted, however, that
court judgments of most other foreign
(1) registration application;
jurisdictions are not directly enforceable
(2) the original decision on the state re- in the Kyrgyz Republic. A judgment
registration of a legal entity; of a foreign court obtained against a
(3) original certificate of state registration; Kyrgyz company may be enforced in the
(no longer issued after March 2023) Kyrgyz Republic only if there is a treaty
between the Kyrgyz Republic and the
(4) for shareholders – legal entities: relevant foreign jurisdiction on the mutual
legalized extract from the state register
recognition and enforcement of court
or other document confirming that the
judgments or, in the absence of such treaty,
legal entity is valid and acting under the
laws of its state of incorporation (the on the basis of reciprocity.
term for an extract should not exceed 6 27. Are arbitration clauses legally
months from the date of its issuance); permissible or generally included in
(5) power of attorney for representatives; acquisition documents?

(6) original counterparts of a share transfer The Kyrgyz Republic is a party to the New
agreement. York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards
(7) permission of an owner of premises that
serve as a legal address (if changed); (1958) and an arbitration award rendered
in accordance with the procedure specified
(8) confirmation on the payment of state in acquisition documents would be
fees. recognized and enforced by Kyrgyz courts
24. Are there any incentives (such without re-examination or re-litigation of
as tax exemptions) available for the matters thereby adjudicated.
acquisitions in your jurisdiction?
28. Are there any specific formalities
There are no specific incentives provided for the execution of acquisition
by the current legislation of the Kyrgyz documents? Is it possible to
Republic pertaining to acquisitions. remotely/digitally sign documents?
F. Enforceability Signatories of the parties should be
25. Can acquisition documents be duly authorized to execute acquisition
executed in a foreign language? documents, for that purpose, relevant
decisions of the governing bodies should
Yes, acquisition documents can be
executed in a foreign language. If the target be provided along with the proper power
company is a Kyrgyz legal entity, acquisition of attorney. It is not common to execute
documents have to be translated with documents in the presence of witnesses,
subsequent notarization as the language of but there are no explicit restrictions too.
submitted documents must be either state This suggests that witnessing can be done
(Kyrgyz) or official (Russian) languages. at the discretion of the parties.

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If the SPA is governed by the Kyrgyz laws gain more control over the mining sector
and executed in the Kyrgyz Republic, undermining investors’ rights over their
the signatures of individuals should be mining assets.
notarized. Other than that, there are no
Having been mentioned a number of times
other specific formalities for the execution
throughout this questionnaire, the banking
of acquisition documents.
sector of the Kyrgyz Republic has seen
Remote/digital signing is possible in theory some significant developments in recent
and under the SPA governed by foreign years under the control of the National
laws. Kyrgyz laws require local SPAs to be Bank of the Kyrgyz Republic. So far, there
executed in writing and in the number of have been a number of M&A transactions
counterparts for each of the parties. There in this sector and seemingly, the banking
have been some developments in remote sector is moving towards consolidation
execution of documents, but it has not with many foreign investors investing
become common yet. capital into the Kyrgyz Republic.
G. Trends and Projections 30. Are any significant development
29. What are the main current trends in or change expected in the near
M&A in your jurisdiction? future in relation to M&A in your
jurisdiction?
Ever since the fall of the Soviet Union, the
government has made significant progress It is not presently possible to predict any
in the privatization of state-owned assets. significant developments or changes
This trend is still relevant as the Kyrgyz in relation to M&A in Kyrgyzstan. There
Republic seeks to sell some of its assets are already a number of reforms that are
in order to gain investments and foreign aiming at improving the legal framework
expertise. As a result of this trend, the in Kyrgyzstan, however, not many of
government is trying to sell one of the these reforms will be completed due
major telecommunication operators in the to many factors, one of those being
Kyrgyz Republic. political instability. There have been many
There has been significant progress in the undertakings so far but with the change
field of mining with many of the mining of regime, some of these undertakings are
companies being purchased by foreign compromised and cannot be completed.
investors due to the abundance of certain Hopefully, the current regime will be able
natural resources in the Kyrgyz Republic. to finalize some of the legal and regulatory
That said, mining legislation is constantly reforms that would result in facilitation of
changing and not always for the better M&A activities and attraction of foreign
as the current government is trying to investments in the Kyrgyz Republic.

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LATVIA
TGS BALTIC

Andra Rubene Anna Vaivade Kaspars Treilibs

Partner Senior Associate Senior Associate
andra.rubene@ anna.vaivade@ kaspars.treilibs@
tbsbaltic.com tbsbaltic.com tbsbaltic.com

A. General • the Civil Law of January 28, 1937.

1. What is the main legal framework 2. What are the most common types
applicable to companies in your of corporate entities (e.g., joint
jurisdiction? stock companies, limited liability
companies, etc.) used in your
The Commercial Law (“CL”) (Komerclikums) jurisdiction? What are the main
of April 13, 2000, effective from January differences between them (including
1, 2002, governs companies in Latvia. but not limited to regarding the
The Financial Instrument Market Law of shareholders’ liability)?
November 20, 2023, effective from January
The most common types of companies are:
1, 2004, provides additional rules applicable
to the listed companies. Other laws • Limited Liability Company (“LLC”)
regulating companies in Latvia are: (sabiedrība ar ierobežotu atbildību);
• the Group of Companies Law of March • Joint Stock Company (“JSC”) (akciju
23, 2000; sabiedrība).
• the Law on the Prevention of Money The mandatory share capital contribution
Laundering and Terrorism and for the LLC is EUR 2,800, while for the JSC -
Proliferation Financing of July 27, 2008; EUR 25,000.
• the Trade Secret Protection Law of It is mandatory for JSC to have a
February 28, 2019; supervisory board consisting of at least 3
(three) members, whereas for LLC, having a
• Law on the Enterprise Register of the
supervisory board is optional.
Republic of Latvia of November 20,
1990; The shareholders of the LLC may decide

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on any issue in the competence of the forests and agricultural land, companies
management and supervisory board by in strategic partnership with the Ministry
assuming liability for the decision, while the of Defence for strategic goods or military
shareholders of JSC may only decide on the production, companies that produce,
issues provided by law (approval of annual develop, or trade-in dual-use goods,
reports, distribution of dividend, change have access to voter data and/or process
of articles, change of the share capital, critical infrastructure data. Commonly,
the election of the supervisory board, such companies should be registered as
etc.). All other issues are decided by the “important to national security” in the
management board by obtaining approval Register of Enterprises.
of the supervisory board if provided by law
The national security regime restricts
and the articles of association.
citizens and legal entities incorporated in
It is also possible to set up an LLC with the Russian Federation and the Republic
a share capital of less than EUR 2,800 of Belarus from acquiring control,
(mazkapitāla sabiedrība ar ierobežotu shareholding above 10%, or UBO status in
atbildību), which is mainly aimed at start- an entity important to national security or
ups. Such LLCs must comply with specific owning or holding critical infrastructure.
criteria (e.g., the founders may only be
4. Are there any foreign exchange
natural persons, and there are not more
restrictions or conditions applicable
than 5 (five) of them, the management
to companies such as restrictions to
board members may only be the
foreign currency shareholder loans?
shareholders, etc.).
There are no foreign exchange restrictions
B. Foreign Investment or conditions applicable to companies in
3. Are there any restrictions on foreign Latvia.
investors incorporating or acquiring
5. Are there any specific considerations
the shares of a company in your
for the employment of foreign
jurisdiction?
employees in companies
In Latvia, according to the National Security incorporated in your jurisdiction?
Law (“NSL”), a prior permit of the Cabinet
There are almost no restrictions for EU/EEA
of Ministers must be obtained for the
citizens to work in Latvia, and they may
following transactions concerning an entity
start working as soon as an employment
important to national security or one with
contract is signed. Those EU/EEA citizens
critical infrastructure:
who wish to stay in the Republic of Latvia
• direct or indirect acquisition of control, for more than 3 (three) months must be
registered with the Office of Citizenship and
• shareholding above 10%,
Migration Affairs and obtain a certificate of
• retaining influence or shareholding in registration.
case of change of an Ultimate Beneficial
As to the employment of third-country
Owner (“UBO”),
nationals (non-EU/EEA employees), there
• takeover, or are several restrictions concerning entering
(visa), staying (residence permit), and
• granting a loan.
employment (right to employment), while
The NSL applies to energy, telecom, and the employer is fully responsible both for
media companies, companies owning the foreigner’s employment (including

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restrictions related to wages and salary), In general, entities are required to have
staying (including the place of residence an audit of their (if relevant, consolidated)
and health care), and removal costs, if any. financial statements conducted by a sworn
auditor if they satisfy certain conditions
C. Corporate Governance (e.g., balance sheet above EUR 1,000,000;
6. What are the standard management net turnover above EUR 2,000,000; a staff
structures (e.g., general assembly, of at least 50 people per year). The content
board of directors, etc.) in a corporate of the financial statements depends on the
entity governed in your jurisdiction size of the company.
and the key liability issues relating
Annual financial statements of corporate
to these (e.g., liability of the board
entities in specific sectors (e.g., financial
members and managers)?
institutions and insurance companies) must
The governing institutions of the company be audited in Latvia, regardless of size.
are the shareholders meeting and the
management board, as well as the
D. Shareholder Rights
supervisory board, if mandatory or former. 8. What are the privileges that can
be granted to shareholders? In
For JSC, it is mandatory to have a
particular, is it possible to grant
supervisory board, whereas it is optional
voting privileges to shareholders for
for LLC.
appointment of board members?
The management board is the executive
A company can have different categories
institution of the company, which manages
of shares, each of which may have various
and represents the company.
rights fixed in the articles of association.
The supervisory board is the supervisory
The rights provided by shares may include
institution of the company, which
a voting right at the shareholder’s meeting,
represents the interests of shareholders
a right to receive dividends, and a right to
during the time periods between the
receive a liquidation quota.
meeting of shareholders and supervises
the activities of the management board. 9. Are there any specific statutory rights
In the cases provided for in the articles of available to minority shareholders
association, the management board must available in your jurisdiction?
obtain the supervisory board’s approval for
The general approach is that the majority
certain company transactions.
shareholders hold decision-making power.
The management and supervisory board The rights of minority shareholder depend
members must act with due care of a on the proportion of the share capital they
prudent manager and are jointly and hold. Usually, to exercise certain minority
severally liable for losses they have caused rights, a shareholder must possess at least
to the company. An LLC’s management one-tenth of the share capital.
board or supervisory board member is
Shareholders representing at least one-
not liable for losses caused to a company
tenth of the share capital may request the
if he or she acted in good faith within
convocation of the shareholders meeting,
the framework of a lawful decision of the
object to the approval of annual accounts
shareholder’s meeting.
due to deficiencies therein, and request
7. What are the audit requirements in secret voting (instead of open voting) at the
corporate entities? shareholders’ meeting, etc.

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The company must take an action against E. Acquisition

the founders, the management board,
supervisory board, or the auditor if a 12. Which methods are commonly used
minority of shareholders who jointly to acquire a company, e.g., share
representing no less than one-twentieth of transfer, asset transfer, etc.?
the share capital requests it. The most common way to acquire a
10. Is it possible to impose restrictions business is the purchase of shares.
on share transfers under the Other ways of business transfer include
corporate documents (e.g., articles acquiring a business as a going concern
of association or its equivalent in and assets. Business and asset deals are
your jurisdiction) of a company more frequently used to take over certain
incorporated in your jurisdiction? parts of a business or assets. Transfer of
business entails transferring specific assets,
Concerning LLC, in case of a sale, according
contracts (including suppliers, clients, and
to law, the right of first refusal or, in case
of any other transaction than a sale, prior employees), and liabilities related to a
consent from the shareholder’s meeting particular business type or business unit.
must be obtained. The acquirer remains jointly and severally
liable with the seller in business transfer
Regarding JSC, share transfer restrictions concerning third parties.
can be included in the company’s articles of
association. 13. What are the advantages and
disadvantages of a share purchase
11. Are there any specific concerns or as opposed to other methods?
other considerations regarding the
composition, technical bankruptcy The share purchase deal is comparatively
and other insolvency cases in your more straightforward because there is
jurisdiction? no need to transfer assets and suppliers,
clients, and employees by notifying or
If the losses of the company reach at least a
renovating their contracts by three-party
half of the share capital of the company or
novation agreements. As a result, the
the company has limited solvency, the signs
acquirer takes over the shares of a company
of insolvency, or they are likely to occur,
and its management, and the seller is liable
the management board shall notify the
supervisory board, if established, thereof for the title to shares and the business
and convene shareholders meeting in according to the share purchase agreement
which the management board shall provide negotiated by the parties.
explanations. The advantages of the share acquisition
It is upon a shareholders’ meeting to decide include the absence of VAT, which applies
on an application for legal protection to asset transfer but not to business
proceedings or insolvency proceedings, transfer, and the absence of joint and
the termination and liquidation of the several liability with the seller for the
company, reorganization, changes in obligations before the transfer as opposed
the share capital, or another decision to a business transfer deal.
on improving the company’s economic
Asset and business deals have their
condition.
taxation specifics; hence, these deals must
The Insolvency Law provides the legal be structured carefully and thoughtfully to
framework for insolvency matters. comply with tax requirements properly.

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14. What are the approvals and 15. What are the regulatory
consents typically required (e.g., competition law requirements
corporate, regulatory, sector applicable to private acquisitions in
based and third-party approvals) your jurisdiction?
for private acquisitions in your
Depending on the turnover and the market
jurisdiction?
share in Latvia of the parties involved
In each case, the required approvals for in the transaction, clearance from the
M&A deals vary depending on the parties Competition Council may be required.
and the target company. Subject to certain thresholds, the parties
may submit full or short-form notifications
The most common are third-party approval to the competition authority. Review of
requirements arising from change the application takes from 45 days up to
of control clauses in the agreements 4 (four) months (3 (three) months in case
concluded by the target company. Typically, of short-form notification) after complete
consents are required from financial notification is submitted.
institutions by loan or lease agreements
and from the main customers or providers The deal is considered void if a transaction
of international size. Encumbered shares qualifying for the mandatory competition
may only be transferred upon consent from clearance is carried out without it. However,
the respective third party. the competition authority will usually allow
the parties to rectify the deficiency by
Corporate approvals include waiver of submitting the notification after the closing
the statutory pre-emption rights if less of the transaction and applying penalties.
than 100% of shares of the target are sold.
The articles of association of the target 16. Are there any specific rules
company or the seller may specify other applicable for acquisition of public
corporate approvals required (for example, companies in your jurisdiction?
approval from the supervisory board or The shareholders of a public limited
shareholder of the seller). company do not have pre-emption rights.
The spouse’s consent will usually be For the acquisition of more than 30% of
required if the seller is an individual in a shares of a publicly listed company, the
marital relationship with joint property share buy-back procedure must be carried
rights. out before the transaction.

Regulatory approvals are applicable in 17. Is there a requirement to disclose

specific sectors; for example, the acquisition a deal, for instance to regulatory
of shares in a financial market participant authorities? Is it possible to keep a
is subject to the approval of the Bank deal confidential?
of Latvia (in Latvian – Latvijas Banka). Obtaining title to shares and becoming an
Acquisitions of shares in national security UBO must be registered in the Commercial
objects (such as certain companies in the Register based on a shareholders register
electricity or heating sector, owners of and the UBO disclosure documents.
forest or agricultural land, among others) However, the share purchase agreement
entail foreign direct investment (“FDI”) and other transaction documents must not
clearance by the Cabinet of Ministers. be disclosed.
Please see the answer to Question15 Disclosure of a deal to regulatory
regarding competition clearance. authorities may be required when

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purchasing a regulated entity, for example, Depending on the due diligence findings,
a financial institution or an insurer, or the parties may agree on various business-
when regulatory approval is required for related conditions precedent, such as
other reasons, such as competition or entering into or prolonging business
FDA clearance. In such cases, transaction agreements, correcting legal deficiencies,
documents must be disclosed to authorities registering any status or property rights,
but unavailable to the public. etc.
18. Can sellers be restricted from 20. What are the typical warranties
shopping around during a and limitations in acquisition
negotiation process? Is it possible documents? Is it common to obtain
to include break fee or other warranty insurance?
penalty clauses in acquisition Usually, a wide range of seller warranties
documents to procure deal are required, which commonly include
exclusivity? the title to shares, authority to enter a
Documents governing the due diligence transaction, legal compliance, financial
and negotiation phase, such as a letter condition, title to assets and property,
of intent or preliminary agreement, may business agreements and operations,
provide for the exclusivity of the deal. The employment issues, litigation, and
exclusivity period is at the discretion of the tax compliance of the target. Specific
parties. warranties may be included or emphasized
depending on the target company’s
Acquisition documents may include business type, such as intellectual
contractual penalties to safeguard the property, environmental matters, data
exclusivity provisions. It may be agreed protection, governmental authorizations,
that losses due to non-performance of the etc. Warranties are usually qualified by the
contract shall be compensated additionally information disclosed by the seller before
or insofar as they exceed the contractual the transaction’s closing, whether during
penalty. due diligence or by disclosure letter.
19. What are the conditions precedent Confirmation of AML compliance, absence
in a typical acquisition document? of sanctions, and the clean origin of funds
Is it common to have conditions to have become a typical buyer warranty
closing such as no material adverse lately.
change?
It is common to restrict the seller’s liability
Typical conditions precedent includes by de minimis, basket, and overall cap
affirmative due diligence (including Anti- limitations. Time limitations also usually
Money Laundering (“AML”) and sanctions apply, providing time periods for different
compliance), receipt of third-party consents warranties. Tax and title warranties tend
(for example, from banks, key clients, or to have longer liability terms than other
suppliers), regulatory approvals (including warranties.
competition clearance and FDI clearance),
Apart from general warranties, the buyers
and pre-transaction restructurings where
often request the sellers to provide specific
required by the parties. The transaction’s
indemnities regarding specific risks
closing is commonly subject to the
discovered during the due diligence.
accuracy of the warranties and the absence
of material adverse effects. Deferred payment or guarantee by the

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seller’s parent company or ultimate document must be signed with a qualified

beneficial owner is typical. In some specific electronic signature containing a qualified
transactions - security. Occasionally, in time stamp. If the document is signed with
some more significant transactions (approx. a wet-ink signature, the signatures of all
5-7% of all Baltic transactions), warranty parties must be notarized.
insurance is used.
24. Are there any incentives (such
21. Is there a requirement to set a as tax exemptions) available for
minimum pricing for shares of a acquisitions in your jurisdiction?
target company in an acquisition?
A Latvian company shall not pay corporate
There are no minimum pricing income tax (CIT) from the capital gains
requirements in Latvia. Only transactions earned from the sale of direct participation
between related companies must shares if the company has held the shares
correspond to fair market value. for at least 36 months. This exemption
22. What types of acquisition financing does not apply in case of sale of real estate
are available for potential buyers in company shares.
your jurisdiction? Can a company If the shares are held less than 36 months
provide financial assistance to a a gain arising on the disposal of a shares
potential buyer of shares in the is treated as ordinary income, however,
target company? 20% CIT shall be applied only if the profit is
Bank loans, venture capital fund financing, distributed.
funds obtained via bonds and IPOs, F. Enforceability
shareholders’ loans from parent companies,
or ultimate beneficial owners. 25. Can acquisition documents be
executed in a foreign language?
Although only public limited companies
are expressly prohibited from financing the Yes, acquisition documents can be
acquisition of their shares, Latvian courts, in executed in a foreign language.
their decisions, occasionally have attributed
26. Can acquisition documents be
this prohibition also to private limited
governed by a foreign law?
companies.
Yes, foreign law can govern acquisition
23. What are the formalities and
procedures for share transfers and documents, although mandatory provisions
how is a share transfer perfected? of Latvian law apply.

The shares and the underlying 27. Are arbitration clauses legally
shareholders’ rights are transferred to permissible or generally included in
the new shareholder upon inscription of acquisition documents?
the new shareholder in the company’s Courts are a more popular venue for
shareholders register. The respective new dispute resolution. In larger or cross-border
division of the shareholder’s register of the transactions, parties agree on neutral
company must be signed by the seller of arbitration in jurisdictions seperate from
the shares, the acquirer of the shares, and their own or the target’s.
the chairman of the management board of
the target company (or in the absence of 28. Are there any specific formalities
such, all management board members or for the execution of acquisition
a management board member expressly documents? Is it possible to
authorized by the other members). The remotely/digitally sign documents?

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According to the CL, the acquisition with continued investor interest across
transaction shall be in writing. key industries. Significant transactions
are anticipated in the energy, TMT, retail,
It is possible to sign documents remotely/
forestry, environment, and infrastructure
digitally. For documents subject to
sectors, driven by both domestic and cross-
submission to the commercial register,
border investments.
requirements regarding using qualified
electronic signatures containing qualified 30. Are any significant development
time stamps apply. or change expected in the near
future in relation to M&A in your
G. Trends and Projections jurisdiction?
29. What are the main current trends in Amendments are expected to the
M&A in your jurisdiction? Commercial Pledge Law to simplify
In 2024, Latvia’s M&A market demonstrated the administrative procedures and
increased deal activity, with a notable documentary requirements. Changes to
rise in transaction volume compared to the Law on Control of Aid for Commercial
previous years. However, overall deal values Activity will simplify the financial reporting
declined, reflecting a market trend where of large enterprises facilitating large-scale
numerous smaller-scale transactions, investment projects and improving legal
including start-up acquisitions, certainty for investors. Amendments to
complemented several high-value deals. the Commercial law will facilitate early
The most active sectors driving M&A repayment and refinancing of loan and
activity included energy, retail, technology, leasing agreements. As a member of the
European Union, Latvia will continue
media, and telecommunications (TMT),
integrating key EU regulatory acts,
wood processing, and packaging, waste,
particularly in the areas of corporate
recycling.
sustainability, competition law, and
Despite ongoing geopolitical challenges, investment control, ensuring alignment
the outlook for 2025 remains positive, with broader EU policy goals.

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LIBYA
TUMI LAW FIRM

Dr. Mohamed Tumi Mazen Tumi Imtinan Al Rwemed

Founder Partner Associate
mtumi@ mmtumi@ imtinan.alrwemed@
tumilawfirm.com tumilawfirm.com tumilawfirm.com

Zakria Khalid Abdalmomen Hannah Khllat

Junior Associate Junior Associate
zakria@ hannah.khllat@
tumilawfirm.com tumilawfirm.com

A. General • Law No. 6 of 2022 concerning Electronic

Transactions
1. What is the main legal framework
• Decision No. 590 of 2013 of the Ministry
applicable to companies in your
of Labor
jurisdiction?
• Decision No. 107 of 2009 on
• Civil Code of Libya Establishing the Libyan Investment and
• Law No. 23 of 2010 on Commercial Development Fund
Activities (Commercial Code) • Decision No. 207 of 2012 Regarding
• Law No. 10 of 2023 concerning Libyan Foreigner’s Participation in Foreign
Commercial Arbitration Companies
• Law No. 12 of 2010 concerning Labor • Law No. 9 of 2010 on Investment
Relations (Primary Labor Legislation) Promotion (Investment Law)

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2. What are the most common types • Computing and information technology
of corporate entities (e.g., joint sector
stock companies, limited liability • Technical consulting, studies, training
companies, etc.) used in your and supervising
jurisdiction? What are the main
differences between them (including B. Foreign Investment
but not limited to with regard to the 3. Are there any restrictions on foreign
shareholders’ liability)? investors incorporating or acquiring
For foreign companies, the most common the shares of a company in your
corporate entities in Libya are joint stock jurisdiction?
companies and limited liability companies. Under Commercial Law foreigners are not
Local companies often choose to register as permitted to fully own a company. For
limited liability companies. instance, as per Article 3 of Decree 207 of
The main difference is in respect to the the year 2012, foreigners are limited to a
minimum capital set by Libyan law to maximum of 49% of shares of the company.
establish each entity. Namely, a minimum However, if foreigners choose to establish
capital of 1,000,000 LYD (one million a company under Libyan Investment Law,
Libyan Dinars) is collectively required for they are permitted to own up to 100% of
joint stock companies during the process the shares of the company.
of registration. As for the registration
of branches for foreign companies, the The conditions to qualify for an investment
required minimum seed capital is 250,000 law registration are quite strict and limited.
LYD (two hundred and fifty thousand There are also a number of procedures that
Libyan Dinars) whereas a minimum capital are necessary to be repeatedly completed
of 3,000 LYD (three thousand Libyan during the operation of work in Libya. This
Dinars) is required for local limited liability is not an option for oil & gas operators as
companies. well as most service companies within the
sector as most companies within the sector
It is also important to note, that branches are not legally permitted to register under
of foreign companies have the unique investment law. If foreign companies can
additional requirement of supplying three qualify and have the ability to consistently
experience certificates from previous clients meet legal requirements as well as
in which the company intending to register procedures, the foreign companies can
the branch has provided work to within the enjoy some tax and legal incentives.
same field it is registering for in the State
of Libya. Branches of foreign companies, 4. Are there any foreign exchange
uniquely are only permitted to register in restrictions or conditions applicable
Libya within one field. The permitted fields to companies such as restrictions to
foreign currency shareholder loans?
are listed within Decision No. 207 of the
year 2012 and are as follows: This is not regulated.
• Contracting and Civil works 5. Are there any specific considerations
• Field of electrical energy for employment of foreign
employees in companies
• Oil & gas sector
incorporated in your jurisdiction?
• Communication sector
Article 3 of the Decision of the Ministry of
• Industrial sector
Labor No. 590 of the year 2013 (“Decision”)
• Surveying and planning lists 23 professions that foreigners are
• Environmental protection sector prohibited from performing, such as legal,

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tourist guide, administrative, etc. and article Chairman and members of the board of
4 of the the employers are allowed to directors should perform satisfactorily
employ foreigners for 11 professions listed the legally imposed duties according
in the Decision, with the condition that to the articles of association and in
there are no available national employees accordance with the legal requirements
for such professions. and they will be interdependently
responsible towards the company of
Companies registered under commercial any harm due to nonperformance of
law have the local employment content the duties. They are also responsible
requirement of 75% as required by Article towards company’s creditors for
51 of Law No. 12 of 2010 concerning non-performance of their duties for
Labor Relations with some exceptions preserving company’s properties.
and permissions available in certain
circumstances. As for companies • Auditors committee: External auditor
registered under investment law, the local should submit a written report
employment content requirement is 30% including his/her idea on company’s
as per Article 7(7) of Law No. 9 of 2010 on accountancy and financial issues.
Investment Promotion. 7. What are the audit requirements in
C. Corporate Governance corporate entities?

6. What are the standard management The external accounts auditor should be a
structures (e.g., general assembly, licensed person to exercise this profession.
board of directors, etc.) in a corporate The issued report by the licensed auditor,
entity governed in your jurisdiction as well as the budget and audited final
and the key liability issues relating accounts, is considered correct unless the
to these (e.g., liability of the board contrary is proved.
members and managers)? Financial statements are to be provided
The standard management structure is a to certain authorities on an annual basis
hierarchy of the following: with strictly enforced deadlines. Fines
are imposed for late submissions. All
• General assembly: Company’s general submissions, for auditing purposes or
assembly is composed of all its otherwise are required to be in the Arabic
shareholders, and is held as an ordinary language.
general assembly and an extraordinary
general assembly. The general assembly D. Shareholder Rights
meetings will be in the place of the 8. What are the privileges that can
company’s headquarter if the basic be granted to shareholders? In
system does not stipulate otherwise. particular, is it possible to grant
The key liability of the general voting privileges to shareholders for
assembly is, to discuss reports of the appointment of board members?
board of directors, control authority
Under Libyan commercial code the
and account’s external auditor and
privileges that can be granted to
to approve the financial documents
shareholders include the following:
(general budget, profit and loss
account) and profits’ distribution. 1- Economic Rights such as Preemptive
Rights and Profits
• Board of directors: The key liabilities
of the board of directors is to take all 2- Corporate Affairs Rights (Political
decisions and sign all deals to achieve Rights) such as election of directors,
company’s purpose and activity. right to call a meeting, right to

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information, voting on corporate E. Acquisition

matters (each share is entitled to one
vote in any circumstances and multiple 12. Which methods are commonly used
voting Shares are not allowed under to acquire a company, e.g., share
Libyan law), in addition to the appraisal transfer, asset transfer, etc.?
rights and derivative action (to bring a The most common methods are share
Law Suit) transfer and asset transfer.
Further, in accordance to the Libyan 13. What are the advantages and
commercial law there is no voting disadvantages of a share purchase
privileges to shareholders for appointment as opposed to other methods?
of board members. However, in all cases,
any group of shareholders holding at least The principal benefit of a share acquisition
one -fifth of the voting shares that form the is that it is relatively straightforward
capital stock of a company has the right to and requires less legal documentation
remove one director from office in case this to complete the transaction. The main
group decide to bring a law suit against this disadvantage is that the target company’s
member of board of director.” liabilities follow it after the purchase
completes.
9. Are there any specific statutory rights
available to minority shareholders 14. What are the approvals and
available in your jurisdiction? consents typically required (e.g.,
corporate, regulatory, sector
Yes, for instance, the minority shareholders based and third-party approvals)
can request a General Assembly invitation. for private acquisitions in your
10. Is it possible to impose restrictions jurisdiction?
on share transfers under the Article 301 of the Commercial Law outlines
corporate documents (e.g., articles the required procedures as follows:
of association or its equivalent in
your jurisdiction) of a company • Issuance of acquisition decision from
incorporated in your jurisdiction? the extraordinary general assembly of
each company from the amalgamated
Yes, it is possible to place restrictions on and acquisition companies
shares under the Articles of Association
of the company. Further, Article 137 of • Evaluation of assets and liabilities
the Commercial Law states, transfer of of each company of the acquired
shares to others is allowed subject to the companies according to the report
agreement of the board of directors, except of committee of experts including a
in inheritance where the contract or basic legal accountant to be appointed by
system stipulates that the application for the competent court of first instance
obtaining approval should include name in order to specify the net rights of
or names of those to whom the shares are shareholders or partners
transferred, the number of shares to be
• Acquisition contract to be signed by
transferred, and the agreed price.”
the authorized officials on behalf of
11. Are there any specific concerns or the amalgamated and amalgamating
other considerations regarding the companies.
composition, technical bankruptcy
15. What are the regulatory
and other insolvency cases in your
competition law requirements
jurisdiction?
applicable to private acquisitions in
None. your jurisdiction?

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A shareholder, without agreement of the This is dependent on the terms and

other shareholders, should not practice any conditions of applicable contracts.
activity contradicting company’s activity
19. What are the conditions precedent
or will be an interdependent partner in
in a typical acquisition document?
other competitive company, if practicing
Is it common to have conditions to
the activity or subscription in a competitive
closing such as no material adverse
company, it is assumed that approval to be
change?
obtained is prior to the company’s contract
and that the partners have knowledge Article 301 of the Commercial Law outlines
about this issue. If the partner contradicts the required procedures as follows:
this, the company has right to dismiss the
• Issuance of acquisition decision from
partner and claim compensation for harm the extraordinary general assembly
caused. of each company from the acquisition
A shareholder, without agreement of the companies is the typical acquisition
other shareholders, shall not practice any document.
activity in contradiction with the company’s Further, Article 306 states, “Amalgamation
scope of activity or get involved in as decision, establishment contract and new
an interdependent partner in another basic system or any amendments will be
competitor company. If a shareholder registered in the competent trade register
is practicing an activity in contradiction and will be published according the
with the company’s scope of activity decided procedures in this law. Registration
or is subscribing as a shareholder in a of the companies whose corporate
competitor company, then it is assumed characteristic is expired will be cancelled
that the other shareholders have agreed on according to the decided procedures of this
such circumstances and have knowledge law.”
about such involvement. If a shareholder
contradicts that, the company has a right 20. What are the typical warranties
to dismiss the shareholder and claim and limitations in acquisition
compensation for damages. documents? Is it common to obtain
warranty insurance?
16. Are there any specific rules
applicable for acquisition of public This is up to the party’s discretion as the law
does not regulate this.
companies in your jurisdiction?
21. Is there a requirement to set a
No, the rules are applicable only to private
minimum pricing for shares of a
companies.
target company in an acquisition?
17. Is there a requirement to disclose
No.
a deal, for instance to regulatory
authorities? Is it possible to keep a 22. What types of acquisition financing
deal confidential? are available for potential buyers in
your jurisdiction? Can a company
There is no such requirement. provide financial assistance to a
18. Can sellers be restricted from potential buyer of shares in the
shopping around during a target company?
negotiation process? Is it possible Not regulated.
to include break fee or other
penalty clauses in acquisition 23. What are the formalities and
documents to procure deal procedures for share transfers and
exclusivity? how is a share transfer perfected?

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The company’s basic system may stipulate operates on a reciprocity principle as per
entry or substitution of any kind of Article 62 of Law No. 10 of 2023 concerning
its issued shares to any other kind by Libyan Commercial Arbitration. The State
shareholder’s request and company’s of Libya is a party to the Riyadh Convention
agreement according to the percentages allowing for the enforcement of arbitral
and method of the basic system. awards originating from a State within the
Arab League.
24. Are there any incentives (such
as tax exemptions) available for 28. Are there any specific formalities
acquisitions in your jurisdiction? for the execution of acquisition
documents? Is it possible to
No. Although, if a company, particularly remotely/digitally sign documents?
foreign companies as fewer registration
options are available to them, can be In addition to the above-mentioned
provided with tax exemptions for certain formalities under question No. 14, Article
activities if registered under investment law 302 required the companies to inform the
and can maintain the conditions set out creditors. Namely, Article 302 states, “The
under investment law. legal representatives of the companies
concerned with amalgamation should
F. Enforceability inform the creditors of the amalgamated
25. Can acquisition documents be and amalgamating companies about the
executed in a foreign language? amalgamation decision during 10 days
from date of registering the amalgamation
No, the acquisition documents must be in in the trade register as well as its
Arabic as they must be submitted to the publication and announcement in two
relevant Libyan Public Authorities. national daily newspapers.”
26. Can acquisition documents be Moreover, it is possible to use an electronic
governed by a foreign law? signature either Rometty/ digitally
No. according to Law No. 6 of the year 2022.
27. Are arbitration clauses legally G. Trends and Projections
permissible or generally included in
29. What are the main current trends in
acquisition documents?
M&A in your jurisdiction?
It is permissible to include arbitration
Acquisition is not a heavily regulated
clauses. However, it must be noted that if
area of law. The Commercial Law only has
the clause relates to the acquisition of a
certain and limited provisions that govern
locally established company (incorporated
mergers and acquisitions. Thus, it is not a
in Libya), then Libyan Law is the applicable
regular practice in Libya.
law.
30. Are any significant development
When selecting a location for arbitration
outside of Libya, it is best to select a or change expected in the near
location which can provide an arbitral future in relation to M&A in your
award enforceable in the State of Libya jurisdiction?
as Libya is not a party to the New York No.
Convention on the Recognition and
Enforcement of Foreign Arbitral Awards.
Libyan law on the recognition and
enforcement of foreign arbitral awards

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LUXEMBOURG
BRUCHER THIELTGEN & PARTNERS

Philippe Sylvestre Sébastien Rimlinger

Partner Counsel
philippe.sylvestre@ sebastien.rimlinger@
brucherlaw.lu brucherlaw.lu

A. General company (société à responsabilité limitée)

and the public limited company (société
1. What is the main legal framework anonyme).
applicable to companies in your
jurisdiction? Both companies have to be incorporated
in front of a public notary. The shares of
The commercial companies in Luxembourg a private limited company are not freely
are governed by the law dated 10 August transferable (the approval of the other
1915 on commercial companies as
existing shareholders is required prior to
amended from time to time.
any transfer). The shareholders are limited
The main companies are commercial to 100 shareholders.
companies however the Luxembourg civil
The shares of a public limited company are
code contains some regulations applicable
freely transferable and may be listed. There
to civil companies and also applicable to
the commercial companies. is no limit with respect to the number of
shareholders.
2. What are the most common types
of corporate entities (e.g., joint In both cases, the liability of the
stock companies, limited liability shareholders are limited to their
companies, etc.) used in your contribution.
jurisdiction? What are the main The public limited company is managed by
differences between them (including a board of directors or a sole administrator
but not limited to with regard to the in case of a sole shareholder. The private
shareholders’ liability)? limited company is managed by a sole
Generally speaking, two types of companies manager or a board of managers (collège de
are used in Luxembourg, the private limited gérance).

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B. Foreign Investment 5. Are there any specific considerations

for employment of foreign
3. Are there any restrictions on foreign employees in companies
investors incorporating or acquiring incorporated in your jurisdiction?
the shares of a company in your
jurisdiction? A third-country national who wishes to
come to Luxembourg to carry out a salaried
Under Luxembourg law, there are no activity for a period of more than 3 months,
applicable restrictions apart from KYC and must follow a procedure in two consecutive
AML requirements. steps:
However, the Luxembourg government Before entering the country, (i) he must
presented bill no. 7885 in front of the submit an application for a temporary
Luxembourg parliament. Such bill authorisation to stay to the Immigration
establishes a national screening mechanism Directorate of the Ministry of Foreign and
for foreign direct investment that may be European Affairs (Ministère des Affaires
detrimental to security or public order and étrangères et européennes), (ii) be in
to establish the mechanism for cooperation possession of a valid passport and (iii) for
between the Member States of the persons subject to visa requirements in
European Union. The said bill intends to order to enter Luxembourg: request a type
D visa after having obtained the temporary
implement the regulation (UE) 2019/452
authorisation to stay;
of the European Parliament and of the
European Council dated 19 mars 2019. After entering the country, he/she has to
make (i) a declaration of arrival in the new
The bill implements the European
commune of residence in Luxembourg,
provisions by providing for a three-step (ii) undergo a medical check and (iii) then
screening mechanism. The first step is for submit an application for a residence
the foreign investor to notify his foreign permit for third-country national salaried
direct investment when it concerns critical workers.
activities. The Minister of Economy and
the Minister of Finance decide whether An employer who has not been presented
the foreign direct investment should be with a suitable candidate from the National
Employment Agency (Agence pour le
subject to a screening procedure. If such
développement de l’emploi) (“ADEM”) within
a screening procedure has been initiated,
3 weeks following his declaration of a
the foreign direct investment is subject to
vacant position can request a certificate
authorisation in view of its potential impact
from the director of the ADEM which
on security or public order.
will allow him to recruit a third-country
4. Are there any foreign exchange national.
restrictions or conditions applicable C. Corporate Governance
to companies such as restrictions to
foreign currency shareholder loans? 6. What are the standard management
structures (e.g., general assembly,
Regarding foreign investments, the board of directors, etc.) in a corporate
company and its investors have to comply entity governed in your jurisdiction
with the KYC & AML requirements but and the key liability issues relating
also with any applicable sanction list (e.g., to these (e.g., liability of the board
Russian sanction list). members and managers)?

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In principle, companies are managed by a specific offences (but not limited to):
board of managers/directors. Managers/ a. failure to submit the annual accounts
directors have the broadest powers to
to the general meeting of the
realize the corporate object of the company
shareholder(s),
and to represent it towards third parties.
b. failure to convene the general meeting
The directors, the members of the of the shareholder(s),
management committee and the directeur
général (managing executive officer) c. manipulation of the market price of
are liable to the company in accordance shares, bonds and other securities,
with the general law for the execution of d. forgery of the annual accounts with
the mandate given to them and for any fraudulent intent or intention to harm,
misconduct in the management of the and
company’s affairs.
e. misuse of company assets.
The directors and members of the
7. What are the audit requirements in
management committee can be held
jointly and severally liable towards either corporate entities?
the company or any third parties for Both public and private limited companies
damages resulting from the violation of this must be supervised by one or more internal
law of articles. auditors (commissaires). For private limited
The directors and members of the companies, this will be the case if they have
management committee shall be more than 60 shareholders.
discharged from such liability in the case of A partnership limited by shares (société en
a violation to which they were not a party commandite par actions) is supervised by
provided no misconduct is attributable a board of three internal auditors (except
to them and they have reported such where an approved statutory auditor
violation, as regards members of the (réviseur d’entreprises) is appointed).
board of directors, to the first general
meeting and, as regards members of the However, an approved statutory auditor
management committee, during the first must audit the accounts of a public limited
meeting of the board of directors after they company, a private limited company,
had acquired knowledge thereof. a simplified joint stock company and a
partnership limited by shares if two of the
The annual accounts of the company must following conditions are met during two
be approved every year by the shareholders consecutive financial years:
during its ordinary general meeting. During
such general meeting, the shareholders  the total balance sheet exceeds EUR 4.4
can also appoint and/or remove the million.
management of the company.  the net profits exceed EUR 8.8 million.
An extraordinary general meeting of
 the company has at least 50 employees.
shareholder(s) must be convened to amend
the articles of association. D. Shareholder Rights
Under the law dated 10 August 1915 on 8. What are the privileges that can
commercial companies as amended from be granted to shareholders? In
time to time and the Luxembourg criminal particular, is it possible to grant
code, managers/directors may notably voting privileges to shareholders for
be held criminally liable for the following appointment of board members?

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Each shareholder can take part in collective  bring a liability claim on behalf of the
decisions irrespective of the number company against the management or
of shares they own. They have a right supervisory board; and
to attend the general meetings of the
 convene a general or extraordinary
concerned companies.
general meeting of the shareholders of
Unless shares are issued without voting the company.
rights, each shareholder has voting rights
10. Is it possible to impose restrictions
commensurate with its shareholding.
on share transfers under the
However, a shareholders’ agreement can
corporate documents (e.g., articles
specify that directors will be appointed by of association or its equivalent in
the shareholders from a list proposed by your jurisdiction) of a company
one shareholder and the other directors incorporated in your jurisdiction?
can be appointed by the shareholders from
a list proposed by the second shareholder. Yes.

It is also possible to impose to the board of 11. Are there any specific concerns or
managers/directors the prior approval of other considerations regarding the
the shareholder(s) prior to the adoption of composition, technical bankruptcy
a specific decision. and other insolvency cases in your
jurisdiction?
9. Are there any specific statutory rights
available to minority shareholders No.
available in your jurisdiction? E. Acquisition
The main actions that minority 12. Which methods are commonly used
shareholders can bring include: to acquire a company, e.g., share
• the Shareholders representing at least transfer, asset transfer, etc.?
5% of the share capital of a public In Luxembourg, the company are mainly
limited company (a société anonyme) acquired via share deals.
can, in the context of an increase of
the share capital of the company by 13. What are the advantages and
way of a contribution in kind, require a disadvantages of a share purchase
valuation of the contributed assets by as opposed to other methods?
an approved statutory auditor. In a share purchase, the buyer acquires
• the shareholders of a public limited the target company with all its assets,
company (a société anonyme) liabilities, and obligations (including those
representing at least 10% of the share that the buyer does not know about). The
capital can: seller’s liability is limited to the extent of
the warranties and indemnities given to the
 ask for an explanation or information buyer.
in writing from the management body
Parties to an asset purchase can opt for
about a specific transaction and, in the
the purchase to be governed by the all
absence of an answer, request a judge
assets and liabilities transfer regime. Under
to appoint an assessor. Such article may
this specific regime, all the assets and
also be applicated to a private limited
liabilities are transferred to the buyer by
company;
law (including personal service agreements
(intuitu personae), unless expressly

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prohibited in the agreement itself. The 15. What are the regulatory
seller or preferably a third party (since the competition law requirements
seller will have no assets following the applicable to private acquisitions in
transfer) may grant specific warranties and your jurisdiction?
indemnities in favour of the buyer.
The Law of 30 November 2022 on
In a share purchase, shares are transferred competition as amended (“Competition
to the buyer through the share purchase Law”) provides the competition law
agreement. All the assets, liabilities, and framework.
obligations of the target company are The Competition Law provides the
acquired without any specification. substantive rules:
In a share purchase, in principle, no third- • Article 4 covers the prohibition of
party consents or notifications are required, cartels.
unless provided for in specific agreements
through, for example, change of control • Article 5 covers the prohibition of abuse
provisions, or due to specific regulations. of a dominant position.
However, in a private limited company The competition council can intervene,
(a société a responsabilité limitée) a new after the completion of a transaction, to
shareholder must be approved if he does remedy anti-competitive agreements or
not acquire the entire share capital of the abuse of a dominant position resulting
concerned company. from the acquisition.
In an asset purchase, the asset purchase The competition council can intervene on
agreement must detail the assets, liabilities, its own initiative or following a complaint.
and obligations to be transferred and third-
16. Are there any specific rules
party consents or notifications are usually
applicable for acquisition of public
required to achieve the transfer of specific
companies in your jurisdiction?
assets/agreements.
Some rules for specific companies exist.
14. What are the approvals and
For example, in case of a target whose
consents typically required (e.g., registered office is in Luxembourg and
corporate, regulatory, sector securities are admitted to trading on a
based and third-party approvals) regulated market in Luxembourg, the offer
for private acquisitions in your will be supervised by the Commission de
jurisdiction? Surveillance du Secteur Financier (“CSSF”).
An acquisition will usually require corporate Furthermore, if a target company carries
approvals from the buyer and the seller a license from the CSSF, the change in
(typically, board resolutions) authorising shareholding must be approved by the
the entering into the transaction and the CSSF. Finally, it might be possible for the
signing and execution of the transaction Luxembourg government to intervene in
agreement. The articles of association may a contemplated acquisition, which aims at
require the approval of the shareholders of certain Luxembourg entities that are doing
the buyer and/or the seller. business in highly sensitive governmental
areas.
Sometimes, the provision of these decisions
is a condition for closing. Alternatively, the 17. Is there a requirement to disclose
parties declare and guarantee to each other a deal, for instance to regulatory
that all necessary authorisations have been authorities? Is it possible to keep a
obtained. deal confidential?

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Non-disclosure agreements are not subject platforms, DAC7 introduces a number of

to any specific formalities to ensure their generic changes to the DAC not limited to
enforceability. digital platforms, including a delineation
of the internationally agreed standard
However, the following rules reduce the
of foreseeable relevance and a legal
“confidentiality” of a deal:
framework for the conduct of joint audits
• all affected Luxembourg entities must between two or more Member States.
disclose their (new) beneficial owner(s)
18. Can sellers be restricted from
to the Register of Beneficial Owners. shopping around during a
This includes commercial companies, negotiation process? Is it possible
special limited partnerships, investment to include break fee or other
funds including common funds, non- penalty clauses in acquisition
profit associations, and foundations. documents to procure deal
• on 9 August 2019, the Luxembourg exclusivity?
government published a legislative Yes, in both case.
proposal to implement the EU
Mandatory Disclosure directive (the 19. What are the conditions precedent
Directive, also known as “DAC 6”). in a typical acquisition document?
Under the mandatory disclosure rules, Is it common to have conditions to
qualifying intermediaries (such as closing such as no material adverse
financial and tax advisers, lawyers, change?
banks, accountants and domiciliation Examples of such conditions are:
service providers) and – under certain
circumstances – taxpayers need to - the delivery of certain financing
report certain arrangements to the facilities to the purchaser;
relevant tax authorities. The reporting - the prior approval of, or absence of
obligations will apply as from 1 July express objection to, the contemplated
2020, but will also retroactively cover transaction by a regulatory or public
arrangements that started being authority;
implemented after 24 June 2018.
- the passing of resolutions of the
In addition, the Luxembourg government target’s shareholders to approve the
laid bill no. 8029 (the “Bill”) before contemplated transfer of the shares
Parliament. It would implement into under the contemplated transaction;
domestic law Council Directive (EU)
2021/514 of 22 March 2021 amending - no material adverse change during the
Directive 2011/16/EU on administrative negotiations,
cooperation in the field of taxation - commitment to solve some specific
(“DAC 7”). The Bill contains several sections issues before completion.
that introduce a reporting obligation for
20. What are the typical warranties
digital platforms whether located inside
and limitations in acquisition
or outside the EU and an automatic
documents? Is it common to obtain
exchange of information between EU
warranty insurance?
Member States’ tax administrations on
revenues generated by sellers on these The warranties and indemnification
platforms as of 1 January 2023. In addition provisions usually cover all aspects of the
to this new reporting obligation for digital target company and its business (including

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its subsidiaries), with a particular focus Financial assistance may be possible,

on the financial accounts used for the however it is heavily restricted and not
transaction and the company’s main assets. commonly used.
In a share transfer, guarantees are broader 23. What are the formalities and
and cover more extensive issues (taxation, procedures for share transfers and
target’s annual accounts, and so on). how is a share transfer perfected?
In an asset transfer, guarantees focus on the It depends on the legal form of the
assets transferred. company. The key points are the execution
The main limitations on the warranties and of the share purchase agreement, the
indemnification provisions relate to the: notification to the company of the transfer
of its shares, registration of the transfer in
- scope of the warranties or the share register, and in some cases the
indemnification provisions. The publication of the transfer of the shares.
warranties may be qualified or
purposefully not cover certain assets or 24. Are there any incentives (such
characteristics of the target company. as tax exemptions) available for
The agreement can even expressly acquisitions in your jurisdiction?
exclude certain types of liability;
Generally, asset sales are fully taxable while
- enforcement process for the share sales are generally tax exempt.
indemnification provisions. These
However, if the securities sold are in a
provisions generally include time
Luxembourg tax transparent entity (société
limitations on claims, minimum
civile) holding at least one Luxembourg real
thresholds for claims, maximum liability
estate asset, registration duties apply.
provisions, and exclusion of contingent
liabilities. Capital gains realized by fully taxable
The appetite for utilizing warranty Luxembourg companies on a disposal of
insurance has increased markedly in recent shares are subject to corporate income tax
years. (“CIT”) and municipal business tax (“MBT”).

21. Is there a requirement to set a Capital gains realised by a qualifying seller

minimum pricing for shares of a on a disposal of shares in a qualifying
target company in an acquisition? subsidiary are exempt from CIT and MBT in
Luxembourg, provided that:
No, but the price must be fixed or must
be determinable according to objective  At the date of the disposal, the
criteria. qualifying seller has held or commits
itself to hold a participation for an
22. What types of acquisition financing uninterrupted period of at least 12
are available for potential buyers in months;
your jurisdiction? Can a company
provide financial assistance to a  During this 12-month period, the
potential buyer of shares in the participation represents at least 10%
target company? in the qualifying subsidiary or the
acquisition price of the participation is
Bank loans, lines of credit, and loans from
at least EUR 6 million.
private lenders are all common choices for
acquisition financing.

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F. Enforceability G. Trends and Projections

25. Can acquisition documents be 29. What are the main current trends in
executed in a foreign language? M&A in your jurisdiction?
Yes. The most common type of deal remains a
share deal.
26. Can acquisition documents be
governed by a foreign law? 30. Are any significant development
or change expected in the near
Yes.
future in relation to M&A in your
27. Are arbitration clauses legally jurisdiction?
permissible or generally included in
There are no significant developments or
acquisition documents?
changes expected in the near future in
Yes, this may be contractually foreseen. relation to M&A in Luxembourg.
28. Are there any specific formalities
for the execution of acquisition
documents? Is it possible to
remotely/digitally sign documents?
Regarding the share deal, no specific
formalities are needed. Under Luxembourg
and European law, an electronic signature is
recognized.

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MALTA
FENECH & FENECH ADVOCATES

Nicolai Vella Falzon Luca Amato

Managing Partner Senior Associate
nicolai.vellafalzon@ luca.amato@
fenechlaw.com fenechlaw.com

A. General private limited liability companies and

qualifying as shipping organizations in
1. What is the main legal framework terms of the Merchant Shipping Act (Chater
applicable to companies in your 234, Laws of Malta).
jurisdiction?
2. What are the most common types
The main legal framework applicable to of corporate entities (e.g., joint
companies in Malta is the Companies Act stock companies, limited liability
(Chapter 386, Laws of Malta) (the “CA”) companies, etc.) used in your
together with all subsidiary legislation jurisdiction? What are the main
enacted thereunder. The CA sets out the differences between them (including
general legal framework on the regulation but not limited to with regard to the
of commercial partnerships and limited shareholders’ liability)?
liability companies, while the subsidiary The most common types of corporate
legislation regulates more specific entities in Malta are private Limited Liability
topics, such as the offering to the public Companies (“LTDs”) and Public Limited
of securities and the regulation of cell Liability Companies (“PLCs”). Both are
companies. limited liability companies and largely share
A parallel legal framework that is relevant many characteristics. The most notable
to a certain category of Maltese companies differences between the two are:
is the Merchant Shipping (Shipping - Share capital – LTDs must have a
Organizations – Private Companies) minimum share capital of EUR 1,165
Regulations (S.L. 234.42). These regulations (at least 20% paid up) while PLCs must
largely mirror the CA and regulate shipping have a minimum share capital of EUR
organizations, i.e., companies formed as 46,588 (at least 25% paid up);

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- Number of shareholders – LTDs can - Private companies being investment

have a minimum of 1 (one) shareholder companies with variable share capital
(subject to qualifications for single- (SICAVs);
member companies) and a maximum
- Public companies being investment
of 50. PLCs must have a minimum of
companies with variable share capital
2 (two) shareholders and there is no
(SICAVs);
maximum number of shareholders;
- Public companies being investment
- Number of directors – LTDs can have
companies with fixed share capital
a minimum of 1 (one) director and
(INVCOs)
a maximum of 50. PLCs must have
a minimum of 2 (two) shareholders - Private companies registered as
and there is no maximum number of shipping organisations as discussed
directors; further above;
- Corporate approvals – LTDs allow - Cell companies operating within the
for resolutions in writing signed by business of insurance and registered in
all shareholders in lieu of holding terms of the IBA.
general meetings, while PLCs require
Finally, Maltese law also allows the
resolutions to be taken at general
formation of partnerships en nom collectif
meetings duly convened and held;
(general partnership) and partnerships
- Restriction on right to transfer shares – en commandite (limited partnership). The
LTDs must restrict the right to transfer former will have 1 (one) or more general
shares in the memorandum & articles partners who assume unlimited liability
of association, while PLCs have no such for the partnership’s debts and obligations
requirement; with all their personal assets. The latter
will have general and limited partners,
- Invitations to the public for subscription
with the general partners being in charge
of shares or debentures – LTDs are
of the management of the partnership
required to prohibit any invitation to
and liable with all their personal assets to
the public to subscribe for any shares
the partnership’s liabilities, while limited
or debentures of the company, while
partners are liable only to the extent of
PLCs may offer shares or debentures
their contributions to the company.
to the public but may not issue any
form of application for their shares B. Foreign Investment
or debentures unless the company is
3. Are there any restrictions on foreign
registered and the issue is accompanied
investors incorporating or acquiring
by a prospectus.
the shares of a company in your
Since both LTDs and PLCs are limited jurisdiction?
liability companies, the shareholders’
There are no restrictions on investors
liability in each case is limited to the
directly or indirectly originating from a
amount, if any, unpaid on the shares
European Union (“EU”) member state,
respectively held by each of them.
naturally provided that such investors
duly comply with Anti-Money Laundering
(“AML”) requirements and are not caught
Other types of corporate entities, which
by sanctions applicable in Malta and the EU.
however fall under the general categories
of LTD and PLC listed above, include: With regard to non-EU investors, the

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National Foreign Direct Investment Office such rate shall be the official euro reference
Screening Act (Chapter 620, Laws of Malta) middle exchange rate published by the
(the “NFDIOSA”) provides restrictions on European Central Bank, or the indicative
the incorporation or acquisition of shares middle exchange rate published by the
in certain Maltese companies. Briefly, the Central Bank of Malta, as the case may be,
NFDISOA outlines several key activity for that date.
areas (in turn derived from Article 4 of
5. Are there any specific considerations
the EU Foreign Direct Investment (“FDI”)
for employment of foreign
Regulation) whereby, if an investment (via
employees in companies
incorporation or acquisition) resulting in
more than 10% of shares being directly incorporated in your jurisdiction?
or indirectly held by a non-EU investor Foreign employees that originate from EU
is intended in companies operating in member states can freely work for Maltese
such key activity areas, the Maltese FDI companies without any restrictions.
Office will need to be notified. Depending
on the nature of the transaction, and Third country (non-EU) nationals are
particularly if such transaction could affect also free to work for Maltese companies.
the public order and security of Malta, the However, if they are to reside in Malta,
Maltese FDI Office may then subject the then they will require a work/residence
investment to screening and trigger the Permit. Moreover, if they reside outside of
EU cooperation mechanism in terms of the Malta, then there may be situations where,
EU FDI Regulation. The notification needs notwithstanding that the governing law
to be made prior to the investment being of the employment contract is stipulated
effected. Otherwise, the Maltese FDI Office as Maltese law, the contract would still
reserves the right to unwind the investment be deemed regulated by the place of
and apply administrative penalties. residence of the employee.

4. Are there any foreign exchange C. Corporate Governance

restrictions or conditions applicable 6. What are the standard management
to companies such as restrictions to structures (e.g., general assembly,
foreign currency shareholder loans? board of directors, etc.) in a corporate
There is no restriction on foreign currency entity governed in your jurisdiction
shareholder loans or similar. Moreover, the and the key liability issues relating
share capital of a Maltese company may to these (e.g., liability of the board
be denominated in any currency which members and managers)?
is a convertible currency, euro being the As a preliminary note, the constitutive
default.
documents of all Maltese companies are the
However, it should be noted that, for the memorandum and articles of association
purposes of preparation of the company’s of the company (the “M&As”). These
annual accounts, the reporting currency documents set out the constitutional affairs
should be the same as the share capital of the company including the composition
currency. Where the annual accounts of of the board of directors, the legal and
a company are presented in a currency judicial representation of the company,
other than euro, there shall be stated on the authorised and issued share capital
the balance sheet of the company the and the various rights and obligations of
exchange rate between the currency used shareholders. They also regulate, within the
and euro on the balance sheet date and parameters of the law, the right to transfer

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shares, increases in authorised and issued Maltese jurisprudence has determined that
share capital, granting of encumbrances directors’ duties are owed to the company
over shares etc. itself, rather than to shareholders. Moreover,
directors may be found personally liable if
By law, the management of the company
they are found to have breached Maltese
(and any attached liability) is entrusted to
law provisions on wrongful and/or
the board of directors. The board is in turn
fraudulent trading. Otherwise, to the extent
appointed by the shareholders. The first
that they have not breached their duties at
director(s) are nominated in the first M&As
law, they will not be found personally liable
of the company on incorporation and are
for debts of the company on the principle
thus appointed unanimously by the initial
of the separate juridical personality of the
shareholders. Further appointments to the
company.
board may be made by ordinary resolution,
unless the M&As provide otherwise. Shareholders, on their part, are not involved
in the management of the company.
The CA defines an ordinary resolution as
Consequently, and in line with the principle
a resolution passed by a shareholder or
of limited liability and the corporate veil,
shareholders having the right to attend
as a general rule they are not liable for the
and vote, holding in the aggregate shares
wrongdoings of the company. Their liability
entitling the holder or holders thereof
is thus capped to the amount, if any, unpaid
to more than 50% of the voting rights
on the shares respectively held by each of
attached to shares represented and entitled
them. While this is the general position at
to vote at a meeting. An extraordinary
law, there are some exceptions in which
resolution is in turn defined as a resolution
the so-called corporate veil will be lifted
taken at an extraordinary general meeting
and creditors will be given recourse against
which has been passed by a shareholder
the shareholders. Thus, for example, in
or shareholders having the right to attend
the context of the insolvent liquidation of
and vote at such meeting, holding in the
companies, findings of fraudulent trading
aggregate not less than 51% in nominal
on the part of the shareholders will expose
value of the shares conferring that right.
them to personal liability for all or any
While these are the default thresholds set
debts of the company. More generally, if a
out at law, the CA allows such thresholds
court finds that the business of a company
to be higher (but not lower) by prescribing
has been carried on with the intent to
such in the M&As.
defraud creditors and the shareholders
As the body entrusted with the were knowingly a party to that fraud, the
management of the company, the board of directors and shareholders may assume
directors has several general and statutory/ personal liability for the debts incurred by
administrative duties. The general duties the company.
are wide and include the duty to act
7. What are the audit requirements in
honestly, in good faith and in the best
corporate entities?
interests of the company, to promote the
well-being of the company, to exercise the All companies in Malta are required to
due degree of care, diligence and skill, and keep proper accounting records, which are
to ensure that personal interests do not determined by reference to the company’s
conflict with the interests of the company. accounting reference date. A company
The statutory duties cover more specific may specify a particular date by filing the
company obligations, such as filing and appropriate forms with the Malta Business
fiscal duties. Registry, failing which the reference date

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will be deemed to be December 31 of every prepared in accordance with the CA

year. and whether they give a true and fair
view of the financial position, financial
The accounts shall comprise the balance
performance and cash flows of the
sheet as at the last day of the accounting
company in accordance with GAPSME
period to which they refer, the profit and
or IFRS, as applicable. The opinion shall
loss account for that period, the notes
be either unqualified, qualified or an
to the accounts and any other financial
adverse opinion.
statements and other information which
may be required by generally accepted Once approved, the annual financial
accounting principles and practice. To this statements, directors’ report and auditors’
end, small and medium sized companies report must be submitted to the Malta
may adopt the General Accounting Business Registry within 42 days from
Principles for Small and Medium-Sized the end of the period for submitting
Entities (“GAPSME”) standards outlined in annual financial statements to the general
the Accountancy Profession Regulations meeting.
(S.L. 281.05) or the International Financial
Reporting Standards as adopted by the While the audit requirement is applicable
European Union (“IFRS”) whereas public to all companies registered in Malta, it
interest entities and large entities must should be noted that small private exempt
necessarily adopt IFRS. Moreover, holding companies are allowed to exclude the
companies must, in addition to individual income statement from the published
accounts, also prepare consolidated group financial statements.
accounts, although there are certain In addition to the above, certain Maltese
exemptions to this rule. companies are also bound by the auditing
All Maltese companies must appoint and reporting requirements emanating
auditors at each annual general meeting, from the Corporate Sustainability Reporting
who will hold office until the next Annual Directive (Directive (EU) 2022/2464) (the
General Meeting (“AGM”). The first auditors “CSRD”) which entered into force on
of the company are usually appointed by January 5, 2023. Consequently, companies
the directors, but thereafter the auditors falling within the thresholds stipulated
are appointed by the shareholders at the in the CSRD will now be required to also
annual general meeting. During the AGM, report on their sustainability metrics in line
the directors shall present: with the European Sustainability Reporting
Standards (ESRS) developed by EFRAG.
- the annual financial statements,
including a balance sheet and income D. Shareholder Rights
statement, together with any other 8. What are the privileges that can
statement and accompanying notes as
be granted to shareholders? In
required in terms of GAPSME or IFRS;
particular, is it possible to grant
- a directors’ report, generally outlining voting privileges to shareholders for
the company’s affairs and what appointment of board members?
amounts, if any, the directors propose
The powers reserved for the shareholders
to distribute as dividends;
of a Maltese company are residual powers
- the auditors’ report, which shall state in the sense that all matters relating to the
whether, in the auditors’ opinion, general administration and management
the accounts have been properly of the company and its affairs are

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entrusted to the board of directors. The Article 402 of the CA. Briefly, this article
CA then reserves a number of rights grants any shareholder the right to pursue
and powers which are constitutional in court action if said shareholder feels that
nature to the shareholders holding voting the affairs of the company have been, are
shares in the company. These rights and being, or are likely to be conducted in a
powers are generally entrenched in the manner that is, or that any act or omission
CA subject to modification in the M&As of the company have been, are, or are likely
and are exercisable in virtue of ordinary to be, oppressive, unfairly discriminatory
or extraordinary resolutions of the against, or unfairly prejudicial, to a member
shareholders. Generally, these include the or members or in a manner that is contrary
right and power to: to the interests of the members as a whole.
If an action to this effect is successful,
- amend the M&As; the court has a wide discretion on what
- increase or decrease the share capital of measures to impose, which might include
the company and any rights attaching regulating the conduct of the company’s
to shares; affairs, requiring, restricting or forbidding a
particular act, and in perhaps more extreme
- change the currency of the share
cases, dissolving and winding up the
capital;
company.
- appoint and remove directors;
Another statutory right granted to minority
- dissolve and wind up the company. shareholders is contemplated under Article
It is also possible for certain operational 214(2)(b)(iii) of the CA, which provides
decisions typically exercised by the board that a court shall order the dissolution of
of directors to be designated as shareholder a company where it is of the opinion that
reserved matters, whereby such actions that there are grounds of sufficient gravity
would need to be referred by the board to warrant the dissolution of the company.
to the shareholders for final ratification. Any shareholder may bring an action
However, the extensive delegation of such under this article and, consequently, this is
powers to the shareholders is not advisable another important tool afforded to minority
since in such instances shareholders may be shareholders.
deemed to be ‘shadow directors’ or ‘de facto’ While Article 402 and 214(2)(b)(iii)
directors of the company thereby exposing might suggest an overlap (in that both
them to the responsibilities, duties and contemplate the dissolution of the
liabilities that would typically fall on company), it should be noted that the
directors (for example liability for wrongful criteria for each action are different. The
trading in the event of insolvency), thereby former requires the shareholder to prove
diminishing the protection afforded at law either oppression, unfair prejudice or unfair
by the company law principle of limited discrimination, while the latter simply
liability. requires the court to find ‘grounds of
sufficient gravity’, which is arguably a wider
9. Are there any specific statutory rights
test. Moreover, the 402 action provides a
available to minority shareholders
wide range of remedial actions that the
available in your jurisdiction?
court may pursue, while the 214(2)(b)(iii)
Maltese law grants several statutory rights is a somewhat more drastic action which
to minority shareholders. The primary provides the court no remedial action
statutory right is the so-called unfair other than ordering the dissolution of the
prejudice remedy contemplated under company.

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The CA provides some further statutory shareholders prior to transferring them to

rights to minority shareholders, such as the third parties or appropriating and acquiring
right to: them himself in satisfaction of the debt.
- Receive notice of general meetings; 11. Are there any specific concerns or
other considerations regarding the
- Request the court to order the holding
composition, technical bankruptcy
of a general meeting;
and other insolvency cases in your
- Request the court to appoint a director jurisdiction?
if the number of directors falls below
It should be noted that the bankruptcy
the statutory minimum;
regime regulated in the Commercial
- Request the court to appoint an auditor. Code (Chapter 13 of the Laws of Malta),
while applying to traders and registered
Some further rights are available to
commercial partnerships, does not apply to
minority shareholders who together form
limited liability companies. The dissolution
qualified majorities of at least 1/10th of
and winding up of Maltese companies
the total number of shares having voting
(including on the ground of insolvency) is
rights, including the right to requisition an
regulated in the CA itself.
extraordinary general meeting and to apply
for an investigation into the company’s E. Acquisition
affairs.
12. Which methods are commonly used
10. Is it possible to impose restrictions to acquire a company, e.g., share
on share transfers under the transfer, asset transfer, etc.?
corporate documents (e.g., articles
The most common method of acquiring a
of association or its equivalent in
company is the purchase of a controlling
your jurisdiction) of a company
interest in or all of the issued shares of a
incorporated in your jurisdiction?
company. This would typically occur via a
Yes. It is quite common for the M&As to standard purchase of shares agreement,
include pre-emption rights that would although less commonly it could also occur
require shareholders to offer shares to other via a judicial sale or the appropriation of
shareholders before selling these to third shares held by a pledge.
parties. Similarly drag-along and tag-along
Asset transfers are also allowed; however,
provisions are also commonly included in
this would not entail the acquisition of the
the M&As. The terms and procedure for
company as such, but rather its business/
the exercise of such rights must clearly
going concern, which may include its
be indicated in the M&As. Naturally, these
assets, intellectual property, employees etc.
can be waived, as commonly occurs in the
context of a company acquisition by a third 13. What are the advantages and
party. disadvantages of a share purchase
as opposed to other methods?
In the case of private limited liability
companies, pre-emption rights on transfers A share purchase allows the buyer to
of shares are not entrenched in the law and acquire the company as a whole, with all
must thus be provided for in the M&As. its assets, liabilities, employees, contractual
In the case of a transfer of shares on the relationships etc. As such the company’s
enforcement of a pledge, the executing affairs remain intact, as it is only the
creditor must offer the shares to other ownership which is changing. The buyer

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is thus stepping into the shoes of the acquirer originates from a third country,
prior shareholders, which also means that notification and possibly screening by the
the history and legacy of the company is NFDISO would be required.
preserved. It is also relatively more seamless
From a competition law perspective,
than an asset purchase.
where the acquisition would qualify as
An asset purchase allows the buyer to a concentration that meets the merger
purchase only those parts of the company’s control thresholds established under
business which it is interested in. The Maltese law, then a notification to the
advantage would be that the buyer can Office for Competition would be required.
exclude certain parts of the business which
Where the company being acquired holds
are undesirable, including certain liabilities
contractual relationships that contain
and contracts. The disadvantage is that,
change of control provisions, a notification
from a legacy perspective, the business is
to, and possibly consent from, the
moving from one company to the next. In
contracting parties would also need to be
this sense, it is the end of a chapter and the
made.
beginning of a new one for the business.
It should be noted that considerations 15. What are the regulatory
relating to merger notification, FDI and competition law requirements
mandatory transfer of employees may applicable to private acquisitions in
also apply in the context of asset transfer your jurisdiction?
transactions.
Under the Control of Concentrations
14. What are the approvals and Regulations (S.L. 379.08) (the “CCR”), where
consents typically required (e.g., the acquisition of shares in a Maltese
corporate, regulatory, sector company leads to a lasting change in
based and third-party approvals) control (in terms of the EC Consolidated
for private acquisitions in your Jurisdictional Notice) it must be notified to
jurisdiction? the Office for Competition (the “OfC”) if the
From a corporate perspective, where the relevant turnover thresholds are met. The
M&As of the company include pre-emption turnover thresholds, which are cumulative,
rights, such rights must be waived by the are the following:
existing shareholders for the acquisition - The undertakings (i.e., buyer and target)
to proceed. This is typically granted by concerned had an aggregate turnover
virtue of an extraordinary resolution of the in Malta (in the preceding financial year)
shareholders. If the M&As of a private LTD which exceeded EUR 2,329,373; and
are silent, then a shareholder may freely
transfer shares without obtaining consent - Each of the undertakings concerned
from the other shareholders. had a turnover in Malta equivalent to at
least 10% of the combined aggregate
From a regulatory perspective, whether or turnover in Malta.
not approval is required depends on the
nature of the company. If the company The OfC will review the concentration and
operates within a regulated industry such declare that the concentration either: (i)
as insurance, financial services, aviation falls out of scope of the CCR; (ii) falls within
or gambling, consent would be required scope of the CCR, but does not give rise to
from the relevant regulatory authority. As competition concerns and should therefore
explained in Question 3, if the company be declared lawful; or (iii) falls within the
operates within a sensitive FDI area and the scope of CCR, raises serious competition

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concerns and therefore requires a more rights if duly authorised by the M&As or
thorough (Phase II) investigation. The OfC via an extraordinary resolution in general
might then require the buyer to submit meeting to this effect.
certain commitments with a view to
Certain additional formalities regarding
rendering the concentration lawful. In any
the offer for shares, such as the need for a
event, the OfC must take a Phase II decision
prospectus in certain cases, are required,
as soon as concerns are removed and not
although there are certain exemptions to
later than 4 (four) months from when the
the prospectus requirement, such as where
Phase II proceedings are initiated, provided
the offer for shares is made in the context
that this time limit may be suspended for a
of a take-over bid.
period of up to 1 (one) month.
17. Is there a requirement to disclose
16. Are there any specific rules
a deal, for instance to regulatory
applicable for acquisition of public
authorities? Is it possible to keep a
companies in your jurisdiction?
deal confidential?
Preliminarily, the CA specifically provides
As discussed in Question 14 above, certain
that the M&As of a public company may
regulatory authorities would require prior
not: (i) restrict the right to transfer shares;
disclosure (and in some cases consequent
(ii) limit the number of its shareholders; and
authorization) of the intended acquisition
(iii) prohibit any invitation to the public to
or change in control if the target company
subscribe for any shares or debentures of
falls within their remit.
the company.
Such authorities might include the
The above rules represent the main
differences between public and private NFDISO (for FDI purposes), the OfC (for
companies in Malta. Otherwise, the rules competition), the Malta Gaming Authority
governing the acquisition of shares are (for gambling businesses), the Malta
largely similar and would thus be typically Financial Services Authority (for financial
included in the M&As of the company, and services, banking and insurance) and the
in any event be generally regulated by the Civil Aviation Directorate (for aviation).
CA. Acquisitions of non-regulated businesses
It ought to be noted that the CA provides or which otherwise don’t give rise to FDI
some additional rules in the context of or competition law issues don’t need to
public companies. Firstly, the directors of be disclosed in advance. However, any
a public company are obliged to register changes in corporate status arising as a
the transfer of any shares in the company result of the deal, such as the change in
in favour of any person who has acquired shareholding, any changes to the board of
those shares as a result of a judicial sale. directors or company secretary, alterations
There is no similar provision in the CA to rights conferred by shares, changes to
which covers private companies. the M&As, etc., will be made public on the
Malta Business Registry Portal.
Secondly, the CA grants a statutory pre-
emption right to existing shareholders 18. Can sellers be restricted from
whenever a public company proposes shopping around during a
to issue and allot additional shares for negotiation process? Is it possible
consideration. This pre-emption right may to include break fee or other
however be waived by an extraordinary penalty clauses in acquisition
resolution in general meeting. The board of documents to procure deal
directors may also waive such pre-emption exclusivity?

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Exclusivity is typically entrenched in the - Not carrying out the business of the
letter of intent or similar signed prior company in the ordinary course;
to the final share purchase agreement - Not amending the share capital or
regulating the deal. Since such preliminary issuing further shares;
agreements are typically non-binding
clauses referencing exclusivity should - Not changing the business of the
specifically be designated as binding company or selling any company
to ensure that the parties are duly property that is material;
safeguarded. It is possible to include - Not amending the M&As;
break-free or other penalty clauses in such
agreements. - Not employing additional key
personnel;
19. What are the conditions precedent
- Not commencing or settling any
in a typical acquisition document?
litigation.
Is it common to have conditions to
closing such as no material adverse The share purchase agreement would
change? typically also grant the prospective buyer
Share purchase agreements will almost the right not to proceed to closing if there
always contain conditions precedent to are any material adverse changes, such as
closing. These can vary widely depending the commencement of litigation above a
on the nature of the target company, its certain quantum or an adverse regulatory
business, any financial commitments it event, or if any warranties are breached.
already holds etc. A standard list might It is not unusual for SPAs to include a
include: locked-box mechanism in which case
- Legal, financial and tax due diligence provisions relating to permitted leakage
that is satisfactory to the buyer; and compensation or price adjustments for
leakage in the period prior to closing are
- Obtaining regulatory consents to the common.
transaction (if applicable);
20. What are the typical warranties
- The passing of any required corporate and limitations in acquisition
approvals, waiver of pre-emption rights documents? Is it common to obtain
etc; warranty insurance?
- Obtaining consents from third parties Warranties and indemnities are generally
for material contracts containing subject to lengthy negotiations and can
change of control clauses/limitations range from fairly limited to quite extensive,
and any loans, facilities and finance depending on the risk appetite of the
documents; parties and the value of the deal. Some
- The company executing some form of standard warranties and indemnities
financial restructuring; included in share purchase agreements
might include:
- Procuring the exercise or cancellation of
any outstanding share options. - Warranties covering the capacity,
authority and solvency of the sellers
The share purchase agreement would
and buyers;
typically also include actions which the
sellers undertake not to do, carry out or - Warranties covering the corporate
permit between the date of signing of the status, solvency and good standing of
SPA and closing, such as: the target and any subsidiaries;

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- Warranties covering the statutory Maltese law contains prohibition of

books, financials and tax position of the financial assistance provisions whereby it
target and subsidiaries; is unlawful for a company to give, whether
directly or indirectly, and whether by
- Warranties covering the assets,
means of a loan, guarantee, the provision
contracts, intellectual property,
of security or otherwise, any financial
employees and IT systems of the target
assistance for the purpose of an acquisition
and subsidiaries.
or subscription made or to be made by any
It is becoming increasingly common person of or for any shares in said company
for parties (mostly buyers) to obtain or its parent company.
warranty & indemnity (W&I) insurance to
protect against unintended contractual There is however an exception that would
misrepresentations in the representations apply if the assistance is being granted in
and warranties included in the share the context of an employee share incentive
purchase agreement. scheme, provided that such assistance does
not reduce the company’s net assets below
21. Is there a requirement to set a the value of its issued share capital and its
minimum pricing for shares of a undistributable reserves.
target company in an acquisition?
Maltese law also includes a more generic
There is no minimum pricing for shares whitewash procedure whereby the financial
set out under Maltese law. However, it assistance provisions can be whitewashed
should be noted that, for the purposes if:
of calculating any taxes or stamp duty
that might be due, the value of the shares - The company is a private company;
will be considered to be the Fair Market - The directors, after taking into account
Value (“FMV”) of such shares, and this the financial position of the company
notwithstanding that the purchase price and having considered their general
included in the share purchase agreement obligations at law, resolve via a majority
may be lower than such FMV. Where the vote to authorize the grant of financial
purchase price is higher than the FMV, then assistance for the specific transaction;
it is said higher purchase price that will be
considered as the consideration on which - The directors’ resolution is ratified
tax will be paid. via an extraordinary resolution of the
shareholders;
22. What types of acquisition financing
are available for potential buyers in - A declaration in the prescribed
your jurisdiction? Can a company statutory form is submitted to the Malta
provide financial assistance to a Business Registry.
potential buyer of shares in the 23. What are the formalities and
target company?
procedures for share transfers and
All typical means of acquisition financing how is a share transfer perfected?
are available to potential buyers. Bank
Generally, the various formalities and
finance, shareholder loans, debt security
procedures for a share transfer under
(e.g., by the issue of bonds subject to
Maltese law would constitute the following:
regulatory requirements), equity finance,
venture capital financing, leveraged - Signing of the share purchase
buyouts etc. are all allowed and regulated agreement outlining the terms of sale
by Maltese law. and purchase, including conditions

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precedent to completion. While this is company holds business interests, more

not strictly mandatory, it is customary than 90% of which are outside of Malta (for
because it outlines the parameters stamp duty), and where the seller is not tax
of the deal and often provides for resident in Malta (for capital gains tax).
important conditions precedent to
closing such as regulatory approvals
F. Enforceability
(merger control, FDI, etc.); 25. Can acquisition documents be
executed in a foreign language?
- Once the SPA conditions are met,
proceed to closing which would There is no prohibition on the share
generally include: purchase agreement being executed in a
foreign language. However various other
o Passing of any necessary corporate documents that would form part of the
approvals in terms of the M&As; completion deliverables, particularly those
o Execution by the seller and buyer which would require filing with and vetting
of a short form share transfer by the relevant authorities, would need
instrument. This is required in term to be in a form that is acceptable to the
of the CA and also for filing with the authorities, which means they would need
relevant authorities; to be drafted in English or Maltese.
o Updating of the register of 26. Can acquisition documents be
members (shareholders) of the governed by a foreign law?
company;
Yes. Indeed, it is quite common for
o Cancellation of old share certificates documents in cross-border transactions
and issue of share certificates to the to be governed by a foreign law which is
new shareholder; familiar to all parties, the most popular of
o Execution of relevant statutory which would generally be English law.
forms; 27. Are arbitration clauses legally
o Execution of statutory tax and duty permissible or generally included in
schedules. acquisition documents?

- Once the documents have been Parties are free to adopt any dispute
executed, they must be filed with the resolution mechanism they deem fit, and
Malta Tax and Customs Administration it is common for arbitration to be adopted
and the Malta Business Registry within in lieu of more conventional court dispute
14 days. Failure to do so within the resolution procedures.
statutory period will lead to late filing Maltese law provides an arbitration
penalties. regime under the Arbitration Act (Chapter
24. Are there any incentives (such 387, Laws of Malta) and the Arbitration
as tax exemptions) available for Rules (S.L. 387.01). These laws set out
acquisitions in your jurisdiction? the parameters for domestic arbitrations
held in Malta (under the auspices of the
Yes. While the default position under Malta Arbitration Centre) and also allow
Maltese law is that the sale of shares will for international arbitrations to be held in
attract stamp duty and capital gains tax, terms of the Model Law on International
the Maltese fiscal regime provides various Commercial Arbitration adopted on June
exemptions. Some instances where such 21, 1985 by the United Nations Commission
exemptions may apply would be where the on International Trade Law.

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An essential requirement when choosing (EU) No 910/2014 (the “eIDAS Regulation”).

arbitration for dispute resolution is for Thus, it is nowadays possible for documents
the parties to enter into an arbitration to be executed using a qualified electronic
agreement which would regulate the terms signature. It should be noted that such
of the arbitration, such as the number of signatures must be made via trusted service
arbitrators, any appeal options etc. It is providers that are authorised in Malta, as
common practice for this agreement to listed in the Malta section of the eIDAS
be included within the arbitration clauses Dashboard of the European Commission.
of the share purchase agreement, which
is why it is important for these clauses to G. Trends and Projections
be carefully drafted to avoid any potential 29. What are the main current trends in
misinterpretations. M&A in your jurisdiction?
28. Are there any specific formalities Following the M&A slowdown experienced
for the execution of acquisition during COVID, 2022 and 2023 were busier
documents? Is it possible to
years for M&A activity in Malta, with 2024
remotely/digitally sign documents?
being one of the busiest years on record.
There are no particular formalities The local market is seeing a notable
regulating the validity of a share purchase level of acquisitions, particularly in the
agreement and its ancillary documents Technology, Media & Telecommunications
and they are in fact typically drawn up as (TMT) and igaming sectors, both of
private agreements between the parties. which are very strong industries in Malta.
Notarial involvement is not required. The Specifically within the igaming sector, we
share purchase agreement and certain are experiencing a period of consolidation,
ancillary agreements such as shareholder with large market players actively pursuing
agreements can be signed in wet ink or acquisitions of smaller players, both
remotely (by exchanging scanned copies vertically and horizontally.
of signature pages, or via digital signature),
although in the latter cases it would be 30. Are any significant development
prudent to include such authority in the or change expected in the near
relevant corporate approvals. future in relation to M&A in your
jurisdiction?
Until recently, certain statutory forms and
tax documents requiring filing with the We expect the current market trend,
Maltese authorities had to necessarily be particularly within the igaming sector, to
signed and submitted in wet ink original. continue. We are also noticing an increase
This position was recently revised to bring in redomiciliation in and out of Malta and
the Maltese system in line with Regulation expect these to continue.

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MEXICO
CUESTA CAMPOS

Azucena Marin Rafael Sanchez Acosta Jesús Bueno Jorge González

Partner Principal Senior Associate Associate
amarin@ rsanchez@ jbueno@ jgonzalez@
cuestacampos.com cuestacampos.com cuestacampos.com cuestacampos.com

A. General The most common types of entities

in Mexico are (i) Sociedad Anónima
1. What is the main legal framework (“S.A.”) comparable to corporations and
applicable to companies in your incorporated by shareholders, and (ii)
jurisdiction? Sociedad de Responsabilidad Limitada (“S.
The main legal framework for companies in de R.L.”), comparable to limited liability
Mexico is the General Act for Commercial companies, which are formed by members.
Entities, which provides the general Nonetheless, there are other commonly
regulations for the corporate governance used options depending on the specific
and organization of corporations and features of the project or the purpose of
companies. However, there are other the investment such as Sociedad Anónima
laws that apply to companies, such as the Promotora de Inversión (“S.A.P.I.”), similar to
Federal Civil Code, the Code of Commerce, S.A., regulated by the Securities Market Act,
the Foreign Investment Act, the Securities or the Sociedad Financiera de Objeto Múltiple
Market Act, as well as other particular (SOFOM), aimed to conduct financial
laws that may apply, depending on the activities related to granting of credit,
industry or specialized matters, such as leasing, or factoring, among others.
telecommunications, mining, energy,
All the options above mentioned grant
aeronautic, transportation, among others.
protection to the shareholders/partners.
2. What are the most common types Their liability is limited to the amount of
of corporate entities (e.g., joint their contributions in the capital stock.
stock companies, limited liability Except for very exceptional cases, the
companies, etc.) used in your “corporate veil” cannot be pierced, and
jurisdiction? liabilities reach the shareholders/partners.

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What are the main differences between have the right of first refusal to acquire
them (including but not limited to with the equity interests intended to be
regard to the shareholders’ liability)? transferred.
Between the two main corporate vehicles  Surveillance committee: S.A. are
above referred (S.A. and S. de R.L.), there subject to the mandatory requirement
are several differences, some more to the appointment of at least 1
relevant than others. Particularly, the (one) examiner who may be or not
most important matter to consider when shareholders. The main purpose of the
deciding on the type of company that will figure of the examiner is to supervise
be used is the kind of operations that the the compliance by the board, director
company will carry out, the investment and managers to corporate governance
scheme, and the admission of new rules and applicable laws. Regarding
shareholders. For example, if the intention the S. de R.L., there is no mandatory
is to incorporate a company that will have requirement to appoint an examiner.
constant variations in its capital due to
 Corporate rules: The law provides
rounds of investment or the admission
more flexibility to incorporate into
of new shareholders on a recurring basis,
the bylaws of a S.A. special rules
it’s more advisable to incorporate a S.A.,
regarding obligations and rights
while, on the contrary, if the company
of the shareholders, contributions,
is a family business or a small group of
investments, restrictions. S.A. (and its
shareholders that is not likely to have
modality of S.A.P.I.) is the ideal vehicle
frequent modifications in its distribution of
when the project is a Joint Venture,
the capital stock, it would be more optimal
or a SPV is required. On the other
to consider a S. de R.L.
hand, a S. de R.L. is more suitable for a
Some of the main differences between wholly owned subsidiary, with simple
both types of entities (S.A. and S. de R.L.) corporate structure.
are:
B. Foreign Investment
 Ownership: The holders of interests
3. Are there any restrictions on foreign
in a S.A. are called shareholders, and
investors incorporating or acquiring
they hold shares which, subject to the
the shares of a company in your
provisions of the bylaws, can grant
jurisdiction?
different level of benefits and rights
to the shareholders. In a S. de R.L., the As a general rule, foreign investors are
holders are members, and they hold allowed to conduct business in Mexico,
equity interests. All equity interests either personally, through a branch
must grant the same rights and (foreign entity doing business in Mexico)
obligations. or a subsidiary (an incorporated Mexican
entity). There are no restrictions to foreign
 Transfer of ownership: In a S.A., as
investment.
a general rule, the shares are freely
transferable, except for particular As exception to the general rule, there are
restrictions that may be provided in the some limitations to foreign investment
bylaws. In a S. de R.L., the admission in very particular scenarios. The Foreign
and the transfer of the participation of Investment Act foresees some categories
the partners requires the consent and of activities that are (i) exclusively
approval of the other members, who reserved to the Mexican government, (ii)

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exclusively reserved to Mexican nationals the foreign employee must be executed,

and to Mexican companies, in which which must include details such as salary,
foreign investment cannot participate, (iii) position, duration of employment and
Activities in which foreign investment is working conditions.
limited to specific percentages, ranging
The visitor visa with permission to conduct
from 10% to 49% and, (iv) Activities which remunerated activities, authorizes the
require authorization from the National foreigner employee to work or stay in the
Commission of Foreign Investment to have country for up to 180 days. For this type of
more than 49% of foreign participation. visa, it is required to have either a formal
Some examples of business sectors to job offer or a formal invitation from an
which foreign investment is restricted are authority or institution.
terrestrial transportation of passengers,
national freight forwarding services, The temporary residency with permission
agricultural land, certain port services, to work in Mexican territory, authorizes
among others. the foreign employee to work in Mexico
and receive a payment for their work. The
4. Are there any foreign exchange foreign employee must have a formal
restrictions or conditions applicable job offer to be able to obtain a work visa.
to companies such as restrictions to With this permit, the foreign employee is
foreign currency shareholder loans? granted the status of temporary resident
There are no particular restrictions for with permission to work and to stay in the
transactions to be entered within Mexico, country for a year. This visa card can be
in connection to foreign currency. Loans, renewed.
investments, capital contributions, and The companies that employ foreigners
in general, any transaction or payment must obtain an Employer Certificate from
obligation can be executed in Mexican the National Migration Institute (INM). The
currency or a foreign currency. If the employer must also enroll their foreign
agreement or contract is silent on the workers on the Mexican Institute of Social
currency, the obligation shall be settled in Security (IMSS) as well as provide them with
Mexican pesos. If the agreement is silent social security benefits.
on the exchange rate, parties shall use the
official exchange rate published by the C. Corporate Governance
Mexican Central Bank. 6. What are the standard management
5. Are there any specific considerations structures (e.g., general assembly,
for employment of foreign board of directors, etc.) in a corporate
employees in companies entity governed in your jurisdiction
incorporated in your jurisdiction? and the key liability issues relating
to these (e.g., liability of the board
In order for foreigners to work for members and managers)?
companies in Mexico, they must obtain
the appropriate immigration permit that The most important (and minimal)
allow them to work in the country, whether structures, according to the General Act of
it be the visitor visa with permission to Commercial Entities, are the following:
conduct remunerated activities or the
Shareholders’ Meeting
temporary resident visas, depending on
each particular case. For both scenarios, The shareholders’ meeting is 1 (one)
a written and legally valid employment of the most important management
agreement between the employer and structures of the Mexican company since,

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in accordance with the General Act of of the accounting and management

Commercial Companies, it’s the supreme company.
corporate authority of the company; it can
• Appointment or removal of directors,
approve and ratify all acts and operations
managers, and employees.
of the Company and its resolutions shall
be carried out by the person appointed for • Approve the annual budget and
that purpose or by the general sole director business strategy of the company.
or the board of directors when applicable.
With regards to liabilities, when a
It is in charge, among other activities and
representative of the company does not
depending on whether it’s an ordinary or
act on the best interest of the company
extraordinary meeting, of: (i) approving
or acts beyond the limits of its authorities
fiscal years, (ii) reviewing and approving
(ultra vires), commits fraud, acts against
the Administration Body and Examiner(s)
Mexican laws and regulations, or acts in
Report, (iii) appointing and ratifying the
bad faith before creditors, such director
members of the administration body
may be held responsible for any damages
and the examiner(s) and their authorities
or losses caused to the company. Also,
and powers of attorney, (iv) determining
under certain circumstances, the directors
the payments of the members of the
(as representatives of the company), may
administration body and its examiner(s) for
be jointly or severally liable for certain tax,
their duties, and (v) reviewing the auditors’
environmental or criminal liabilities.
report, if applicable. Also, the shareholders’
meeting approve (i) dissolutions and Surveillance Body
liquidations, (ii) increases and decreases
Finally, the surveillance body is an
in capital stock, (iii) mergers, and (iv)
internal corporate body (without powers
amendments of the corporate bylaws of the
of attorney) responsible for overseeing
Company.
the activity of the administration body.
Regarding liabilities, the general rule is the It can be composed by 1 (one) member
liability of the shareholders or members is (examiner), or a committee composed
limited to the value of their contributions by several members. This structure is
to the capital stock. However, this rule not mandatory for S. de R.L. companies,
does not apply to non-limited liability contrary to S.A. companies, in which
companies, and for certain very specific is required. The examiner cannot be a
matters (for example, under certain member of the administration body, but it
circumstances, tax liabilities, fraudulent can a shareholder.
resolutions, among others).
The main duty of the examiner is to
Management Body monitor the corporate and business
operations of the company in relation to
The management body may be composed
its corporate structures and the activities
by 1 (one) or more members (sole director
executed by the administration body or
or board of directors), which oversees
similar management positions, to mitigate
defining the strategy for the execution of
or to detect any irregularity. As such, they
the business. Some of its most common
have the authority, for example, to call to
activities are:
shareholders’ meeting when they deem
• Approve the annual report for the necessary. The members of the surveillance
shareholders’ meeting, to inform the body may be liable for lack of diligent
acts carried out, as well as the status supervision.

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The examiners are individually responsible body is composed by 3 (three) or more

for the compliance of the obligations board members, shareholders having 25%
provided by the corporate bylaws and of the capital stock may appoint 1 (one)
the General Act of Commercial Entities; board member. The bylaws may provide for
however, they may be assisted by third special classes of shares whereby special
parties acting under their direction or by rights may be conferred, allowing issuance
the services of technicians or independent of shares with privileged (or restricted)
professionals. voting or economic rights.
7. What are the audit requirements in 9. Are there any specific statutory rights
corporate entities? available to minority shareholders
As previously mentioned, S.A. companies available in your jurisdiction?
are more regulated regarding audit and Corporate law in fact provides rights to
surveillance requirements and obligations. minority stockholders, including, to oppose
In accordance with the General Act of meeting decisions, review balance sheet
Commercial Companies, S.A. companies and books of the company, as well as the
must appoint at least 1 (one) person to act ability to appoint at least 1 (one) board
as an “examiner”, which will carry out audit member when the administration body is
and supervision activities to the operations integrated by 3 (three) or more members,
of the board of directors or general sole as long as such minority represents a 25%
director of the company. On the other of the capital stock. For public companies,
hand, S. de R.L. companies do not have whose shares are listed at the Mexican
such obligation; however, they are able to Exchange Stock Market such percentage
appoint an examiner if the shareholders will be reduced to 10%.
deem it appropriate.
10. Is it possible to impose restrictions
Additionally, according to the Federal Tax on share transfers under the
Code, in case companies surpass certain corporate documents (e.g., articles
thresholds on their annual income, their of association or its equivalent in
financial statements must be audited by your jurisdiction) of a company
a certified accountant, as part of their incorporated in your jurisdiction?
compliance tax obligations.
Mexican law allows for shareholders
Other than the above, there are no agreements or bylaws to provide
additional mandatory corporate restrictions to the transfer of shares. Some
requirements for audits to be conducted by of restrictions and special rules for share
the company. transfers that can be contemplated, include
D. Shareholder Rights previous approval of the board, rights of
first refusal, tag-along, drag-along, put-call
8. What are the privileges that can
options, among others.
be granted to shareholders? In
particular, is it possible to grant 11. Are there any specific concerns or
voting privileges to shareholders for other considerations regarding the
appointment of board members? composition, technical bankruptcy,
and other insolvency cases in your
As a general rule, the shareholders voting
jurisdiction?
rights for the election of board members
in proportion to their participation. In a Mexican courts have developed important
non-public S.A., when the management precedents, experience and criteria with

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respect to insolvency and bankruptcy are indeed transferred with the change
procedures and creditor’s rights. Insolvency of control. The transaction will not trigger
can be filed either voluntarily by the value added tax on the shares– while an
insolvent company, or by a creditor or asset acquisition will trigger value added
the district attorney’s office directly, by tax (16% general rate) on certain assets
following the procedures stated in its among joint liability on tax liabilities of
special regulation. Under insolvency seller. For seller, under certain elections and
statutes, certain creditors will rank ahead formalities, the transfer of shares could be
secured bank or third parties loans, such as,
taxed on a gain basis (to avoid withholding
preferential labor payments, management
taxes, subject to certain requirements and
fees and expenses of the estate.
depending on the tax residence of the
E. Acquisition seller).
12. Which methods are commonly used Operatively speaking, a share acquisition
to acquire a company, e.g., share poses an easier transition, as commercial
transfer, asset transfer, etc.? and employment relations remain in
In Mexico, the main methods to acquire a the acquired entity, having a smoother
private legal entity are the following: logistic as opposed to asset or joint
venture transaction, where purchase order
- Total or partial acquisition of shares, settlement, transit of inventory and sales,
securities, or interests by means of a pending obligations, accounts receivable
stock purchase agreement; and payable, notices to clients, suppliers
- total or partial acquisition of the assets and third parties, transfer of equipment and
of a company/business, through an machinery ownership shall be taken into
asset purchase agreement; consideration.
- joint venture agreement, typically Finally, depending on the party’s
through the incorporation of a new perspective, assumption or release of
legal entity, where the parties of the liabilities is an important consideration
joint venture contribute funds, assets for the transaction, as purchaser will
and/or rights, or inherit through the acquisition of shares,
- merger with the target entity. all liabilities of the target entity, including
civil, labor, administrative, environmental,
13. What are the advantages and operating, tax, ongoing disputes, litigations
disadvantages of a share purchase and corporate criminal liabilities, thus
as opposed to other methods? purchaser shall conduct an extensive due
As opposed to the other acquisition diligence prior closing transaction and
methods, share purchase method offers seller might be burdened with pre-closing
a straightforward control and acquisition clean ups and in some cases a purchase
of the target entity, and in general terms, price reduction based on monetized risks.
share purchase negotiations tend to be 14. What are the approvals and
shorter than any of the other acquisition
consents typically required (e.g.,
methods.
corporate, regulatory, sector
If this method is overseen from a tax based and third-party approvals)
perspective, both seller and purchaser are for private acquisitions in your
benefited. Tax attributes of the company jurisdiction?

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Share acquisition consents that shall be met the IFT are about to be replaced by a
for closing of transaction will be primarily new antitrust authority once the federal
shareholders’ approval of the transaction legislation that amends or substitutes
and of any other special requirements the current economic competition legal
or waivers as may be required under its framework is passed by the Congress.
bylaws (for example, waivers of rights of As of March 4, 2025, there is a new law
first refusal or option rights of other non- initiative that is under discussion by the
purchasing parties). legislative bodies but it is still unclear if
the current draft of anti-monopoly law
Supplier and customer consents or notices
will be approved (or substituted by a
will also be relevant for the case of change-
different law initiative) and exactly when
of control provisions or asset acquisitions.
the new antitrust authority will take office.
Approvals of sector regulatory bodies will
In case the transaction needs to be filed
be directly linked to the activity or industry
for clearance by the relevant economic
of the operation of the target company.
competition authority, the transaction may
Also, depending on the value of the not be closed, until it is approved by the
transaction, as well as other economic relevant authority, otherwise, important
aspects of the purchasing and selling sanctions may be imposed.
parties involved, the clearance of the
M&A transactions in certain industries may
transaction by the applicable economic be supervised by other authorities, such
competition authority (either the Federal as banking, insurance, and financial bonds
Economic Competition Commission or sectors.
the Federal Telecommunications Institute)
might be required. In case that certain 16. Are there any specific rules
thresholds for pre-merger filing are met, applicable for acquisition of public
the transaction cannot be closed until the companies in your jurisdiction?
relevant antitrust clearance is issued. Publicly traded companies in Mexico can
be acquired through a takeover or a public
15. What are the regulatory
acquisition offer (“OPA”), duly authorized
competition law requirements
by the National Banking and Securities
applicable to private acquisitions in Commission (Comisión Nacional Bancaria
your jurisdiction? y de Valores or “CNBV”) and the Mexican
In case the transaction exceeds certain Exchange Stock Market (Bolsa Mexicana de
economic thresholds, an antitrust test Valores or BMV); the securities in question
must be performed to determine if the shall be registered at the National Securities
Registry (Registro Nacional de Valores or
private acquisition requires approval from
RNV).
the Federal Telecommunications Institute
(“IFT”), for the case of companies relating 17. Is there a requirement to disclose
to the telecommunications or broadcasting a deal, for instance to regulatory
sectors, or from the Federal Economic authorities? Is it possible to keep a
Competition Commission (“COFECE”), deal confidential?
which is the economic competition In order to determine whether an M&A
authority for any other economic sector. operation can remain fully confidential
However, it is important to mention that before authorities, there’s two items that
due to a constitutional reform published shall be considered, firstly if the target
on December 20, 2024, the COFECE and company is publicly traded or private, and

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secondly, to determine antitrust thresholds of intent and non-disclosure agreements,

where a notice shall be filed with the as well as in the promissory purchase
antitrust authority. agreements or purchase agreements that
are subject to closing conditions. The
For transactions involving private
parties may validly agree on break-up fees
companies, there is no legal provision
and other conventional penalties in case of
asserting the obligation of the parties to
default of the exclusivity obligations.
disclose a transaction; instead, the parties
agree when and how to publicly announce 19. What are the conditions precedent
the transaction. Depending on the legal in a typical acquisition document?
vehicle selected, certainly there are filings Is it common to have conditions to
that shall be performed following closing closing such as no material adverse
that are available to the public – such change?
as filings with the electronic system of
Conditions precedent for Mexican M&A
commercial entities of the Ministry of
transactions usually include for the target
Economics. Also, other filings will be
company to have obtained all regulatory
required, such as tax returns relating the
approvals, consents and/or waivers from
transfer of shares or assets, merger notice
corresponding governmental authorities,
to the tax authorities, filings with the
as well as assurance that there’s no legal
National Foreign Investment Registry.
impediment, claims, actions, or proceedings
On the other hand, regarding publicly that may declare the transaction illegal or
traded corporations, these shall prohibit its consummation. No material
disclose relevant operations, events and adverse change provisions are customary,
transactions that may have an effect and seller and purchaser typically negotiate
over the value of the shares, as well as to its scope and limitations. The COVID-19
provide relevant information to CNBV for pandemic introduced new provisions
OPA approval which shall be disclosed negotiated among the parties to exclude
to the public a day prior to the OPA’s public health governmental orders, among
commencement validity date, and they others as material adverse changes or
shall submit certain reports before the events.
Securities National Registry.
20. What are the typical warranties
18. Can sellers be restricted from and limitations in acquisition
shopping around during a documents? Is it common to obtain
negotiation process? Is it possible warranty insurance?
to include break fee or other
Customary representations and warranties
penalty clauses in acquisition
in M&A transactions include, corporate
documents to procure deal
organization, consents and approvals,
exclusivity?
ownership, assets and real estate
Exclusivity periods provisions are common matters, material contracts, employment
and well used in Mexican M&A transactions, matters, environmental, taxes, customs,
in order to prevent seller to engage in regulatory matters, anticorruption, and
negotiations regarding assets, shares, or other compliance topics. The type of
any other subject matter related to the business activity and sector of the target
M&A transaction. These provisions are company will determine representations
commonly integrated to the term-sheet of and warranties that may be required.
memorandums of understanding, letters Representations and warranties on

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Environmental, Social and Governmental In Mexico, the minimum formalities for the
(ESG) aspects have increased due to transfer of stock are (i) the execution of the
international trends. stock purchase agreement (and although
not being a requirement of validity, it is
Representations and warranties insurance
recommended to certify the agreement
is not widely common in M&A transactions
with a notary public, required for tax filings
in Mexico, but each time, is more frequently
seen, particularly, in multijurisdictional/ and appropriate support of the effective
cross-border transactions. date of the transaction), (ii) shareholders
resolution approving the transaction, if
21. Is there a requirement to set a required under the by-laws of the target
minimum pricing for shares of a company, (iii) delivery and endorsement of
target company in an acquisition? share certificates and (iv) registration in the
There is no legal provision that obliges or corporate books of the target entity of the
provides a minimum price for shares of a relevant transfer of shares. Certain notices
target company in an acquisition; however, will be required before the corresponding
purchase price should be based on market authorities, such as tax authorities, Ministry
value considerations. In case of transactions of Economy, National Registry of Foreign
where related parties are involved, Investments and, depending on the target
transfer pricing rules shall be considered. company’s activities and/or sector, notices
Acquisitions below fair market value could to regulatory entities, as provided by
be challenged by tax authorities or be the special regulation of such sector or
subject to fraudulent conveyance claims. industry.
24. Are there any incentives (such
22. What types of acquisition financing
as tax exemptions) available for
are available for potential buyers in
acquisitions in your jurisdiction?
your jurisdiction? Can a company
provide financial assistance to a M&A transactions are subject to federal,
potential buyer of shares in the state, and local taxes depending on the
target company? type of transaction (for example, if real
estate assets are involved in an asset deal,
Several structures of acquisition finance local taxes will apply for the transfer of the
may be considered by buyers of target real estate).
companies in Mexico, including, bank
At the federal level, Seller would have
commercial loans, asset-based loans, mixed
to pay income tax, and buyer (when the
senior and subordinated loans, private acquisition is on assets) would have to pay
equity funding, mezzanine loans, leveraged value added tax. Depending on whether
buyout, owner earnout. Financing may the transaction involves individuals or
come from banking or other financial entities, and their tax residency, different
institutions, either local or international. rates and rules would be applicable.
Therefore, companies may provide financial Depending on this as well, international
assistance to the potential buyer of shares, tax treaties may be applicable for reduced
either through equity or debt, or a mix of rates. There are no federal tax exemptions
both. applicable to M&A transactions as a
general rule; although, it is relevant to
23. What are the formalities and mention that on June 2023, the Federal
procedures for share transfers and Government issued a decree that provides
how is a share transfer perfected? up to 100% income tax and value added

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tax exemptions for 3 (three) and 4 (four) practice is to prepare a short form purchase
years respectively for companies investing agreement in bilingual form, typically
within the Isthmus of Tehuantepec in Spanish and English, for filing purposes.
certain economic activities (electronic,
26. Can acquisition documents be
semiconductors, automotive, medical
governed by a foreign law?
devices, pharmaceutical, agroindustry,
generation and distribution of green Under Mexican law, the election of a foreign
energy, machinery and equipment, law is valid (subject to certain conditions)
information technology and others). Also, and, therefore, foreign law can govern
on January 21, 2025, Mexico’s Federal the main purchase agreement. However,
Government issued a Decree of federal Mexican statutory regulations and
tax incentives for immediate deduction of public law provisions must be taken into
certaub investments in new projects as a consideration, such as, formalities required
counter measure against the new tariffs for the transfer and registration of stock,
and measures being imposed by the US transfer of real estate, notices to authorities,
Government as a result of the new foreign among others. Other topics that should be
trade policies of its president Donald considered when electing the applicable
Trump. law are: (i) address of the party with the
Regarding estate and local taxes, potential obligation to indemnify (it is
exemptions or special treatments may easier to enforce and execute a “local” court
be applicable, but that would depend / arbitration ruling than a “foreign” one; and
on the regulations of specific state with (ii) arbitration versus courts of law (consider
jurisdiction on the particular asset or the expertise in foreign law of a court of law
operation. The typical incentives for new of another country versus the knowledge of
investments include temporary discounts arbitrators).
or exceptions in payroll taxes, property 27. Are arbitration clauses legally
transfer taxes and support on capital permissible or generally included in
investments. acquisition documents?
Foreign entities could be subject to taxes Yes, arbitration clauses are permissible
under certain circumstances, considering, and normally included in acquisition
among others, rules of (i) tax residency, (ii) documents. They are more widely used for
permanent establishment, and (iii) source transnational transactions or when different
of income to determine whether taxes are jurisdictions are involved. As explained
applicable in Mexico. above, in selecting the country for the
F. Enforceability arbitration and the applicable law, we
suggest using the criteria of “enforcement”,
25. Can acquisition documents be
i.e., selecting the country where the
executed in a foreign language?
agreement or transaction is likely to be
Yes, acquisition documents may be enforced.
executed in any language, however, for
28. Are there any specific formalities
the mandatory notarization in Mexico of
for the execution of acquisition
any of such documents, for the filing or
documents? Is it possible to
registration before a Mexican authority (if
remotely/digitally sign documents?
statutorily required) and for tax compliance
purposes, a translation to Spanish is Since 2003, through the Code of
required. In M&A transactions, the standard Commerce, Mexico began regulating digital

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and electronically signed documents. Later, by private equity capital, syndicated bank
in 2016, with another amendment to the loans (under different structures) and
Commerce Code, it has been approved owner earn-outs. However, as further
that all documents, despite being wet-ink explained in the following section, Mexico
or electronically executed, have the same has been facing important challenges in
validity and enforceable power before third the international trade scenario due to
parties and authorities. the new US measures under the Trump’s
administration, which effects are still to be
For a digital document to be completely
assessed.
valid, the digital-signature services provider
must comply with certain requirements 30. Are any significant development
which are regulated by Mexican Official or change expected in the near
Standard 151, regarding protection future in relation to M&A in your
and preservation of data messages jurisdiction?
and digitization of documents (such
Mexico’s first female president, Claudia
fully recognized signature, “advanced
Sheinbaum, took office on October 1, 2024.
e-signature”). If the provider of e-signature
She has close ties with the former president
services does not have this certification, the
and therefore, it is anticipated that she will
e-signature will not be considered equally
continue the strategic government policies
valid as a wet-ink signature, and therefore,
of her predecessor. During the first weeks
it will not be an advanced e-signature.
of her tenure, several constitutional and law
Finally, for customary uses and practices, amendments aiming to convert the Federal
more than legal provisions, there are Electric Commission (“CFE” for its acronym
some debates on the validity of advanced in Spanish) and the oil production entity,
e-signature in certain documents (for PEMEX from state-owned “productive”
example, in labor and employment to “public” companies, have been in the
disputes). In M&A transactions in Mexico, process of approval. These amendments
wet-ink signatures are still preferred and seek to strengthen the powers of these
recommended. state-owned companies and limit private
investment in certain energy activities. For
G. Trends and Projections instance, one of the objectives is that 54%
29. What are the main current trends in of the energy production is concentrated
M&A in your jurisdiction? by the CFE, while 46% may be concessioned
to private companies subject to strict rules
Due to the nearshoring opportunities
to be issued. It is also anticipated that the
for Mexico, as a strategic neighbor of the
energy transition to renewable sources will
United States of America, M&A transactions
be exclusive to the Mexican government.
have been importantly active and rising
in Mexico. The trending targets in Mexico Apart from that, the Mexican government
are manufacturing companies, agro- shared in October 2024 its strategy to
industries, pharmaceutical, electronic, promote and support private and foreign
automotive, financial, digital industries, investment. Among the areas where the
telecommunications, logistics and government is interested in promoting
infrastructure. We have seen M&A investment are housing, trains, highways,
transactions in their different forms: stock ports, and infrastructure in general,
sales, asset acquisition, joint ventures, among other activities that are expected
strategic expansions, and divestitures. to be continued, such as manufacturing,
Also, we have seen both M&A financed technology and consumer products.

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It is also relevant to mention that an will be effective long term or not but, in
important judicial reform was approved any case, international companies will
by the Congress in September 2024. This have to deal with the new foreign trade
reform aims to have judges, magistrates scenarios, review their international sale,
and Supreme Court ministers elected manufacturing, supply or distribution
by popular vote (in replacement of the agreements and review and adapt their
former judicial-career system). Due to the strategic plans in the short and long
uncertainty of the practical effects of this terms. Mexico has opened anti-dumping
reform in the day-to-day administration investigations with respect to certain
of justice in Mexico, it is expected that products coming from China, and it
foreign law (when feasible) and arbitration is expected that Mexico will impose
provisions will become more frequent in certain retaliatory measures against the
cross-border M&A transactions. importation duties imposed by the US
Another trend to mention is that government (in case the current scenario
representation & warranty insurance in does not change).
Mexico is becoming more frequent in Despite the above, Mexico is still being
cross-border and multijurisdictional M&A seen as a strategic location to do business
transactions. and to take advantage of the nearshoring
Finally, Mexico has been navigating within opportunities. Business decisions are being
uncertain waters due to, first, the tariff taken under a long term vision, and the
threats and, then, the effective 25%-tariff current troubled waters in the international
imposition by Donald Trump on March 4, relations sea have not created, until now,
2025 (date in which this Mexico chapter a generalized freeze of ongoing M&A
was completed). It is unclear if these tariffs transactions or business projects in Mexico.

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MOLDOVA
EFRIM ROȘCA ASOCIAȚII LAW FIRM

Oleg Efrim Maxim Macovei

Managing Partner Managing Associate
[email protected] [email protected]

A. General differences between them (including

but not limited to with regard to the
1. What is the main legal framework shareholders’ liability)?
applicable to companies in your
jurisdiction? Within the Republic of Moldova’s business
environment, LLCs are prominently
The Civil Code of Republic of Moldova favoured. Their operational flexibility
provides general regulations of legal combined with a supportive regulatory
entities. Limited Liability Companies framework makes them a top choice
(“LLC”) and Joint Stock Companies (“JSC”) for both budding entrepreneurs and
are also governed by the special laws: the established enterprises, including those
Law on Limited Liability Companies, the with foreign capital. Consequently, there’s
Law Regarding Joint Stock Companies.
a significant disparity in the prevalence of
Other legal framework applicable for
LLCs compared to other structures, such as
the operation of companies and M&A
JSCs.
transactions include: the Law on the State
Registration of Legal Entities and Individual Both types of corporate entities operate
Entrepreneurs, the Competition Law, and with their own legal identities, and
the Law on the Capital Market. the responsibility of their members
(shareholders) is restricted to the value of
2. What are the most common types
their capital contributions.
of corporate entities (e.g., joint
stock companies, limited liability The primary distinctions between
companies, etc.) used in your LLCs and JSCs lie in their initial capital
jurisdiction? What are the main requirements. While LLCs may have a share

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capital of at least MDL 1 (approximately - hydrometeorological and geophysical

EUR 0,005) consisting of contributions in activities;
kind or cash, JSCs necessitate an initial
- waste management, especially
capital of minimum MDL 600,000 which
radioactive;
is approximately EUR 30,000. Another
difference pertains to the corporate - infrastructure sectors like energy,
governance structure, which tends to be transport, water, aerospace, defense,
more complex for JSCs, notably due to the and electoral systems;
mandatory presence of a company board.
- advanced technologies like artificial
Concurrently, the registration timelines intelligence, robotics, cybersecurity,
differ. An LLC can be swiftly registered aerospace, defense, quantum,
in just 4 (four) hours under an expedited nuclear, nanotechnologies, and
process, whereas a JSC undergoes a more biotechnologies;
intricate establishment procedure.
- production of cryptographic
Other types of entities are available but information protection means;
are rarely used (especially in the context of
- production and commercial acquisition
M&A transactions).
of state secret protection means;
B. Foreign Investment - explosives production for industrial use;
3. Are there any restrictions on foreign
- aviation security activities;
investors incorporating or acquiring
the shares of a company in your - design and operation of aircraft and
jurisdiction? their components;
Generally, in our jurisdiction, there are - management of airports, train stations,
no restrictions on foreign investors waterways, and ports;
incorporating or acquiring the shares of
- TV broadcasting and audiovisual
a company. However, there are specific
services;
considerations and additional preliminary
conditions, particularly in the context of - communication services, geological
the Law on the Examination Mechanism for studies of subsoil resources;
Investments of Importance to State Security
- production and trading of weapons and
No. 174 dated November 11, 2021.
military equipment.
The law applies to investment activities
There are restrictions on individuals and
by both individuals and legal entities
legal entities (including foreigners)
who, in any manner, directly or indirectly,
who intend to invest in the above-
individually or in collaboration with third
mentioned areas significant for state
parties, including as beneficial owners,
security. These restrictions apply to
intend to carry out or are conducting
those:
specific types of investment activities and/
or transactions that are significant for state - residing in jurisdictions that do not
security. meet international transparency
standards;
Areas deemed significant for state security
encompass a wide range of sectors - involved in money laundering and
including: terrorism financing activities;

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- engaged in activities threatening the Payments and Transfers:

state’s security or public order;
- Payments and transfers related to
- having ties with foreign governments, current foreign exchange operations
entities, or individuals that pose a threat between residents and non-residents
to national security; can be made without restrictions.

- connected with organized criminal - Non-residents can freely receive/

groups or foreign intelligence services transfer payments within or from the
linked to international terrorist Republic of Moldova.
organizations; - Non-residents can transfer funds from
- convicted of corruption, money their accounts in licensed banks or from
laundering, terrorism financing, or their payment accounts with resident
non-bank payment service providers
similar offenses.
abroad without any limitations.
Any potential investor intending to invest
Currency Regulations:
in the vital sectors for state security must
obtain prior approval from the Council - Within Moldova (means the payments
for the Promotion of National Importance made with local banks, for current
Investment Projects (“Council”). and local operations), payments and
transfers between residents and
If an investor intends to transfer control non-residents are primarily made in
of their investment to another individual the national currency, with certain
or legal entity, they must obtain consent allowances for foreign currencies.
from the Council. This is termed the ‘change
of control clause’, and if it is not expressly - However, in Moldova, payments
stated in investment agreements, it is and transfers in foreign currency are
presumed to exist. prohibited in specified cases, including
retail shopping, provision of local
In summary, while our jurisdiction is utilities, and wages paid to non-resident
generally open to foreign investors, those employees by resident employers.
intending to invest in areas of importance
- Payments and transfers between
to state security must observe specific
residents in Moldova are usually in
procedures, ensure they aren’t subject
the national currency, but exceptions
to any of the mentioned restrictions,
are explicitly stated in the law. These
and obtain prior approvals, including exceptions encompass various
when there’s a change in control of the operations, including transactions
investment. involving licensed banks, insurance
4. Are there any foreign exchange services, payment for excess baggage
restrictions or conditions applicable at international airports, and foreign
to companies such as restrictions to currency donations, among others.
foreign currency shareholder loans? Direct Investments:
This summary provides just a broad - Direct investment operations relate
overview of the foreign exchange (and to establishing or maintaining lasting
currency) regulations applicable to economic ties between the investor and
companies in the Republic of Moldova. the entity in which capital is invested.

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- Lasting economic ties are characterized d. Criminal Record: This must be

by holding 10% or more of the share sourced from the employee’s country
capital or voting rights or by having of residence, then translated and
significant influence over the entity’s notarized into Romanian.
administration or operations. e. Proof of Residence: Original and a
- Direct investments can be made copy of either a property document
through various modalities, such as or a rental contract. If using a lease
agreement, it should be registered with
establishing a legal entity, buying
the tax service before submitting.
an existing entity, granting and
receiving long-term loans, real estate f. Photograph: A color photo measuring
transactions, and reinvesting earnings. 3x4 cm.
No notification usually is required for g. Job Announcement: The employer
these operations. should have made a public job posting
However, loans from non-resident on appropriate job websites or through
shareholders (investors) with a term of less a competent local public authority,
than 5 (five) years exceeding EUR 10,000 stating the specific position for which
the employee will be hired. This
require notification to the National Bank of
should be done a few days before the
Moldova.
document submission.
5. Are there any specific considerations
h. Power of Attorney: This is needed if the
for employment of foreign procedure is being done on behalf of
employees in companies the applicant.
incorporated in your jurisdiction?
The foreigner who was initially recorded
Foreign employees seeking to work in with the assignment of the state
Moldova typically need to secure a work identification number of the natural
permit or a residence permit specifically person (IDNP), with or without the issuance
tailored for employment purposes. of identity documents, without his
presence on the territory of the Republic
For most positions within a company,
of Moldova, is entitled to work without
except the role of a general director obtaining a visa, the right of residence or
or administrator, usually the following the right of temporary residence, without
documents are required: first obtaining the right of temporary
a. Questionnaire: A filled-out form as per residence for the purpose of work and a
the standards set by the migration temporary residence permit provided that
the following conditions are cumulatively
authority.
fulfilled:
b. Passport: A copy of the page containing
a) the foreign employee has a state
the identification details from the
identification number of the natural
foreigner’s national passport. person (IDNP) and electronic identity in
c. Employment Contract: A draft of the accordance with the law;
individual employment agreement b) the foreign employee is not and will
highlighting the monthly salary, which not be during the performance of
must at least match the projected work on the territory of the Republic of
average monthly wage for that fiscal Moldova for a period that exceeds the
year. The current threshold stands at right of residence under the terms of
approximately 600 EUR/month. the law;

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c) the foreign employee does not have body in an LLC. It holds the broadest
the status of a resident of the Republic powers to make decisions concerning the
of Moldova under the conditions of the company’s activities, including changes in
Fiscal Code of the Republic of Moldova; share capital, approval of annual reports,
and the appointment or removal of
d) work is provided based on the
administrators. Decisions are typically taken
individual employment contract
by the majority of votes of the shareholders
concluded in the form of an electronic
present.
document, signed with a qualified
electronic signature, issued under the B. Administrator(s): This is the executive
law. body of the LLC. The administrator (or
administrators, if there are 2 (two) or more)
Certain jobs or sectors might have different manages the day-to-day operations of the
conditions or documentation requirements. company and represents the company in its
The procedure might be simpler or differ dealings with third parties. A legal person
for specific roles, like administrators in IT can also act as the administrator of an LLC.
companies.
C. Board of Directors: While most LLCs in
Ukrainian citizens have the option to go Moldova traditionally opt against having
through a different, more streamlined a board of directors, the law does not
procedure termed ‘Temporary protection’. prohibit or restrict their establishment.
This is both technically and operationally
easier than the conventional work permit D. Liability of LLC Members: The liability
process. Permit can be secured within 2 of an LLC’s members is limited to their
(two) weeks post the online submission of contribution to the share capital. However,
the required documents and application. administrators can be held liable to the
The applicant should have a registered company, its shareholders, and third
lease agreement with the tax service and parties for damages resulting from their
must not have stayed for more than 90 days negligence or wilful misconduct.
within a span of 180 calendar days. 2. Joint Stock Company (JSC):
C. Corporate Governance A. General Meeting of Shareholders
6. What are the standard management (GMS): Just like in an LLC, the GMS in a
structures (e.g., general assembly, JSC is the top decision-making body. It
board of directors, etc.) in a corporate makes major decisions, such as amending
entity governed in your jurisdiction the company’s bylaws, approving annual
and the key liability issues relating financial statements, and electing members
to these (e.g., liability of the board of the board of directors.
members and managers)? B. Board of Directors: A characteristic
feature of JSCs, the board of directors plays
In the jurisdiction of Moldova, the
a pivotal role in setting the company’s
management structure of a corporate
strategic direction and supervising the
entity is generally determined by its type,
executive body’s activities. Members of the
either an LLC or a JSC. Here’s a closer look
board are elected by the shareholders and
at each:
are responsible for significant decisions that
1. Limited Liability Company (LLC): shape the course of the company.
A. General Meeting of Shareholders C. Liability of JSC Members: Similar to
(“GMS”): The GMS is the supreme governing LLCs, the liability of shareholders in a JSC

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is limited to their contribution to the share ensure smooth operations and compliance
capital. However, members of the board with Moldovan law.
of directors and other managerial staff
7. What are the audit requirements in
can be held accountable for breaches of
corporate entities?
their fiduciary duties or any negligent or
wilful actions that harm the company or its The following entities are required to
shareholders. undergo mandatory audit:
Both LLCs and JSCs are subject to some a. Medium-sized Entities: Entities that
overarching principles laid down in the aren’t classified as micro or small and, as of
Civil Code regarding the liability of their the reporting date, do not exceed 2 (two) of
executive bodies. These include: the following criteria:

• Obligation to Pursue the Purpose of the Total assets: MDL 318,000,000 (approx. EUR
Legal Entity: The executive must work 16,445,000).
in the best interest and objective of the Sales revenue: MDL 636,000,000 (approx.
company. EUR 32,889,000).
• Obligation to Act with Competence Average number of employees during the
and Diligence: The executive should accounting period: 250.
perform their duties with the requisite
skill and care expected of their position. b. Large Entities: Entities that, at the
reporting date, surpass 2 (two) of the
• Obligation to Avoid Conflicts of Interest: following limits:
The executive must not let personal
interests clash with those of the Total assets: MDL 318,000,000 (approx. EUR
company. 16,445,000).

• Obligation Not to Accept Benefits from Sales revenue: MDL 636,000,000 (approx.
Third Parties: The executive shouldn’t EUR 32,889,000).
accept personal benefits from third Average number of employees during the
parties if it could compromise their accounting period: 250.
decision-making for the company.
c. Public Interest Entities: These comprise:
• Obligation to Declare Interest in a
Proposed Legal Act or Transaction: If - Entities with securities admitted for
an executive has a personal interest in trading on a regulated market.
any company transaction, it must be - Banks.
disclosed.
- Insurance (or reinsurance) companies.
• Obligation of Confidentiality: The
executive must maintain and protect - Collective investment bodies in
securities (legal entities).
the confidentiality of the company’s
information. - Large entities that are state enterprises
or joint-stock companies in which
In conclusion, while there are common
the state holds over 50% of the share
elements in the management structures
capital.
of both LLCs and JSCs, their features and
nuances vary. It’s essential for entities and d. Consolidated Financial Statements:
their members to be aware of their roles Groups that present consolidated financial
and the potential liabilities associated to statements.

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Medium-sized entities and large entities shareholder with less than 33% ownership
keep double-entry bookkeeping and can retreat from the company at any time
prepare complete financial statements without requiring the consent of other
according to national standards of shareholders. With respect to JSCs, the
bookkeeping. Public interest entities always minority shareholder has the right to
keep double-entry bookkeeping and request at any time that a person, who
prepare financial statements according to independently or in conjunction with those
IFRS. affiliated with him, owns more than 90% of
the total volume of shares, purchase their
Entities that aren’t subject to the
held shares.
mandatory audit requirements can still opt
for an audit. They may decide to include 10. Is it possible to impose restrictions
provisions in their Statute or other internal on share transfers under the
documents that specify their procedure for corporate documents (e.g., articles
undertaking an audit. of association or its equivalent in
your jurisdiction) of a company
D. Shareholder Rights incorporated in your jurisdiction?
8. What are the privileges that can
In the Republic of Moldova, corporate
be granted to shareholders? In
documents of an incorporated company
particular, is it possible to grant
can indeed have stipulations limiting share
voting privileges to shareholders for
transfers. Both the articles of association
appointment of board members?
and the shareholders’ agreement can
As a basic principle, shareholders usually mandate that share transfers receive prior
get rights corresponding to the ownership approval from either the company itself or
of the shares. Shareholders of JSCs or LLCs its board of directors. It is recommended
can enter into a shareholders’ agreement to to include such limitations in public
set out their commitments to exercise their registers (such as register of legal entities)
rights in a certain way. Such agreements to make the opposable to third parties.
may establish alternative rules, for example Nevertheless, any restriction on the transfer
regarding the proportionality (or setting of shares shouldn’t entirely prevent their
another rule, or setting an obligation to sale, as that would render the restriction
vote in a specific way) of the vote to the futile.
value of the shares, the distribution of
11. Are there any specific concerns or
net profit, the procedures for appointing
other considerations regarding the
board members, including granting certain
composition, technical bankruptcy
shareholders personal rights (for example
and other insolvency cases in your
the right to appoint board members).
jurisdiction?
9. Are there any specific statutory rights
In the Republic of Moldova, the insolvency
available to minority shareholders
process is governed by the Insolvency Law,
available in your jurisdiction?
which allows both the creditor and the
Minority shareholders are given the debtor to initiate insolvency proceedings.
same statutory rights as majority Upon filing an application, the court has the
shareholders, particularly in terms of authority to commence various procedures,
access to information and collection of such as general insolvency proceedings,
dividends. However, the Law on Limited simplified bankruptcy, or the restructuring
Liability Companies stipulates that a of the company.

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A distinctive feature of Moldova’s and the retention of existing contracts,

insolvency system is the central role licenses, and permits can make share
played by insolvency practitioners. These purchases appealing. On the downside,
are licensed professionals tasked with buyers assume all of the company’s
overseeing and managing the insolvency liabilities, both known and unknown,
process, whether it involves restructuring and might face challenges with hidden
the company or moving towards liabilities, potential shareholder disputes,
liquidation. or integration issues, making the process
potentially riskier and more complex
The rights of foreign creditors are generally
compared to other acquisition methods.
recognized and protected in Moldovan
insolvency proceedings, but navigating the 14. What are the approvals and
process might require local expertise and consents typically required (e.g.,
understanding of Moldovan procedures corporate, regulatory, sector
and laws. based and third-party approvals)
for private acquisitions in your
For potential investors or parties interested
jurisdiction?
in acquiring assets from insolvent
companies, it’s crucial to be aware of In Moldova, private acquisitions often
potential liabilities, especially hidden ones, necessitate a series of corporate approvals.
that might not be immediately obvious. This can include the endorsement of the
Due diligence is paramount. board of directors and potentially a specific
percentage of shareholders, depending
E. Acquisition on the company’s internal documents like
12. Which methods are commonly used the articles of association or shareholders’
to acquire a company, e.g., share agreements.
transfer, asset transfer, etc.?
Regulatory consents are also crucial.
In Moldova, as in many other countries, Acquisitions that might influence market
there is a range of methods to acquire a competition would require the approval of
company. These primarily encompass share the Competition Council. Moreover, there
transfers, asset transfers, mergers. The most are sectors where approval from specific
prevalent form of company acquisition authorities is necessary, such as those from
involves purchasing either the entirety the National Bank of Moldova for banking
or a portion of the company’s shares. and financial transactions, or the National
Nevertheless, it’s vital to understand that Agency for Energy Regulation for energy-
the most appropriate method should be related acquisitions.
assessed on an individual basis, taking into
Lastly, third-party approvals can be a
account the specifics of each case.
determining factor. These arise from
13. What are the advantages and contractual obligations where a change
disadvantages of a share purchase in company control might necessitate
as opposed to other methods? consents, such as in the case of certain
loans, leases, or other contractual
A share purchase offers the advantage of
agreements.
simplicity, as buyers acquire the company
in its entirety, including all its assets, rights, 15. What are the regulatory
and obligations, often without the need for competition law requirements
intricate asset transfers or renegotiations of applicable to private acquisitions in
contracts. Additionally, certain tax benefits your jurisdiction?

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The laws governing the enforcement of board or bodies legally representing

merger control are Competition Law No. the undertakings, or
183 of July 11, 2012 and Competition
- has the right to manage the
Council Regulation on Mergers No. 17 of
undertakings’ affairs;
August 30, 2013. It is worth mentioning
that the Moldovan legislation on c. those undertakings which have in the
competition constitutes a transposition of undertaking concerned the rights or
European Union regulations, implementing powers listed in (b);
acts, and notices.
d. those undertakings in which an
In Moldova, private acquisitions that fall undertaking as referred to in (c) has the
under the definition of a merger and reach rights or powers listed in (b);
certain thresholds are subject to the merger
e. those undertakings in which 2 (two) or
control by the Moldovan Competition more undertakings as referred to in (a)
Council. to (d) jointly have the rights or powers
If a transaction meets the following listed in (b).
cumulative thresholds set out in the Within 10 (ten) business days after the
Moldova Competition Law, the parties submission, the Moldova Competition
must submit a notification to the Moldova Council will inform the notifying party if the
Competition Council: notification meets the validity requirements
- The aggregate turnover of all the and if more information is required.
undertakings concerned, recorded in Further, there are 2 (two) investigation
the year preceding the transaction, is phases:
more than MDL 50,000,000; and
(i) Phase I – within 30 business days the
- The turnover of each of at least 2 Moldova Competition Council decides
(two) of the undertakings concerned, upon (i) clearing the merger; or (ii) opening
recorded within Moldova and in the the phase II investigation, if the operation
year preceding the transaction, is more raises competition concerns.
than MDL 20,000,000.
(ii) Phase II - the Moldova Competition
The aggregate turnover of the undertakings Council has 90 business days to make a final
concerned is calculated by adding together decision on the compatibility of the merger
the respective turnovers of the following: with the Moldovan competition legislation.
a. undertakings concerned; Following this phase, the Competition
Council will either clear or prohibit the
b. those undertakings in which the merger.
undertaking concerned (i.e., BCR and
the acquiring undertaking), directly or The law provides that, until the Moldova
Competition Council issues a decision
indirectly:
related to the approval of the acquisition
- owns more than half the capital or of control, the following actions cannot be
business assets, or implemented:
- has the power to exercise more than - the entry of the acquired legal entity on
half of the voting rights, or another/new market;
- has the power to appoint more - the exit of the acquired legal entity
than half of the members of the from the market where it carried out its
supervisory board, the administrative operations;

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- the changing of the scope of activity of (which will be higher than the fine that
the acquired legal entity; was set in the first case). The Moldovan
Competition Council also requests the
- the exercising of the voting rights for
undertakings concerned to dissolve the
the appointment of members in the
concentration in order to restore the
executive management of the acquired
situation prior to the implementation of
legal entity;
the concentration;
- the exercising of the voting rights
16. Are there any specific rules
for the approval of the income and
applicable for acquisition of public
expenses budget of the acquired legal
companies in your jurisdiction?
entity;
Acquisition of Public Companies in
- the exercising of the voting rights for
Moldova: In the Republic of Moldova,
the approval of the business plan of the
the acquisition of public companies is
acquired legal entity;
primarily undertaken through 2 (two) types
- the exercising of the voting rights for of takeover bids: the obligatory public
the approval of the investment plan of takeover bid and the voluntary takeover
the acquired legal entity; bid.
- the changing of the name of the Obligatory Public Takeover Bids: An
acquired legal entity; obligatory takeover bid is triggered when
an individual or entity, either alone or in
- the restructuring, closing, or splitting
collusion with others, directly or indirectly
up of the acquired legal entity;
acquires more than 50% of the total voting
- the sale of the assets of the acquired securities of a public company or of the
legal entity; securities that can be converted or provide
the right to acquire such voting securities.
- the dismissal of the employees of the
acquired legal entity; Voluntary Takeover Bids: A voluntary
takeover bid is made at the discretion of the
- the conclusion or termination of long-
bidder without any obligation to acquire
term contracts or other important
a specific number of securities. Such a
agreements signed with third parties;
bid aims to obtain more than 50% of the
- the listing of the acquired legal entity total voting securities of an issuer. When
on the stock market. intending to make a voluntary takeover bid,
the person must:
If the Moldovan Competition Council
finds that the acquisition meets the • Notify the National Commission for
abovementioned thresholds has not been Financial Markets, the issuer of the
notified, it takes 1 (one) of the following securities in question, and the market
measures: or system operator where the securities
are traded.
- Adopts a decision declaring that the
merger does not raise competition • Publish this intention in 1 (one) or more
concerns and sets the fine for non- nationally circulated periodicals.
notification; or
The National Commission for Financial
- Adopts a decision declaring that the Markets then has the responsibility to either
merger raises competition concerns approve or reject the offer prospectus
and sets a fine for non-notification within 10 (ten) business days from the date

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of application submission. This period can acquirer of a public company’s shares

be extended to 15 business days if further must be represented by professional
verification is deemed necessary, especially investment companies or brokers during
regarding the proposed offer price. the transaction. Such brokers are not
authorized to introduce additional
Transfer of Securities Issued by Public
restrictions or criteria concerning
Interest Entities: Securities issued
transactions involving securities issued by
by public interest entities can only be
banks.
transferred on the regulated market if the
sale transaction involves up to 1% of the 17. Is there a requirement to disclose
total securities of a single class. If shares a deal, for instance to regulatory
of a public company are not currently authorities? Is it possible to keep a
traded on the Moldovan regulated market, deal confidential?
and an entity wishes to sell its entire
shareholding, the only viable method to Moldovan law does not impose mandatory
transfer ownership is through the special disclosure requirements for deals.
transactions section of the Stock Exchange Nonetheless, particular transactions might
of Moldova’s regulated market. This requires be subject to specialized regulations that
compliance with conditions related to mandate notifying relevant authorities
special transactions, coordination with under merger control. Otherwise,
the National Commission of the Financial maintaining the confidentiality of a
Market, and potentially the National Bank deal is feasible, and it is customary for
of Moldova. For the purpose of such a the involved parties to establish a non-
sale transaction, the shares of the public disclosure agreement before commencing
company in question would be registered negotiations.
on the regulated market in a distinct list 18. Can sellers be restricted from
and remain there only for the duration of shopping around during a
the trading period. negotiation process? Is it possible
Shares Sale and Purchase Agreement to include break fee or other
(“SPA”): penalty clauses in acquisition
documents to procure deal
While the above details the formalities exclusivity?
for transferring ownership, the seller and
acquirer can directly negotiate and finalize In the realm of mergers and acquisitions
a SPA, agreeing upon a freely negotiated within Moldova, it has become increasingly
price and terms. Payment terms are prevalent for parties to seek provisions
determined based on mutual agreement in that ensure exclusivity and commitment
the SPA. Moldovan law offers considerable throughout the negotiation process.
freedom in this regard, without imposing To further solidify the commitment of
specific constraints on such agreements, the parties involved, break fee or penalty
beyond standard provisions on sale- clauses are incorporated into acquisition
purchase contracts. documents. These penalty clauses are
Role of Professional Securities Market commonly found in term sheets, SPAs with
Participants: It’s pivotal to note that conditions precedent, pre-contracts, and
transactions on the regulated market other M&A-related documents. The intent is
must be executed exclusively by to compensate the aggrieved party for the
professional securities market participants. time, effort, and costs they’ve incurred in
Consequently, both the seller and the the lead-up to the potential transaction.

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Considerations and Practical Tips: bodies might be essential.

- It’s crucial to define the parameters of - Due Diligence Satisfaction: The
the exclusivity clause clearly. Determine acquiring party usually conducts a
the duration of the exclusivity period thorough examination of the target
and the specific actions that would be company’s assets, liabilities, contracts,
deemed as breaches. and other legal obligations. The
satisfaction of any findings from this
- When negotiating a break fee, consider
due diligence can be a condition
its proportionality. While it should
precedent.
compensate the aggrieved party, it
shouldn’t be punitive or prohibitive in - Obtaining Third-Party Consents: If the
excess. target company has existing contracts
or obligations that require third-party
In conclusion, exclusivity and break fee
consent for a change of control or
clauses serve as effective tools in M&A
assignment, obtaining these consents
negotiations, ensuring commitment
can be a necessary condition.
and providing compensation in case of
breaches. While their usage has been on the - Clearance of Encumbrances: Ensuring
rise in Moldova, it’s essential to craft them that the target company’s assets are
with care, precision, and a forward-looking free from liens or encumbrances that
perspective to safeguard the interests of all might affect the acquisition’s value or
parties involved. purpose.
19. What are the conditions precedent - Financing Arrangements: For
in a typical acquisition document? acquisitions that require external
Is it common to have conditions to financing, securing and confirming
closing such as no material adverse these financial arrangements can be a
change? critical condition.
While the exact conditions will vary - Employee and Key Management
depending on the specifics of each deal, Retention: In deals where the continuity
certain conditions precedent are more of the business post-acquisition is
commonly found in acquisition agreements crucial, retaining key employees or
in Moldova. These include: management teams might be set as a
condition.
- Approval by the General Meeting of
Shareholders or Competent Governing - No Material Adverse Change (MAC)
Body: Often, the acquisition cannot Clause: Ensuring that there’s no
move forward without the express significant negative change in the
consent of the existing shareholders or target’s business or financial situation
the competent governing body of the between the signing and closing of the
entity being acquired. deal.
- Regulatory Approvals: Depending on Incorporating these conditions precedent
the nature and scope of the transaction, ensures a comprehensive approach to the
various approvals might be required, transaction, addressing various aspects
such as Competition Council, National that could impact its success. However,
Bank of Moldova, sector-specific it’s essential to tailor these conditions to
authorities: Depending on the industry, the specific transaction at hand, ensuring
approvals from health, environmental, they are relevant, necessary, and not overly
or telecommunications regulatory burdensome to either party.

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20. What are the typical warranties - Tax Compliance: Warranties concerning
and limitations in acquisition the target company’s compliance with
documents? Is it common to obtain all tax obligations and the absence of
warranty insurance? undisclosed tax liabilities.
In Moldova, acquisition agreements often - Material Adverse Change: The seller
feature a series of warranties provided by warrants that no material adverse
the seller to the buyer. These warranties changes have occurred in the target
aim to assure the buyer regarding certain company’s business, assets, or financial
aspects of the target company and to condition since a specified date.
identify potential risks. While the exact Limitations: Warranties typically come with
nature and scope of these warranties certain limitations, including:
can vary based on the specifics of each
transaction, some commonly encountered - Time Limitations: Warranties might be
warranties include: limited to a specified duration post-
closing, after which the buyer cannot
- Title and Ownership: The seller make claims against them.
warrants that it owns the shares or
assets being sold free and clear of any - Disclosure Schedules: Sellers often
encumbrances and has the full right, provide disclosure schedules listing
power, and authority to sell them. exceptions to their warranties. These
schedules effectively limit the seller’s
- Financial Statements: The seller assures liability by excluding these exceptions
that all financial statements provided from the warranties.
are accurate, complete, and have been
prepared in accordance with applicable - Monetary Caps: There might be a cap
accounting principles. on the total monetary amount the
buyer can claim under the warranties.
- Operational Warranties: These may
cover aspects such as the validity of Regarding Warranty Insurance, it’s
contracts, absence of ongoing disputes, noteworthy to mention that, in Moldova,
and compliance with relevant laws and the concept of obtaining warranty
regulations. insurance in M&A transactions is extremely
rare and is practically not utilized in local
- Intellectual Property: Warranties practice. The market dynamics and the local
relating to the ownership, validity, and ecosystem have not yet widely adopted this
infringement-free status of intellectual form of insurance, and parties typically rely
property rights owned or used by the on the negotiated terms of the agreement
target company. for protection.
- Environmental and Regulatory 21. Is there a requirement to set a
Compliance: Assurances that the minimum pricing for shares of a
target company complies with all target company in an acquisition?
environmental laws and regulations
In the context of acquisitions in Moldova,
and possesses necessary permits and
determining the pricing for shares of a
licenses.
target company is typically driven by
- Absence of Litigation: The seller negotiations between the parties, market
confirms that there are no ongoing, dynamics, and due diligence findings.
pending, or threatened legal actions or However, there are specific nuances to
claims against the target company. consider:

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- General Principle: For most corporate practice in this jurisdiction, the available
entities in Moldova, there’s no legal financing avenues and the nuances of
mandate that sets a minimum price financial assistance provision can be
for shares during an acquisition. The delineated as follows:
pricing is predominantly a result of
Primary Financing Methods:
mutual agreement between the buyer
and the seller, and it can be influenced - Bank Financing: The most prevalent
by a variety of factors such as the form of acquisition financing remains
financial health of the target company, loans from domestic or international
its market position, growth prospects, banks. The terms and conditions of
and potential synergies that the such loans vary based on the financial
acquirer expects to achieve. standing of the acquiring company,
- Public Interest Entities: For entities the perceived risk associated with
of public interest, which include the target company, and the overall
publicly traded companies and certain macroeconomic climate. Typically, these
significant financial institutions, among loans might be secured against assets
others, the landscape is different. of the acquiring company or, in some
These entities are often subject to instances, against assets of the target
stricter regulatory oversight, and company post-acquisition.
the pricing of their shares during an - International Institutions: For
acquisition might be subject to specific substantial acquisitions, especially
regulations and requirements. This those with a potential of broader
regulatory framework is designed to economic impact or significance
protect minority shareholders, ensure in specific sectors, financing
transparency, and prevent market can sometimes be sourced from
manipulation. In some cases, there international financial institutions.
might be provisions that require the These organizations may offer
share price in an acquisition to be more favorable terms, given their
at least equivalent to a fair market developmental mandate, but would
value, determined by an independent usually have stringent criteria for
expert or based on recent trading due diligence and would often seek
prices. Additionally, the price might assurances regarding governance,
be subjected to scrutiny by relevant sustainability, and other broader goals.
regulatory bodies to ensure that it is not
detrimental to minority shareholders or Financial Assistance by the Target
the broader public interest. Company:
22. What types of acquisition financing While Moldovan law does not explicitly
are available for potential buyers in prohibit a target company from providing
your jurisdiction? Can a company financial assistance to a potential buyer of
provide financial assistance to a its shares, such arrangements are relatively
potential buyer of shares in the rare in practice.
target company?
It’s crucial to approach these arrangements
In the ever-evolving corporate landscape with caution, considering the potential
of Moldova, acquisition financing plays implications for minority shareholders and
a pivotal role in facilitating mergers and other stakeholders. Financial assistance
acquisitions. Drawing from years of legal could lead to potential conflicts of interest,

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reduce the liquidity or financial standing of the nature of the transaction, the
of the target company, or be perceived as ultimate step to effectuate a share transfer
self-dealing. is its registration at the Public Services
Agency. This formal registration is the
Any such transaction would need to be
definitive act, ensuring the legal change
thoroughly evaluated to ensure it is in
in ownership and reflecting the new
the best interests of the company and its
shareholders and does not contravene any shareholding structure in official records.
fiduciary duties or specific provisions in the Special Considerations for Specific
company’s charter or bylaws. Entities: Certain business entities, due
23. What are the formalities and to their nature or the sector they operate
procedures for share transfers and in, have additional conditions that need
how is a share transfer perfected? to be met during a share transfer. This
applies, but is not limited to, banks,
Drawing on extensive experience in the insurance companies, and non-banking
realm of mergers and acquisitions, the financial institutions. In such cases,
following delineates the key steps and additional clearances, compliance checks,
considerations essential to perfecting a or even specific procedural steps might
share transfer: be warranted to ensure a legally sound
SPA Formalities: transfer.

- Documentary Requirements: As of 24. Are there any incentives (such

January 10, 2022, the law has facilitated as tax exemptions) available for
a more streamlined approach to share acquisitions in your jurisdiction?
transfers, allowing SPAs to be executed
As a general rule, Moldova does not offer
in a simple written form.
specific tax exemptions or incentives
- Notarization as a Best Practice: tailored for M&A deals. While there aren’t
Despite the relaxation in documentary specific incentives in the M&A context,
requirements, a prudent approach, potential acquirers and sellers should be
especially for substantial M&A deals, is conversant with the standard taxation
to conclude the agreements before a framework in Moldova. Familiarity with
notary. Notarization provides an added applicable corporate tax rates, capital
layer of legal safeguard, ensuring the gains implications, and other pertinent tax
authenticity of signatures, the capacity matters is essential.
of parties, and the overall veracity of the
transaction. Though not M&A specific, there might
be sector-specific or regional incentives
Post-Agreement Clearances: Regulatory available in Moldova that indirectly
Approvals: Depending on the nature and benefit acquisitions. For instance,
scale of the transaction, certain clearances industries designated as priority sectors or
or approvals might be necessitated from investments in certain regions might come
regulators or third parties. It’s imperative with their set of incentives - as an example
that these approvals are sought in a
the single tax of 7% applicable to IT Park
timely manner, ensuring there are no legal
residents in Moldova, or special VAT regime
impediments to the completion of the
for the residents of free economic zones.
share transfer.
While these aren’t tailored for acquisitions,
Finalizing the Share Transfer: Registration they might influence the broader financial
at the Public Services Agency: Irrespective implications of a deal.

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F. Enforceability economic, and legislative changes that

have influenced the trajectory of M&A
25. Can acquisition documents be activities in the country.
executed in a foreign language?
Key Recent Phases:
It is acceptable to execute the acquisition
documents in a foreign language. However, - 2014-2018: This period was marked by
in any case when there is required to the acquisition of the most prominent
interact with public authorities – obtain local banks in Moldova by leading
a clearance from a regulator, register the international investors and institutions.
share transfer at the Public Services Agency The phase laid the groundwork for
intensified international participation in
and so on, it will be necessary to have
the Moldovan financial sector.
the documents drafted or translated into
Romanian as well. - COVID-19 Era: The pandemic induced
a surge in deals within the IT sector
26. Can acquisition documents be
and the local IT parks. The health
governed by a foreign law?
crisis highlighted the significance of
It is possible to have the acquisition digital infrastructure and resulted
documents governed by a foreign law. in heightened interest in IT-related
acquisitions.
27. Are arbitration clauses legally
permissible or generally included in - Legacy Takeovers: Another discernible
acquisition documents? trend has been the takeover of legacy
local companies, often established
It is legally permissible to include by Moldovan entrepreneurs in the
arbitration clauses in the acquisition late 1990s and early 2000s. These
documents, and it is a standard practice to acquisitions span across sectors like
do so for important M&A deals. pharma, furniture, agriculture, and
media.
28. Are there any specific formalities
for the execution of acquisition - War Crisis Period: Recent geopolitical
documents? Is it possible to tensions have spurred investments
remotely/digitally sign documents? from professional investors or sizable
corporations in production and
Moldovan law does not require specific
manufacturing companies, signalling
formalities for the execution of acquisition
preparation for local or regional
documents. Also, it is legally permissible to expansion.
digitally sign a document. Law No. 124 of
May 19, 2022 on electronic identification - Post-EU Candidacy Shift (Current
and trust services provides that a qualified Phase): Moldova’s application for EU
electronic signature has the same legal membership in March 2022 and its
value as a handwritten signature. subsequent attainment of the EU
candidate status in June 2022 have
G. Trends and Projections fostered a new wave of interest in its
29. What are the main current trends in M&A space. Presently, we observe
M&A in your jurisdiction? heightened enthusiasm from
experienced investors targeting sectors
The mergers and acquisitions scene in like IT, agriculture, real estate, retail, and
Moldova has witnessed several significant manufacturing, recognizing the nation’s
phases and shifts in recent times. This growing alignment with the European
dynamism has been fuelled by geopolitical, market.

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30. Are any significant development rights associated with share values
or change expected in the near through the company’s statutes.
future in relation to M&A in your
- Granting minority shareholders, a
jurisdiction?
unilateral right to exit the company.
Legislative Evolution:
- Introduction of a ‘phantom stock’,
A new law entered into force on October enabling companies to offer a portion
22, 2023. Moldova will witness the of the net profit to key employees as an
enforcement of a transformative law aimed incentive for loyalty.
at overhauling its corporate governance. - Removal of the cap on the number of
We had the privilege to contribute as shareholders (previously set at 50).
members of the working group tasked with
framing this legislation. - The possibility of waiving pre-emption
rights through the company’s statutes.
The genesis of this new law can be traced
to various sources, including: - Exemption from the need to register
statutory amendments related to
- European Model Companies Act details maintained in the State Register
(EMCA): This provides a scientifically of Legal Entities.
rigorous foundation for European
corporate law, drawing inspiration from - Facilitation of capital increase by
the U.S. Model Business Corporation Act converting the company’s monetary
(MBCA); obligations or through consumable
goods.
- Estonia’s Commercial Code;
Concluding Thoughts:
- Swiss Corporate Legislation;
These imminent legislative changes are
- Model Business Corporation Act (U.S.); poised to enhance the competitiveness of
and Moldova as a jurisdiction. The anticipated
- Ukrainian Law on Limited and reforms will not only attract more
Unlimited Liability Companies. sophisticated transactions but also offer
valuable tools for investors and business
Pivotal Changes include: professionals. The modernization of
corporate governance aligns Moldova
- Explicit regulation of a shareholder’s
with European and international M&A
agreement.
standards, setting the stage for a vibrant
- Abandoning the proportionality rule, and progressive business environment.
allowing for freedom in stipulating

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MONTENEGRO
LAW OFFICE VUJACIC

Susa Vujacic Jelena Vujisic

Managing Partner Partner
sasa.vujacic@ jelena.vujisic@
lawoffice-vujacic.com lawoffice-vujacic.com

A. General Entrepreneur,

1. What is the main legal framework Partnership,

applicable to companies in your Limited Partnership,
jurisdiction? Joint Stock Company (“JSC”),
The Law on Business Entities (Official Limited Liability Company (“LLC”), and
Gazette of Montenegro No. 065/20,146/21) Foreign Entity Branch (“Branch”).
is the main legal framework which
regulates the types of business Out of the above stated modes of business
organizations that can be registered in organization there are 2 (two) models that
Montenegro. are usually used by foreigners “Limited
Liability Company” and “Foreign Entity
2. What are the most common types Branch”.
of corporate entities (e.g., joint
Limited Liability Company
stock companies, limited liability
companies, etc.) used in your LLC is a form of business organization
jurisdiction? What are the main highly recommended to be established for
differences between them (including various aspects, including:
but not limited to with regard to the - It can be organized by both foreign and
shareholders’ liability)? domestic individuals and legal entities;
In accordance to the law following types - Founders are liable for the company’s
of business organization is possible to actions up to the amount of their equity
establish: in the company;

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- There is no minimum number of mother company to the Montenegrin

founders and maximum is 30; Company Registry;
- Minimum amount of founding capital is - Branch does not have a status of an
EUR 1,00 with no maximum limit; independent legal entity,
- Registered founding capital must - Branch has its founder/mother
be fully paid, but can also be freely company and authorized representative
disposed of; as equivalent to the executive director
in the LLC,
- There are no registered or bearer shares,
but founders hold equities in the Taking into consideration practical
company; requirements of the state and municipality
bodies, in all aspects of its function, Branch
- Company’s obligatory bodies are is equal to the LLC and requirements
assembly and executive director, while attached to the status of LLC.
board of directors is optional;
B. Foreign Investment
- In a one‐shareholder company, a
shareholder exercises all rights and 3. Are there any restrictions on foreign
obligations of the Assembly; investors incorporating or acquiring
the shares of a company in your
- Equities are not registered with the jurisdiction?
securities commission,
Foreign investor may be a foreign natural
- Executive director can only be an or legal person established abroad, a
individual, and not a corporate company with more than 25% foreign
structure; capital, a Montenegrin citizen residing
- LLC gains the status of an independent abroad for more than a year and the
legal entity upon registration with company established in Montenegro by a
Montenegrin Company Registry. foreign entity.

LLC is a form of business organization Foreign investors have the following

used most often by both domestic and options:
foreign investors, mostly because of its - Establish a company (either alone or
independency and limited liability towards with other investors),
the shareholder.
- Invest in companies,
Foreign Entity Branch - Purchase a company or portion of it,
Foreign Entity Branch is the type of - Establish a part of a company;
business organization used sometimes
- are subject the same tax regulations as
by the foreign investors, for the following
domestic investors.
reasons and practical aspects, including:
The share of foreign investors may be
- Branch must be registered with the
in cash, goods, services, property and
Montenegrin Company Registry;
securities.
- It must conduct business activity in
4. Are there any foreign exchange
full compliance with the Montenegrin
restrictions or conditions applicable
regulations;
to companies such as restrictions to
- Branch must report all changes in the foreign currency shareholder loans?

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In Montenegro, it is not possible to open

any corporate bank account for companies Joint stock companies, financial institutions,
registered in Montenegro if the founder of insurance companies as well as medium-
such company is a legal entity or company sized and large companies, are required
from an offshore jurisdiction or destination to conduct an audit of their financial
which is on black list of the Central Bank statements.
of Montenegro. Therefore, it is important
to check this before company registration,
D. Shareholder Rights
because such limitation does not exist for 8. What are the privileges that can
company registration, but it can disable the be granted to shareholders? In
company’s operations. particular, is it possible to grant
voting privileges to shareholders for
5. Are there any specific considerations
appointment of board members?
for employment of foreign
employees in companies The shareholders have the right to
incorporated in your jurisdiction? participate and vote in the assembly of
the joint stock company. It is also possible
Foreigners have to apply for a single permit
to conclude a shareholders’ agreement
for temporary residence and work which
between a certain number of company
should be issued in the form of an ID card
shareholders to determine in advance how
with biometric data and will serve as proof
to vote based on their shares.
of legal residence, the right to work, and as
an identification document. In LLC a shareholder/member of the
company may have only 1 (one) share
C. Corporate Governance in the company, which is his percentage
6. What are the standard management in the basic capital of the company. The
structures (e.g., general assembly, voting rights of the shareholders/members
board of directors, etc.) in a corporate of the limited liability company and their
entity governed in your jurisdiction property rights towards the company are
and the key liability issues relating proportional to the shares of the members
to these (e.g., liability of the board in the company’s share capital.
members and managers)?
9. Are there any specific statutory rights
In accordance to the law, the shareholders’ available to minority shareholders
assembly and the executive director are the available in your jurisdiction?
obligatory bodies of the LLC as well as for
Each shareholder has the rights granted to
JSC.
him by the shares he owns, with the fact
The board of directors is a mandatory body that the owners of the same class of shares
at JSC, and it is an optional body at LLC. have the same rights.
The members of the board of directors are
All shareholders are treated equally under
responsible for any damage that they could
equal circumstances.
cause to the company.
10. Is it possible to impose restrictions
7. What are the audit requirements in
on share transfers under the
corporate entities?
corporate documents (e.g., articles
All Montenegrin business entities are of association or its equivalent in
required to provide annual financial your jurisdiction) of a company
statements. incorporated in your jurisdiction?

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There is no such possibility. preceding the concentration;

11. Are there any specific concerns or or
other considerations regarding the
b) combined aggregate annual turnover
composition, technical bankruptcy
of all undertakings participating in
and other insolvency cases in your
the concentration, generated by
jurisdiction?
sale of goods and/or services on
No. the worldwide market in the year
preceding the concentration, exceeds
E. Acquisition
EUR 20,000,000, provided that at
12. Which methods are commonly used least 1 (one) of the participants to the
to acquire a company, e.g., share concentration generated at least EUR
transfer, asset transfer, etc.? 1,000,000 million on the Montenegrin
At LLC it is usually share transfer. market in the same period.

13. What are the advantages and 16. Are there any specific rules
disadvantages of a share purchase applicable for acquisition of public
as opposed to other methods? companies in your jurisdiction?

Share transfer at LLC is mostly cost and tax It depends of the certain company and its
efficient. business activity.

14. What are the approvals and 17. Is there a requirement to disclose
consents typically required (e.g., a deal, for instance to regulatory
corporate, regulatory, sector authorities? Is it possible to keep a
based and third-party approvals) deal confidential?
for private acquisitions in your The main share transfer agreement has to
jurisdiction? be notarized and disclosed to the company
It depends on the company structure register, but there is possible to keep a deal
and other circumstances. For usual LLCs confidential through specific legal structure
there are no specific requirements than of the deal.
registration procedure of share transfer at 18. Can sellers be restricted from
the company register. shopping around during a
15. What are the regulatory negotiation process? Is it possible
competition law requirements to include break fee or other
applicable to private acquisitions in penalty clauses in acquisition
your jurisdiction? documents to procure deal
exclusivity?
Concentration shall be notified to the
national competition authority if: The parties can stipulate those restrictions
through the pre-purchase agreement or
a) combined aggregate annual turnover
other documents, depending on the deal.
of all undertakings participating in
the concentration, generated by 19. What are the conditions precedent
sale of goods and/or services on the in a typical acquisition document?
Montenegrin market, exceeds EUR Is it common to have conditions to
5,000,000 according to the financial closing such as no material adverse
statements for the financial year change?

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If it is necessary, for example, to obtain the F. Enforceability

approval of the competent antitrust agency
in Montenegro or another jurisdiction, it 25. Can acquisition documents be
is usual to agree to fulfill that condition as executed in a foreign language?
precedent. Acquisition documents can be executed
Montenegrin and foreign language on
20. What are the typical warranties
bilingual form.
and limitations in acquisition
documents? Is it common to obtain 26. Can acquisition documents be
warranty insurance? governed by a foreign law?
It is usual that the acquisition document The main share transfer agreement has to
contains warranties of both the seller be governed by Montenegrin law, but other
and the buyer. Other warranties than documents preceding can be governed by
contractual warranties are not typical for foreign law.
these kinds of transactions. 27. Are arbitration clauses legally
21. Is there a requirement to set a permissible or generally included in
minimum pricing for shares of a acquisition documents?
target company in an acquisition? Yes, arbitration clauses are legally
There is no such requirement. permissible in acquisition documents.

22. What types of acquisition financing 28. Are there any specific formalities
are available for potential buyers in for the execution of acquisition
your jurisdiction? Can a company documents? Is it possible to
remotely/digitally sign documents?
provide financial assistance to a
potential buyer of shares in the The main share transfer agreement cannot
target company? be signed digitally because the signatures
have to be notarized, which means that
There are only the usual types of financing,
signatories have to be personally present
such as bank loans, etc. There are no
and sign the agreement before the notary.
specific types of acquisition financing. Other documents that preceding to the
23. What are the formalities and main share transfer agreement can be
procedures for share transfers and signed remotely/digitally.
how is a share transfer perfected? G. Trends and Projections
The share transfer agreement must be 29. What are the main current trends in
notarized, and the new shareholder should M&A in your jurisdiction?
submit the new article of associations, to
the company register for the registration of M&A in Montenegro depends mostly of
the share transfer. the trends from region. Despite deal values
being noticeably lower, M&A activity in the
24. Are there any incentives (such region continued at a steady pace in 2022
as tax exemptions) available for and increased in 2023.
acquisitions in your jurisdiction?
In 2023, the total value of M&A deals in
Not available. Montenegro amounted to 189 million
euros, which was a significant increase
compared to 2021, but such a trend did not
persist in 2023.

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30. Are any significant development

or change expected in the near
future in relation to M&A in your
jurisdiction?
As a result of several macroeconomic
and other reasons, overall M&A activity
has been uneven among countries and
territories in 2023. It reflects to Montenegro
also but we do not expect significant
development or change in near future in
relation to M&A.

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NETHERLANDS
ORANGE CLOVER

Kees Hooft
Partner
[email protected]

A. General lower minimum share capital of €0.01 and

is subject to less stringent regulations. In
1. What is the main legal framework both types of companies, shareholders
applicable to companies in your have limited liability.
jurisdiction?
B. Foreign Investment
The main legal framework applicable
to companies in the Netherlands is the 3. Are there any restrictions on foreign
Book 2 of the Dutch Civil Code (DCC). For investors incorporating or acquiring
listed companies, there is also the Dutch the shares of a company in your
Corporate Governance Code (“DCGC”). jurisdiction?

2. What are the most common types There are only limited restrictions on
of corporate entities (e.g., joint foreign investors incorporating or
stock companies, limited liability acquiring the shares of a company in the
companies, etc.) used in your Netherlands. The restrictions result from
jurisdiction? What are the main Dutch foreign direct investment screening
differences between them (including mechanisms which apply to certain sectors
but not limited to with regard to the and investments in vital providers and
companies active in the area of sensitive
shareholders’ liability)?
technology and telecommunications.
The most common types of corporate
4. Are there any foreign exchange
entities used in the Netherlands are the
restrictions or conditions applicable
public limited company (“NV”) and the
to companies such as restrictions to
private limited company (“BV”). The
foreign currency shareholder loans?
main difference between them is that an
NV is required to have a minimum share There are no foreign exchange restrictions
capital of €45,000 and is subject to more or conditions applicable to companies in
stringent regulations, while a BV has a the Netherlands.

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5. Are there any specific considerations D. Shareholder Rights

for employment of foreign
employees in companies 8. What are the privileges that can
incorporated in your jurisdiction? be granted to shareholders? In
particular, is it possible to grant
There are no specific considerations for voting privileges to shareholders for
the employment of foreign employees appointment of board members?
in companies incorporated in the
Netherlands. Non-EU/EEA employees Shares can be issued with the right to
will require a work permit (with limited dividends but without the right to vote
exceptions possible for example in case of and also without the right to dividends
high-skilled employees). but with the right to vote. Preferred shares
can be issued with a certain preference
C. Corporate Governance in case of distribution of profits. Separate
6. What are the standard management share groups can be issued with (amongst
structures (e.g., general assembly, others) the right to appoint specific board
board of directors, etc.) in a corporate members.
entity governed in your jurisdiction 9. Are there any specific statutory rights
and the key liability issues relating available to minority shareholders
to these (e.g., liability of the board available in your jurisdiction?
members and managers)?
Minority shareholders in the Netherlands
The standard management structures have certain statutory rights, such as the
in a corporate entity governed in the right to information, the right to participate
Netherlands are the general meeting of in a general meeting of shareholders, and
shareholders and the board of directors. the right to request the court to appoint a
A supervisory board can be formed in provisional director.
two tiers. It is also possible to have a
one-tier board with executive and non- There is a specific protection mechanism
executive directors. The board of directors under Dutch law, whereby a minority
is responsible for the management of the shareholder can invoke the dispute
company and the supervisory board is settlement arrangement of Section 1 of
responsible for monitoring the board of Title 8 of Book 2 of the Dutch Civil Code.
directors. Board members (and on a more A minority shareholder who has been
limited basis supervisory board members) harmed in his/her rights or interests by the
can be held liable for damages caused by a conduct of one or more co-shareholders,
breach of their duties. in such a way that the continuation of his
shareholding can no longer reasonably be
7. What are the audit requirements in
expected of him/her, can file a notice of
corporate entities?
withdrawal against those co-shareholders.
The audit requirements depend on
10. Is it possible to impose restrictions
the size of the Dutch corporate entity.
on share transfers under the
Medium-sized and large companies
corporate documents (e.g., articles
are required to have an audit of their (if
of association or its equivalent in
relevant, consolidated) financial statements
your jurisdiction) of a company
conducted by a registered auditor or
incorporated in your jurisdiction?
authorised accounting consultant.
However, for micro and small companies, It is possible to impose transfer restrictions
an audit is not required. on share transfers under the articles of

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association of a Dutch company. Typically, the buyer acquires the target company as
these are in the form of a right of first a going concern, including all of its assets
refusal or the requirement of prior consent and liabilities. The disadvantage is that the
from the shareholders’ meeting. buyer takes on all of the target company’s
liabilities. Amongst others, there will be
11. Are there any specific concerns or
additional advantages or disadvantages
other considerations regarding the
in terms of time, cost and tax perspective
composition, technical bankruptcy
depending on the circumstances.
and other insolvency cases in your
jurisdiction? 14. What are the approvals and
The Dutch Bankruptcy Act consents typically required (e.g.,
(Faillissementswet) and the European corporate, regulatory, sector
Regulation on Insolvency Proceedings are based and third-party approvals)
the primary legal frameworks governing for private acquisitions in your
insolvency proceedings in the Netherlands. jurisdiction?
Insolvency proceedings applicable to The approvals and consents typically
Dutch companies are bankruptcy and a required for private acquisitions in the
suspension of payments. Dutch bankruptcy Netherlands are corporate approvals from
requires non-payment of debts (not the seller, purchaser and target company,
more liabilities than assets). Both the Dutch works council positive advice,
insolvent company and a creditor can regulatory approvals from the Dutch
file for bankruptcy. There are no specific Authority for the Financial Markets (AFM) if
requirements for a Dutch company to applicable, and competition law clearance
file for bankruptcy. However it might be from the Netherlands Authority for
advisable to file for bankruptcy to avoid Consumers and Markets (ACM) if applicable.
directors’ liability: this might be invoked if
the insolvent company continues business 15. What are the regulatory
and enters into new contracts when competition law requirements
knowing the company cannot fulfil its applicable to private acquisitions in
payment obligations, or when selective your jurisdiction?
payments are being made to specific The regulatory competition law
creditors. requirements applicable to private
E. Acquisition acquisitions in the Netherlands are
governed by EU and Dutch competition
12. Which methods are commonly used law, depending on the level of
to acquire a company, e.g., share concentration (combined turnover or
transfer, asset transfer, etc.?
turnover).
The most common method to acquire a
16. Are there any specific rules
company in the Netherlands is through
applicable for acquisition of public
the purchase and transfer of shares. Other
companies in your jurisdiction?
methods include asset transfer and merger
if there is sufficient rationale therefor. There are specific rules applicable for the
acquisition of public companies in the
13. What are the advantages and
Netherlands, such as the obligation to make
disadvantages of a share purchase
a public offer if the acquirer acquires more
as opposed to other methods?
than 30% of the voting rights in the target
The advantage of a share purchase is that company.

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17. Is there a requirement to disclose condition, legal compliance, and

a deal, for instance to regulatory intellectual property. Limitations on liability
authorities? Is it possible to keep a are also common, such as caps on damages
deal confidential? and time limits for making claims. It is
common to obtain warranty insurance in
There are certain requirements to disclose
a deal to regulatory authorities in the the Netherlands.
Netherlands. Disclosure is, amongst other, 21. Is there a requirement to set a
required in case of acquisition of public minimum pricing for shares of a
listed shares subject to meeting various target company in an acquisition?
thresholds or in respect of certain foreign
direct investments as set out above in There is no requirement to set a minimum
respect of that topic. pricing for shares of a target company in an
acquisition in the Netherlands.
18. Can sellers be restricted from
shopping around during a 22. What types of acquisition financing
negotiation process? Is it possible are available for potential buyers in
to include break fee or other your jurisdiction? Can a company
penalty clauses in acquisition provide financial assistance to a
documents to procure deal potential buyer of shares in the
exclusivity? target company?
Sellers can be restricted from shopping Acquisition financing in the Netherlands
around during a negotiation process, and is typically provided by banks or other
it is possible to include break fee or other financial institutions. Specific financial
penalty clauses in acquisition documents to assistance restrictions apply to NV type
procure deal exclusivity. of companies but not to BV type of
companies.
19. What are the conditions precedent
in a typical acquisition document? 23. What are the formalities and
Is it common to have conditions to procedures for share transfers and
closing such as no material adverse how is a share transfer perfected?
change?
Registered shares in Dutch companies are
The conditions precedent in a typical transferred by means of a Dutch notarial
acquisition document include due deed of transfer. The transfer is registered
diligence, regulatory approvals, and in the shareholders register in order to limit
corporate approvals (including where third party protections.
applicable Dutch works council advice). It
is common to have a no material adverse 24. Are there any incentives (such
change to closing (subject to commercial as tax exemptions) available for
negotiations). acquisitions in your jurisdiction?

20. What are the typical warranties There are no general incentives such as tax
and limitations in acquisition exemptions available for acquisitions in
documents? Is it common to obtain the Netherlands, but the Netherlands has a
warranty insurance? favourable tax environment and tax treaty
network which may benefit the acquiring
Typical warranties in acquisition documents
company.
include representations and warranties
related to the target company’s financial

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F. Enforceability 28. Are there any specific formalities

for the execution of acquisition
25. Can acquisition documents be documents? Is it possible to
executed in a foreign language? remotely/digitally sign documents?
Acquisition documents can be executed in There are no specific formalities for the
a foreign language. execution of acquisition documents in
the Netherlands. It is possible to sign
26. Can acquisition documents be
documents remotely/digitally.
governed by a foreign law?
G. Trends and Projections
Acquisition documents other than the deed
of transfer of shares can be governed by a 29. What are the main current trends in
foreign law. M&A in your jurisdiction?
Under current unstable market and
27. Are arbitration clauses legally
geopolitical conditions, the M&A market is
permissible or generally included in
still fully active but it is difficult to distil a
acquisition documents?
current main trend.
Arbitration clauses are legally permissible. 30. Are any significant development
They are generally not included in or change expected in the near
acquisition documents in the Netherlands future in relation to M&A in your
since the Dutch courts process is generally jurisdiction?
considered to be more (cost) effective.
The same as above. The development of
greater foreign direct investment screening.

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NIGERIA
BLOOMFIELD LAW

Dr. Ayodele Oni Adedoyin Afun Ebele Folorunsho

Partner Partner Managing Associate
ayodele.oni@ adedoyin.afun@ ebele.folorunsho@
bloomfield-law.com bloomfield-law.com bloomfield-law.com

A. General v. National Office for Technology

Acquisition and Promotion Act (NOTAP);
1. What is the main legal framework
applicable to companies in your vi. Banks and Other Financial Institutions
jurisdiction? Act (BOFIA) 2020; and
The main legal framework applicable to vii. Foreign Exchange (Monitoring and
companies in Nigeria is the Companies Miscellaneous Provisions) Act amongst
and Allied Matters Act of 2020 (the “CAMA others.
2020”). The CAMA 2020, was amended by
the Business Facilitation (Miscellaneous 2. What are the most common types
Provision) Act of 2022 which was recently of corporate entities (e.g., joint
enacted. stock companies, limited liability
companies, etc.) used in your
There are also other pieces of legislation, jurisdiction? What are the main
applicable to companies in Nigeria differences between them (including
including:
but not limited to with regard to the
i. Companies Regulations 2021; shareholders’ liability)?
ii. Investments and Securities Act (ISA) The most common types of companies in
2007; Nigeria are limited liability and unlimited
iii. Federal Competition and Consumer liability companies. The financial liability of
Protection Act (FCCPA) 2018; shareholders of limited liability companies
iv. Nigerian Investment Promotion limited to the amount unpaid on their
Commission Act (NIPC Act); shares, whilst there is no limit for the

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financial liability of the shareholders of an • such other items as the Federal

unlimited liability company, as per Section Executive Council may, from time to
21 of the Companies and Allied Matters Act time, determine.
2020.
4. Are there any foreign exchange
A limited liability company may be either restrictions or conditions applicable
private or public depending on the to companies such as restrictions to
proposed number of shareholders, its foreign currency shareholder loans?
minimum issued share capital and its ability
to offer shares or debentures to the general There are no restrictions or conditions
public. applicable to Nigerian companies in respect
of foreign exchange (“FX”) shareholder
Whilst the minimum and maximum loans. However, for a company accessing
number of shareholders of a private FX to be able to repatriate the same
limited company must be one (1) and fifty to the country of source at the Central
(50) respectively, a public limited liability Bank of Nigeria (“CBN”) official exchange
company is expected to have a minimum rate, which by the way is the lowest rate,
of two (2) shareholders with no maximum the company is required to bring in the
specified. foreign currency into Nigeria through an
Also, a public limited liability company is authorized dealer using a Certificate of
not restricted from offering its shares and Capital Importation (“CCI”). An authorized
debenture to the Company whilst a private dealer must issue the company an
limited liability company is restricted. electronic CCI (“e-CCI”) within twenty-
four (24) hours of capital importation. The
B. Foreign Investment e-CCI allows the company right to the
3. Are there any restrictions on foreign repatriation of capital and access to FX at
investors incorporating or acquiring the CBN official exchange rate.
the shares of a company in your
It is pertinent to state that the continued
jurisdiction?
relevance of the e-CCI is now subject
There are generally no restrictions on to question with the unification of the
foreign investors incorporating or acquiring Nigerian FX Market.
the shares of a company in Nigeria.
5. Are there any specific considerations
However, foreign investors are prohibited for employment of foreign
from incorporating a company that employees in companies
will venture into businesses listed as incorporated in your jurisdiction?
the ‘negative list’ under the Nigerian
Investment Promotion Commission. These Yes, there are specific considerations for
businesses are as follows: the employment of foreign employees in
companies in Nigeria. The considerations
• production of arms and ammunitions. include:
• production of and dealing in narcotic i. The company must have an expatriate
drugs and psychotropic substances. quota which is a document that permits
• production of military and para-military companies to employ expatriates to
wears and accoutrement, including specifically approved job designations
those of the Police and the Customs, and also specifies the period of such
Immigration and Prison Services. employment; and

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ii. The employee will also be required to Where a company fails to hold its general
obtain the relevant visas and permits to meeting in a year, the Commission may call
enable him/her to work in Nigeria. or direct the calling of the general meeting
of the company. Where the company fails to
It is important to note that the foreigners
call its general meeting as provided above,
(known as expatriates) are employed with
the company and every officer of the
a view to training and transferring requisite
company shall be liable to a penalty in such
skills to Nigerians during the period of
amount as the Commission shall specify.
employment.
BOARD OF DIRECTORS’ MEETING
C. Corporate Governance
The Companies and Allied Matters Act
6. What are the standard management 2020 mandates every company, not being
structures (e.g., general assembly, a small company, to have a minimum of
board of directors, etc.) in a corporate two (2) directors. CAMA expressly directed
entity governed in your jurisdiction companies having less than two (2)
and the key liability issues relating directors to appoint new directors within
to these (e.g., liability of the board one (1) month or cease to carry on business
members and managers)? after the expiration of the one (1) month
GENERAL MEETING period.

Every company, except for small (a private If a director or member of a company,

company with a turnover of not more than which is not a small company, knows that
Twenty-Five Million Naira (N25,000,000) , a company carries on business after the
net assets value of not more than Twelve number of directors has fallen below two
Million and Five Hundred Thousand Naira members, for a period of more than sixty
(N12,500,000), no foreign or government- (60) days, then he/she is responsible for
related shareholders and its directors all liabilities and debts incurred by the
hold at least fifty-one percent (51%) of company, during that period in which the
its share capital. See Section 394 (3) of company carried on its business.
CAMA as amended by Regulation 19 of the A person who is proposed to be appointed
Companies Regulations 2021) and single a director of a public company and who is
shareholder companies, are mandated in more than seventy (70) years old or who
each year to hold a general meeting as has been appointed a director in any other
its annual meeting in addition to its other public company shall disclose his age and
meetings in that year, provided that the the fact of multiple directorships at the
time limit between one general meeting meeting of the company. Failure to disclose
and the next shall not exceed fifteen (15) shall render the director liable to a penalty
months unless extended by the Corporate as the Commission may specify.
Affairs Commission (the “Commission”) for
Where an insolvent person acts as a
a period not exceeding three (3) months.
director of or directly or indirectly takes
Notwithstanding the foregoing, a newly part in, or is concerned in the management
incorporated company need not hold a of any company, he commits an offence
general meeting in its year of incorporation and is liable on conviction to a fine as the
and should hold its annual general meeting Court deems fit, or imprisonment for a term
within eighteen (18) months from the date of at least six (6) months but not more than
of incorporation. two years, or both.

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Further, the first meeting of the directors of company is being mismanaged by a

a company shall be held not later than six director or the former director of the
(6) months after the incorporation of the company and the Board of Directors
company and the liabilities of the directors and the members in general meeting
of a company are as specified in the articles have refused to take steps to sue or
of association of the company. rectify the mismanagement.
7. What are the audit requirements in iii. Relief on Grounds of Unfairly Prejudicial
corporate entities? and Oppressive Conduct: This is suitable
Every company, except from a small where the minority seeks to prove that
company and a company that has not an act taken on behalf of the company
carried on business since its incorporation, has been so taken to oppress the
is required to appoint an auditor or auditors minority shareholder.
to audit its financial statements. iv. Investigation of the Company by the
D. Shareholder Rights Corporate Affairs Commission: An
application may be made by one-
8. What are the privileges that can tenth of members of a company to the
be granted to shareholders? In Commission to investigate the affairs
particular, is it possible to grant of the Company. The Commission
voting privileges to shareholders for may also on its volition make an
appointment of board members?
investigation where it is suspected that
The privileges that are granted to the company’s affairs are conducted
shareholders include right to vote on with an intent to defraud or an act
matters affecting the company (including or proposed act or omission of the
appointment of director(s) and auditor(s) company will be prejudicial or that the
amongst others), right to share in dividend Company was formed for an unlawful
and right to appoint a proxy to attend purpose.
meetings in its stead amongst others.
10. Is it possible to impose restrictions
9. Are there any specific statutory rights on share transfers under the
available to minority shareholders corporate documents (e.g., articles
available in your jurisdiction? of association or its equivalent in
Yes, there are specific statutory rights your jurisdiction) of a company
available to minority shareholders in incorporated in your jurisdiction?
Nigeria. These rights include: Yes, we confirm that a company may under
i. Members Direct Action: A minority its articles of association or a shareholders’
shareholder in a company may agreement impose restrictions on share
institute actions to seek redress for the transfers. For instance, the corporate
wrongs done against itself particularly documents of a private limited liability
regarding its right as a shareholder. company always include restrictions on
This action may be instituted either in a share transfer.
personal or in a representative capacity. 11. Are there any specific concerns or
ii. Derivative Action: This allows minority other considerations regarding the
members to apply to the court for leave composition, technical bankruptcy
to institute an action on behalf of the and other insolvency cases in your
company. This is suitable where the jurisdiction?

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A major concern regarding the a. Acquisition of Liabilities: In a share

composition, technical bankruptcy and purchase, the buyer has limited right to
other insolvency cases prior to 2020 was cherry pick the assets and liabilities it is
the lack of comprehensive legislation in acquiring. It is acquiring the company in
the area of insolvency practice. However, its entirety including unwanted assets and
with the enactment of CAMA 2020 and liabilities to the extent specified in the
the Insolvency Regulation of 2022, there share purchase agreement.
is in place a comprehensive governance
b. Minority shareholders may hinder the
and procedural framework for insolvency
share transfer if they refuse to sell their
practice in line with international best shares or the transfer, subject to their
practices. rights in the corporate documents of the
E. Acquisition company.

12. Which methods are commonly used c. The goodwill of a company whose shares
to acquire a company, e.g., share are to be acquired would be taken into
transfer, asset transfer, etc.? account in determining the purchase price
for the shares/transactions.
In Nigeria, the methods commonly used to
acquire a company are share transfer and 14. What are the approvals and
asset transfer. consents typically required (e.g.,
corporate, regulatory, sector
13. What are the advantages and based and third-party approvals)
disadvantages of a share purchase for private acquisitions in your
as opposed to other methods? jurisdiction?
The advantages of Share Purchase as Subject to the provision of the corporate
opposed to Asset Purchase include the documents of the company, the approvals
following: and consents typically required for private
i. Share purchase is much simpler and acquisitions in Nigeria are:
straightforward. There is no need a. Approval by the board of directors
for assets retitling as well as other of the target company and acquiring
formalities such as re-registration etc. company (the “Companies”).
ii. In a share purchase agreement, the b. Approval by the members in general
buyer may acquire the shares of the meetings of the companies. Such
company. The buyer may choose to approval is to be indicated by a special
rebrand and change any aspects of resolution.
the company’s business. c. Approval of the Federal Competition
iii. In a share purchase, the buyer will and Consumer Protection Commission
(“FCCPC”) where the acquisition
benefit from existing contracts already
amounts to a merger.
assigned to it, existing licenses and
permits of the seller without worrying d. Sanction of the Federal High Court
about third-party consent. (where applicable).
e. Sector specific approvals such as CBN’s
iv. In a share purchase, the buyer benefits
approval (for financial institutions)
from the goodwill and credit history.
and National Insurance Commission’s
The disadvantages of share transfer include approval for insurance companies,
the following: amongst others.

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15. What are the regulatory • If it appears that the merger is likely
competition law requirements to substantially prevent or lessen
applicable to private acquisitions in competition, then determine (a)
your jurisdiction? whether or not the merger is likely to
result in any technological efficiency or
The competitive law governing acquisition another pro-competitive gain which will
is the FCCPC. be greater than and off-set or is likely
The competitive law requirements to result from the merger and would
applicable to private acquisitions in Nigeria not likely be obtained if the merger is
are: prevented; and (b) whether the merger
can or cannot be justified on substantial
a. Whether the merger falls within the public interest grounds by assessing
notifiable threshold which is that (a) factors such as a particular industrial
the combined turnover of the target section or region, employment, ability
and acquiring undertakings in, into and of national industries to compete with
from Nigeria equals or exceeds One international market and the ability of
Billion Naira (N1,000,000,000) in the small and medium scale enterprises to
financial year preceding the merger and become competitive.
(b) the annual turnover of the target
16. Are there any specific rules
undertaking in, into and from Nigeria in applicable for acquisition of public
the financial year preceding the merger companies in your jurisdiction?
equals or exceeds than Five Hundred
Million Naira (N500,000,000); Yes, there are certain rules applicable to the
acquisition of public companies in Nigeria.
b. Where the merger or acquisition falls These rules are found in the following
within the notifiable threshold, the pieces of legislation:
FCCPC will consider the underlisted
before giving its approval: a. The Companies and Allied Matters Act
2020
• Whether or not the merger is likely
b. The Investment and Securities Act
to substantially prevent or lessen
competition. The FCCPC shall assess the c. The Securities and Exchange
strength of competition in the relevant Commission Rules and Regulations
market and the probability that the
d. The Federal Competition and Consumer
undertaking in the market after the
Protection Act
merger will behave competitively or
cooperatively, taking into account any 17. Is there a requirement to disclose
factor that is relevant to competition in a deal, for instance to regulatory
that including (a) the actual or potential authorities? Is it possible to keep a
level of import competition in the deal confidential?
market; (b) the ease of entry into the Yes, the FCCPC Merger Review Guidelines
market including tariff and regulatory 2020 and the FCCPA Merger Review
barriers; (c) the level and trend of Regulations 2020 require parties to disclose
concentration and history of collusion the deal to FCCPC in the application
in the market; and (d) the degree of for consent where the merger is above
countervailing power in the market the notifiable threshold. However,
amongst others. the Commission is mandated to keep

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confidential the contents of an application certificate(s) for the shares or title

and any documents so accompanying documents of the assets to the buyer;
same. and
Further, the only instance where parties are - Absence of any material adverse
not mandated to disclose the deal is in the change which is typical for transactions
case of a small merger. of this nature amongst others.
18. Can sellers be restricted from 20. What are the typical warranties
shopping around during a and limitations in acquisition
negotiation process? Is it possible documents? Is it common to obtain
to include break fee or other warranty insurance?
penalty clauses in acquisition
The typical warranties in acquisition
documents to procure deal
documents include the following:
exclusivity?
i. Incorporation and Authority of the
Yes, sellers may be restricted from shopping
Parties;
around during a negotiation process by
the inclusion of clauses such as exclusivity, ii. Legal capacity of the Parties;
break fee and other penalty provisions in iii. Due Diligence;
the preliminary negotiation document iv. Insurance;
(such as a term sheet) and acquisition
documents. v. Absence of Proceedings;
vi. Pension payments
19. What are the conditions precedent
in a typical acquisition document? vii. Taxation
Is it common to have conditions to viii. Intellectual property
closing such as no material adverse Whilst the limitation on liability typically
change?
included in acquisition documents include
Condition precedents in a typical purchaser’s knowledge, limitation on
acquisition document include: quantum and time to make a warranty
claim, taxation, contingent liability, conduct
- The discharge of any mortgage, charge,
of claims, recovery from third parties and
pledge and other encumbrance on the
retrospective legislation amongst others.
shares or assets to be acquired;
21. Is there a requirement to set a
- Parties obtaining the requisite
minimum pricing for shares of a
consents and approval required for the
target company in an acquisition?
acquisition pursuant to their articles of
association and corporate constitutive There are no laws or regulations that
documents; provide a requirement for a party to set
a minimum pricing for shares of a target
- Procurement of the required regulatory
company.
and third parties’ approvals, consents
and notifications such as the FCCPC 22. What types of acquisition financing
Approval. are available for potential buyers in
your jurisdiction? Can a company
- Execution of all share transfer and
provide financial assistance to a
acquisition documents;
potential buyer of shares in the
- The transfer of the original share target company?

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A potential buyer may finance its the register of members, the company will
acquisition through equity or debt issue a new share certificate (reflecting the
financing. transfer shares) to the purchaser (the new
shareholder) and another share certificate
In Nigeria, it is unlawful for a company
to the shareholder whose shares have been
to provide financial assistance directly
transferred.
or indirectly to a potential buyer for the
acquisition of its shares except in limited 24. Are there any incentives (such
circumstances such as where lending of as tax exemptions) available for
money is part of the ordinary business of acquisitions in your jurisdiction?
the company, the financial assistance is
in accordance of any scheme for the time Yes, there are certain tax exemptions
being, making by a company of loans to available for acquisitions. Section 32 of the
persons, other than directors, bona fide Capital Gains Tax Act as amended (“CGTA”)
in the employment of the company and for example, provides that Capital Gain Tax
any act and transaction authorized by law shall apply on the sale or transfer of assets
amongst others. in respect of an M&A arrangement at the
rate of ten percent (10%) except where:
23. What are the formalities and
procedures for share transfers and (i) the proceeds of such disposal must
how is a share transfer perfected? be reinvested within the same year
of assessment in the acquisition of
Shares can be transferred to the potential shares in the same or other Nigerian
buyer by an instrument of transfer duly companies: provided that tax shall
executed. The instrument of transfer may accrue proportionately on the
be a deed of share surrender or share portion of the proceeds which are not
transfer form and resolution approving the reinvested;
transfer of the shares to the potential buyer.
(ii) disposal proceeds, in aggregate,
The seller is to deliver the original share must be less than One Million Naira
certificate covering the transfer shares to (N100,000,000) in any twelve (12)
the potential buyer (if it proposes to sell consecutive months; or
all the shares to the buyer) or in the case
where only a portion of the seller’s shares (iii) such shares are transferred between
is to be transferred, deliver the share an approved borrower and lender
certificate covering its interests and the in a regulated Securities Lending
instrument of transfer to a company with a Transaction
request that the instrument of transfer be F. Enforceability
recognized and registered.
25. Can acquisition documents be
The buyer shall file the instrument of executed in a foreign language?
transfer with CAC and upon receipt of the
certified true copy evidencing the transfer, Whilst the acquisition documents may be
the buyer shall submit the document to the executed in a foreign language if parties to
company for the registration of its name the transaction understand the language, it
in the member’s register. The company is advisable that the acquisition document
shall register the interest of the buyer in be executed in English considering that
the register of members if satisfied that (a) it is our official language and (b) the
all conditions of transfer have been met. acquisition documents may be submitted
Upon registration of the buyer’s name in to regulatory authority during application

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for consent and will not be accepted if the and TNOG Oil & Gas Limited’s (a
documents are not in English language. related company of Heirs Holdings
and Transcorp) acquired 45 per cent
26. Can acquisition documents be
participating interest in Nigerian oil
governed by a foreign law?
licence OML 17 and related assets
Yes, the parties may choose the law of any from Shell Petroleum Development
country of their choice as the governing Company of Nigeria Limited, Total E&P
law provided that the law has some form Nigeria Limited and ENI.
of connection with the transaction, or it is
In the Finance sector, some of the notable
deemed a neutral forum by the parties.
trends include:
27. Are arbitration clauses legally
i. Titan Trust Bank Limited’s acquisition
permissible or generally included in
of eighty nine point three-nine percent
acquisition documents?
(89.39%) of the issued share capital of
Yes, arbitration clauses are legally Union Bank of Nigeria Plc and Guaranty
permissible and can be generally included Trust Holding Company Plc’s acquisition
in acquisition documents. of one hundred percent (100%) shares
in Investment One Funds Management
28. Are there any specific formalities
Limited.
for the execution of acquisition
documents? Is it possible to ii. First Pension Custodian Nigeria Limited,
remotely/digitally sign documents? a subsidiary of First Bank Nigeria
Limited, also acquired one hundred
There are no specific formalities for the
percent (100%) shares of Access
execution of acquisition documents.
Pension Fund Custodian Limited (a
Acquisition documents can be signed
subsidiary of Access Bank Plc).
remotely or digitally.
30. Are any significant development
G. Trends and Projections or change expected in the near
29. What are the main current trends in future in relation to M&A in your
M&A in your jurisdiction? jurisdiction?
Some of the notable M&A deals were Yes, there are certain developments
mostly involved in the start-up technology expected in the near future concerning
space-which received more funding than M&A.
previous years, the oil and gas sector,
M&A activity in the past was fueled by
the financial services sector inclusive of
investors’ desire to participate in Nigeria’s
banking, insurance and pensions, and the
rapidly developing economy. However,
healthcare sector.
continued uncertainty surrounding
In the oil and gas sector, some of the the foreign exchange regime, coupled
transactions include: with slower economic growth and the
emergence of other frontier markets, has
i. Africa Capitalworks, which acquired a
led investors to become more selective with
significant equity stake in Dorman Long
Nigerian investment. Despite the concerns
Engineering Ltd
and worries, Nigeria continues to witness
ii. Seplat Energy proposed to acquire growing M&A activity across different
Mobil Producing Nigeria Unlimited’s sectors, including technology, especially
offshore shallow water business; in the start-up space, financial services,

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telecommunications, manufacturing and that in the near future, there will be an

consumer goods, and oil and gas sectors. increase in M&A transactions in the country.
It is also believed that the regulatory
Deals have been a mix of local and cross- framework will be amended to include
border with startups continuing to raise contemporary issues surrounding M&A
significant funding in order to expand their transactions thus making it more attractive
operations and businesses. It is expected as an investment option than it already is.

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NORTH MACEDONIA
ODI LAW

Gjorgji Georgievski Dzena Anastasova

Partner Junior Associate
gjorgji.georgievski@ dzena.anastasova@
odilaw.com odilaw.com

A. General The primary legal instrument that applies

to companies in North Macedonia is
1. What is the main legal framework the Law on Trading Companies 2004
applicable to companies in your (“Companies Law”). This umbrella law
jurisdiction? provides regulations for the establishment,
North Macedonia’s legal system is management, operation, and dissolution
based on civil law principles, with of all types of companies, including
organizational units of foreign companies.
codified laws taking precedence. The
Moreover, the Companies Law prescribes
country’s foundational legal document,
rules on mergers and acquisitions, related
the Constitution of North Macedonia,
party transactions, financial reporting,
establishes a framework that supports free-
and other relevant rules. In addition to
market principles and fosters a competitive
the Companies Law, other relevant legal
business environment. To specifically instruments include the Law on Takeover
cater to the intricacies of M&A, a myriad of Joint Stock Companies 2013, which
of specialized laws have been introduced outlines the rules for the takeover of joint
over the years. North Macedonia’s ambition stock companies, the Law on Protection
for European Union (”EU”) membership of Competition 2010, which governs
is a driving force behind many of these merger control and restraints of trade and
legislative reforms. Macedonia’s obligation dominance, and the Law on Bankruptcy
to harmonize its national legislation with 2006 which governs the reorganization and
EU legislation derives from its status as an bankruptcy of companies. Many sector-
EU candidate country, so implementation specific legal instruments also prescribe
of EU legislation is mandatory. specific rules for companies operating in

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telecommunications and media, banking joint stock company is its capability to raise
and finance, insurance, pharmaceutical, capital by offering shares to the broader
energy, transport, mining, gambling and public, an option not available to a limited
other sectors. liability company. Moreover, a joint stock
company is a mandatory business vehicle
2. What are the most common types
for certain types of regulated businesses,
of corporate entities (e.g., joint
such as banks and insurance companies.
stock companies, limited liability
Joint stock companies are subject to
companies, etc.) used in your
more stringent regulations, ensuring
jurisdiction? What are the main
differences between them (including transparency and accountability, especially
but not limited to with regard to the when interfacing with public investors.
shareholders’ liability)? Joint stock companies must publicly
The most common business vehicles disclose a wealth of information, ranging
in North Macedonia are limited liability from financial metrics, shareholder
companies and joint stock companies. The structure, and operational insights to other
limited liability company is the preferred price-sensitive data. The Macedonian Stock
business vehicle for many regulated and Exchange (“MSE”) is the only regulated
unregulated businesses, primarily because stock exchange in North Macedonia
of its flexibility and simplicity. The key that acts as a central marketplace for the
distinctions of a limited liability company admission and trading of equity, debt and
include: other securities. The MSE was established
in 1995 and commenced trading in 1996.
1) Regulatory obligations. Limited liability The MSE is a member of the Federation of
companies are not subject to specific Euro-Asian Stock Exchanges (FEAS) and
regulatory obligations based on its an affiliated member of the Federation
corporate form. of European Stock Exchange (FESE). The
2) Shareholders. A limited liability MSE, like other stock exchanges in South-
company must have at least 1 (one) East Europe (“SEE”), is relatively small
shareholder but cannot have more than and has not attracted investments from
50. Each shareholder is permitted to large institutional investors as they tend
hold only 1 (one) share, with a nominal to view the whole SEE region as 1 (one)
value set at a minimum of EUR 100. marketplace. There are 2 (two) principal
markets in North Macedonia, each of which
3) Limitation of liability. The standout is operated by the MSE:
advantage of a limited liability company
is that its shareholders are shielded 1) Official Market: The official market for
from the company’s debts beyond what listed securities (“Official Market”) is
they initially invested for their shares. the MSE’s flagship market for larger,
more established companies. The
4) Capital requirements. A limited liability
Official Market is home to the largest
company must have a minimum
Macedonian companies subject to the
share capital of EUR 5,000. This capital
highest standards of regulation and
can include both cash and in-kind
governance. The Official Market has 4
contributions.
(four) main segments:
In contrast, a joint stock company is a
• Super Listing segment.
preferred choice for businesses that wish to
raise public capital. The primary allure of a • Exchange Listing.

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• Mandatory Listing. The number of shareholders in a joint

stock company is not limited. Similar to
• Listing of Small Joint-Stock Companies.
a limited liability company, shareholders
2) Regular Market: The Regular Market of a joint stock company are not liable for
is a market of unlisted securities which the company’s debts beyond what they
has 2 (two) main segments: invested for their shares. A joint stock
company mandates a share capital of
• Market of Companies with Special
at least EUR 25,000 if it is incorporated
Disclosure Obligations which includes
without an IPO or EUR 50,000 if an IPO is
companies:
intended.
o that have made an initial public
offering (“IPO”); or
B. Foreign Investment
3. Are there any restrictions on foreign
o companies with a share capital of at
investors incorporating or acquiring
least EUR 1 million and at least 50
the shares of a company in your
shareholders.
jurisdiction?
• Free Market, where all securities, other
North Macedonia has consistently
than those in the Official Market and
worked towards creating a favorable and
the Market of companies with special
welcoming climate for foreign investments.
Disclosure Obligations, are traded.
Recognizing foreign direct investment (FDI)
In 2021, the MSE adopted a new Corporate ‘s significant role in economic growth, job
Governance Code, which applies to creation, and technological advancement,
companies with shares listed on the the country has implemented several
Official Market that meet the criteria set policies to attract and retain foreign
out in the listing rules. These companies investors. North Macedonia has largely
must report annually whether they have liberalized its foreign investment regime.
followed the practices in the code. As in There are no limitations on foreign
other European countries with capital ownership or control in most sectors, which
markets of a similar size and structure, means foreign entities can incorporate
North Macedonia’s new code applies an or acquire the entire share capital of a
approach known as “comply or explain”. This Macedonian company. Foreign investors
approach allows companies not to apply a are generally accorded the same rights
particular standard – for example, one that and obligations as domestic investors.
may not be feasible due to the company’s This non-discriminatory stance ensures a
size or structure – provided they explain to level playing field. The country has ratified
shareholders and the market why they have numerous bilateral investment treaties,
chosen to do so. All other listed companies offering protection against expropriation
that do not meet the criteria of the listing and guaranteeing the repatriation of
rule are encouraged to report voluntarily profits. Furthermore, North Macedonia
on how they implement the code. The goal is a signatory to the Convention on the
of the new corporate governance code is Settlement of Investment Disputes,
to support the successful development of which facilitates an impartial platform for
local companies. The code also introduces resolving any disputes between foreign
for the first-time principles and provisions investors and the state. North Macedonia
on corporate sustainability, as well as the offers various incentives, including tax
environmental and social impact of their breaks, reduced tariff rates, and subsidies,
operations. particularly for investments in technology

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parks, free economic zones, and industries must report the transactions to the National
identified as priority sectors. Significant Bank of the Republic of North Macedonia
efforts have been made to enhance (“NBRNM”) within 10 (ten) business days
infrastructure and connectivity, making it from entering into the finance or security
easier for foreign businesses to set up and documents. The NBRM issues a letter
operate in the country. The government has of confirmation to the borrower or the
initiated reforms to simplify the process of security provider confirming receipt of
business registration and licensing, thereby the notice and setting out the registration
reducing the bureaucratic burden on number of the transaction. The borrower
foreign investors. or the security provider must report to
the NBRM any changes to a reported
While there are no restrictions on foreign
transaction within 5 (five) business days
investors incorporating or acquiring shares
from the change if it relates to the loan
in a Macedonian company, they must
agreement or the balance of the loan.
report to the Register of Direct Investments
of Non-Residents (Direct Investments Local borrowers also must report to the
Register) for statistical purposes the Direct Investments Register long-term loans
following: with a maturity period of 5 (five) years (if
the investor granted the loan to a company
1) The incorporation of a company
fully owned by the investor) or a long-
or increase of the share capital of a
term loan with a maturity period of 5 (five)
company fully owned by the investor,
years or more (if the loan was granted to
establishment of branches or the
establish a lasting economic link between
acquisition of the entire share capital of
affiliated companies). Local borrowers must
an existing company.
report the above transactions to the Direct
2) Shareholdings in a new or existing Investments Register within 60 days from
company that exceed more than 10% of entering into the relevant loan agreement
the entire share capital or voting rights. with the foreign lender.
3) Long-term loans with a maturity period 5. Are there any specific considerations
of 5 (five) years, if the loan was granted for employment of foreign
by the investor to a company fully employees in companies
owned by the investor. incorporated in your jurisdiction?
4) Long-term loans with a maturity period The employment and work of foreigners
of 5 (five) years or more, if the loan was in North Macedonia is governed by
granted to establish a lasting economic the Law on Employment and Work of
link between affiliated companies. Foreigners 2015 (“LEWF”). Under the
LEWF, any foreigner intending to work in
4. Are there any foreign exchange
North Macedonia must previously obtain
restrictions or conditions applicable
a temporary residence permit issued by
to companies such as restrictions to
the Macedonian Ministry of Internal Affairs
foreign currency shareholder loans?
(MOI). The temporary residence permit
There are no restrictions on making loans represents a single integrated permit for
by foreign lenders or granting security or both work and residence of foreigners.
guarantees to foreign lenders. However, Foreigners who have been granted a
local borrowers who are granted a loan by temporary residence permit for work are
foreign lenders or local security providers allowed to reside in North Macedonia only
who provide security to foreign lenders for the purpose of work. The temporary

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residence permit for work purposes may be categories such as (i) job positions, (ii)
issued to a foreigner only if the Macedonian industries; (iii) regions and municipalities in
Employment Agency issues a positive North Macedonia, if it considers that such
opinion that the foreigner meets the limitations would benefit the public and/
requirements per the LEWF. A temporary or commercial interests of the Macedonian
residence permit can be issued for up to 1 labor market.
(one) year. However, it can be renewed for a
period of up to 2 (two) years. C. Corporate Governance
There are specific rules for the cross- 6. What are the standard management
border transfer of employees by a foreign structures (e.g., general assembly,
company to its subsidiary or branch board of directors, etc.) in a corporate
in North Macedonia. As a rule, foreign entity governed in your jurisdiction
companies may temporarily transfer their and the key liability issues relating
employees (“Transferred Employees”) to these (e.g., liability of the board
from the location of their permanent members and managers)?
employment abroad to their subsidiary A limited liability company can be managed
or a branch in North Macedonia to carry either by individual directors or by a
out work based on an agreement for the collective management body comprised
assignment of the Transferred Employees. of individual directors. The shareholders
Apart from entering into an assignment of
also can appoint a supervisory board with
employees’ agreement, foreign companies
competence to oversee the management.
are also required to apply on behalf of
The supervisory board is comprised
the Transferred Employees and obtain a
of at least 3 (three) members who are
temporary residence permit for each of
appointed by the shareholders’ meeting. If
the Transferred Employees. Temporary
a supervisory board is not appointed, the
residence permits can be obtained only for
shareholders’ meeting oversees the work of
Transferred Employees who were employed
the directors.
with the foreign company for at least 1
(one) year and the temporary residence Joint stock companies are required to
permits of the Transferred Employees adhere to specific management structures.
may be renewed for an additional period They can opt for either a one-tier or
of up to 1 (one) year by the filing of an two-tier management system. In a one-
application for renewal at least 30 days tier management system, the company
before expiry of the temporary residence is governed by a board that integrates
permits. executive and non-executive members.
The issuing of temporary residence The board is responsible for both strategic
permits to the Transferred Employees is decisions and daily operations. Oversight
subject to quotas which the Macedonian and control of the board’s actions and
Government sets annually. Therefore, if resolutions are vested in the shareholders’
the quotas are met in 1 (one) calendar meeting. The company is governed by a
year, no additional temporary residence management board and a supervisory
permits can be issued until the beginning board in a two-tier management system.
of the following year. Additionally, under This management board is accountable to a
the LEWF, the Macedonian Government supervisory board that provides oversight.
has a discretionary right to set limitations The supervisory board ensures that the
on the number of temporary residence management board’s decisions align
permits issued to foreigners in different with the interests of the shareholders and

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comply with relevant laws and regulations. audited by an auditor or audit firm licensed
in North Macedonia. The auditors must
The directors of limited liability companies
adhere to the International Standards on
and joint stock companies have fiduciary
Auditing (ISA) and local regulations. After
duties and can be held liable for their
the completion of the audit, the auditor
actions. Directors must act in the best
issues an audit report. This report provides
interests of the company. This includes
an opinion on whether the financial
duties of care and loyalty, which mean that
statements give a true and fair view of
directors should make informed decisions,
the company’s financial position, financial
avoid conflicts of interest, and put the
performance, and cash flows in accordance
company’s interests ahead of their own.
If directors fail to uphold their fiduciary with applicable financial reporting
duties, they can be held liable for damages standards.
to the company. This might include D. Shareholder Rights
situations where a director’s negligence
or misconduct leads to financial loss. If a 8. What are the privileges that can
decision made by the board of a joint stock be granted to shareholders? In
company causes damage to the company, particular, is it possible to grant
all board members may be held jointly voting privileges to shareholders for
and severally liable. This means an injured appointment of board members?
party can pursue 1 (one) or all the directors Shareholders’ privileges or rights are
for the full damages. In some instances, determined by the Companies Law,
directors can also face criminal charges the company’s articles of association,
for severe breaches of duty, such as fraud, shareholders’ agreements, and other
embezzlement, or other illegal activities relevant governing documents of a
carried out in their capacity as directors. company. Typically, each share in a
Directors can sometimes be exempted from company corresponds to a vote. However,
liability if they can prove that they acted in companies might issue different classes of
good faith, relied on expert advice, and had shares, some of which might carry multiple
reasonable grounds to believe their action votes per share or no voting rights at all.
was in the company’s best interests. Shareholders generally have the right to
7. What are the audit requirements in receive dividends, portions of a company’s
corporate entities? profits distributed to its shareholders.
Shareholders also have the right to attend,
Audit requirements for companies vary speak, and vote at general meetings and
between limited liability companies and access certain company information,
joint stock companies. Limited liability including financial statements and board
companies must audit their annual financial minutes. They can also initiate legal action
statements only in some instances (if
against company officers and directors for
they establish and operate wholly-owned
actions that harm the company. In case
subsidiaries). In contrast, all listed joint
of company liquidation, shareholders
stock companies must audit their annual
may have the right to a proportionate
financial statements and make them
distribution of the remaining assets after all
available to the shareholders and the
debts and liabilities have been paid.
general public by publishing them on the
company’s website and the MSE official Voting privileges can be granted to certain
website. Companies subject to mandatory shareholders specifically for appointing
audit must have their financial statements board members. This can be achieved

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through creating different classes of shares, 4) Right to dividends: If the company

where certain classes have enhanced decides to distribute dividends,
voting rights concerning the appointment minority shareholders have a right to
of board members or a system where a their proportionate share.
shareholder can allocate all of their votes to
5) Right to exit: In certain circumstances,
a single nominee for the board of directors
minority shareholders may have the
rather than spreading them across multiple
right to require the company or other
candidates. Shareholders’ agreements
shareholders to purchase their shares,
can include provisions that give certain
especially if certain decisions are
shareholders enhanced rights to nominate
made that fundamentally change the
or appoint board members.
company’s character.
9. Are there any specific statutory rights
10. Is it possible to impose restrictions
available to minority shareholders
on share transfers under the
available in your jurisdiction?
corporate documents (e.g., articles
Macedonian law recognizes the potential of association or its equivalent in
vulnerability of minority shareholders your jurisdiction) of a company
and provides them with specific rights to incorporated in your jurisdiction?
protect their interests against potential
In North Macedonia, it is possible to impose
abuse by the majority shareholders or
restrictions on share transfers through
the company’s management. While the
corporate documents, most notably the
specifics can vary based on periodic
company’s articles of association. These
amendments and judicial interpretations,
restrictions can help ensure that the
some general rights often accorded to
ownership of the company remains within
minority shareholders in North Macedonia
a particular group or to vet potential new
are:
shareholders. Some common types of
1) Right to information: Minority restrictions include:
shareholders have the right to request
1) Right of first refusal: This provision
certain company documents, such as
requires a shareholder wishing to sell
financial statements, board minutes,
their shares to first offer them to the
and other relevant documents, to
other existing shareholders at the same
keep themselves informed about the
price and terms as offered by a third-
company’s affairs.
party buyer.
2) Right to call a shareholders’ Meeting:
2) Pre-emptive rights: When new shares
Minority shareholders, upon reaching
are issued, existing shareholders get
a certain percentage of ownership
the first opportunity to purchase them,
(typically defined by the statute or
often in proportion to their existing
company’s articles), can request the
holdings, before they’re offered to
convening of a shareholders’ meeting.
external parties.
3) Right to challenge decisions: Minority
3) Approval or consent clauses: The
shareholders have the right to
transfer of shares may be subject to the
challenge certain decisions made by
approval of the board of directors or a
the company, especially if they believe
specified majority of shareholders.
those decisions are contrary to the law
or the company’s by-laws or if they 4) Tag-along rights: If a majority
adversely affect their interests. shareholder sells their stake, minority

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shareholders have the right to join the choose to participate in the restructuring
transaction and sell their minority stake process only if they waive their security
at the same terms and conditions. interests.
5) Drag-along rights: If a majority Technical bankruptcy is a situation where
shareholder sells their stake, they can a company’s liabilities exceed its assets but
require minority shareholders to join hasn’t yet filed for bankruptcy. It’s crucial
the transaction, forcing them to sell for company directors to recognize signs of
their shares at the same terms and technical bankruptcy and to act diligently,
conditions. as they might face personal liability for
6) Lock-in periods: Specifies a duration continuing to trade while insolvent. Once a
during which shareholders cannot sell company becomes insolvent or is in a state
their shares. of technical bankruptcy, the management
has a legal obligation to file for bankruptcy
11. Are there any specific concerns or within 45 days. Directors might be held
other considerations regarding the personally liable if they don’t act promptly
composition, technical bankruptcy upon recognizing insolvency or if they
and other insolvency cases in your act detrimentally, worsening the financial
jurisdiction? position of the creditors. This can include
In North Macedonia, as with many accusations of wrongful or fraudulent
jurisdictions, there are particular concerns trading.
and considerations to be aware of As a general rule, on commencement
regarding the composition, technical of bankruptcy over a company, any
bankruptcy, and other insolvency cases. transactions entered into by the company
Composition can be a way for companies and its creditors that prevent the equitable
in financial distress to avoid bankruptcy. settlement of the creditors’ claims, or
When considering a composition, both that provide preferential treatment to
the debtor and the creditors should certain creditors, can be challenged by the
assess the viability of the proposed terms bankruptcy administrator or any of the
and whether it offers a better outcome company’s creditors. These transactions
than a bankruptcy proceeding. Under include:
the Out-of-Court Settlement Act 2014 1) Preferential Treatment
(“Restructuring Law”), a company must
commence a financial restructuring A transaction can be challenged if:
process if it is insolvent for over 30 days. • The creditor has settled its claim or has
The restructuring process involves received security for its claim on the
negotiating a restructuring plan between basis of the transaction.
the company and its unsecured creditors
to provide more favorable terms for • The company was insolvent when it
settling the creditors’ claims compared to finalized the transaction.
bankruptcy proceedings. The Restructuring
• The creditor had actual knowledge
Law excludes secured creditors from the
(or must have had actual knowledge)
restructuring process, and the restructuring
about the company being insolvent.
plan does not bind them since they have
the right to settle their claim from the • The company finalized the transaction
object of the security interest in priority to 90 days before the proposal for the
unsecured creditors. Secured creditors can commencement of bankruptcy.

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Any transactions that meet the above creditors, finalized in the 10 (ten) years
criteria and were finalized after filing before the proposal for commencement
the proposal for commencement can for bankruptcy, can also be challenged.
also be challenged if the creditor had
On a company’s bankruptcy, secured
actual knowledge (or must have had
creditors can settle their claims by direct
actual knowledge) about the company
enforcement of their security interest,
being insolvent or the proposal for the
without regard to the form of the security.
commencement of bankruptcy.
The security interests are not included
Any transactions on the basis of which a in the company’s bankruptcy estate,
creditor has settled its claim or received and secured creditors have the exclusive
security for its claim can be challenged if: right to settle their claims from the net
• The creditor had no right to demand sale proceeds of the security interest. If
settlement of its claim or to receive a security interest has not been validly
security. perfected, the creditor will be deemed to
be an unsecured creditor, and its claim will
• The creditor had no right to demand be subject to ranking together with the
settlement of its claim or to receive claims of all the unsecured creditors. If 2
security in a way provided by the (two) security interests over a particular
company. asset are equal, the first created will have
• The creditor had no right to demand priority.
settlement of its claim or to receive Unsecured creditors’ claims are ranked
security at that particular moment in into higher and lower priority categories.
time. Unsecured creditors’ claims in the lower
• The company finalized the transaction priority category can be settled only after
30 days before the proposal for the full settlement of the claims in the higher
commencement of bankruptcy. The priority category, while unsecured creditors’
suspect period for challenging is 90 claims with the same priority are settled
days before filing the proposal for the proportionally to the value of their relevant
commencement of bankruptcy, only claim. The categories priority for unsecured
if the company was insolvent, or the creditors’ claims is as follows (from highest
creditor had actual knowledge that to lowest):
the transaction was detrimental to the • Costs of the bankruptcy proceedings
other creditors. that include court taxes, bankruptcy
2) Transactions at an Undervalue administrator’s costs and fees, costs
for maintenance of the assets of the
Any transactions in which the
company and other related expenses.
company received no consideration, or
significantly less consideration than it • Insolvent’s employees’ net salaries
provided, that was finalized within the and mandatory health and social
4 (four) years before the proposal for insurance benefits for the last 3 (three)
commencement for bankruptcy, can months before commencement of
also be challenged. the bankruptcy proceedings, personal
injury claims under health and safety
3) Damaging of Creditors
at work regulations, as well as unused
Any transactions in which the company annual leave compensation for the
intentionally caused damage to its current calendar year.

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• Creditors’ claims, for example, account 1) Simplicity and speed: Typically, a share
receivables, taxes, other outstanding purchase is administratively simpler
liabilities to the government and others. and faster than an asset purchase since
• Interest on creditors’ claims it involves the transfer of shares rather
which became due on the date of than individual assets and liabilities.
commencement of the bankruptcy 2) Transfer of intangible assets: Share
proceedings; costs of creditors purchases automatically include
arising out of or in connection with intangible assets such as licenses,
their participation in the bankruptcy permits, and contracts that might be
proceedings; criminal or misdemeanor non-transferable in an asset purchase.
fines; claims of creditors arising out
of agreements at an undervalue; and 3) Tax neutrality: The transfer of shares is
claims for the repayment of loans not a taxable event.
or other claims of the company’s
4) Preservation of contracts: Contracts
shareholders.
with customers, suppliers, or employees
E. Acquisition remain with the company, eliminating
the need to renegotiate or assign each
12. Which methods are commonly used
contract.
to acquire a company, e.g., share
transfer, asset transfer, etc.? 5) No reevaluation: Assets and liabilities
The most common method for the remain on the balance sheet at their
acquisition of a company in North book value without the need for
Macedonia is a share transfer. Control revaluation.
over a company can also be obtained by The main disadvantages of a share
a statutory merger, that is, by merging purchase include:
the company into the acquirer. However,
a statutory merger is not a common 1) Assumption of liabilities: The buyer
mechanism for the acquisition of a assumes all the liabilities of the
company, as many specific hurdles must company, both known and unknown.
be addressed during the merger process.
2) Due diligence complexity: The due
For example, the implementation of a
diligence process can be more
statutory merger requires the management
complicated and lengthier since the
of the merging companies to enter into
a merger agreement which is subject to buyer needs to examine all aspects of
shareholder authorization. Moreover, the the company, including contingent
shareholders can contest the merger if liabilities.
certain conditions are met. Also, on the 3) Potential for minority shareholders: If
successful implementation of a statutory not all shares are acquired, minority
merger, the shareholders of the target shareholders could retain rights,
company become shareholders of the potentially complicating governance.
acquiring company.
14. What are the approvals and
13. What are the advantages and consents typically required (e.g.,
disadvantages of a share purchase
corporate, regulatory, sector
as opposed to other methods?
based and third-party approvals)
The main advantages of a share purchase for private acquisitions in your
include: jurisdiction?

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Various approvals and consents may be • Insurance: The acquisition of insurance

required for private acquisitions, depending companies or significant stakes in
on the nature of the business, its industry them may require clearance from the
sector, and the specifics of the transaction. Insurance Supervision Agency.
Some of the typical approvals and consents
4) Third-party Approvals
that may be necessary include,
Some contracts that the target
1) Corporate approvals
company is a party to may have
Depending on the articles of change-of-control provisions or
association (or equivalent corporate clauses that necessitate the consent
documents) of the company being of the other party/parties before an
acquired, the approval of a certain acquisition.
percentage of shareholders may be
required for the sale or transfer of 15. What are the regulatory
shares. The board of directors may need competition law requirements
to approve the transaction, especially applicable to private acquisitions in
if it significantly alters the corporate your jurisdiction?
structure or strategy of the company. Merger control in North Macedonia is
2) Regulatory approvals governed by the Law on the Protection of
Competition 2010 (“Competition Law”).
• Merger clearance: If the acquisition The competent regulatory authority
results in a significant concentration in for merger control in Macedonia is the
the market, approval may be required
Commission. The Commission has exclusive
from the Commission for Protection of
jurisdiction to investigate and make a final
Competition ( “Commission”).
decision on merger notifications, both
• Securities and Exchange Commission: If in Phase I and Phase II (as defined below)
the target company is a publicly listed proceedings.
entity, the Securities and Exchange
There are no sector-specific merger control
Commission might have specific
requirements or notifications related to regulations, and currently, there are no
the transaction. developments that indicate that there
are any plans to introduce sector-specific
3) Sector-Based Approvals merger control rules in any industry. The
• Banking and finance: Acquisitions in the general merger control regime applies
banking or financial sectors may require equally to all qualifying concentrations,
approval from the National Bank of the irrespective of the industry and sector.
Republic of North Macedonia or the The Competition Law applies only to
Ministry of Finance of the Republic of transactions that qualify as concentrations
North Macedonia. of capital, resulting in a permanent change
of control involving undertakings that
• Telecommunications: Acquisitions in meet specific turnover and market share
the telecom sector may necessitate thresholds. Under the Competition Law,
consent from the Agency for Electronic concentrations include transactions where:
Communications.
(i) 2 (two) or more previously independent
• Energy: Transactions involving energy
undertakings (or parts of undertakings)
companies might need the green
merge.
light from the Energy Regulatory
Commission. (ii) 1 (one) or more undertakings acquire,

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directly or indirectly, control of 1 (one) period of a year from the date of their
or more other undertakings by: acquisition provided that during this
period, the shareholders’ rights are not
a. purchasing securities or assets;
exercised to influence the competitive
b. contract; behavior of that undertaking in the
market.
c. any other means.
(ii) A person acquires control over
(iii) 2 (two) or more undertakings create
an undertaking in the capacity of
a “full-function” joint venture, that
a bankruptcy or as a liquidation
is, a joint venture of two or more
administrator.
independent undertakings that has
all the features of an autonomous (iii) An investment fund acquires shares
economic undertaking. in an undertaking, provided that its
shareholders’ rights are exercised
Control is defined as rights, contracts or
only to maintain the full value of
any other means that, either separately
the investment and not to influence
or combined, and having regard to the
the competitive behavior of that
considerations of fact and law involved,
undertaking in the market.
confer the possibility of exercising a
decisive influence on an undertaking. In The thresholds for the application of the
particular, control can be exercised through merger control regime are relatively low
the ownership or the right to use all or part in comparison to other jurisdictions in
of the assets of an undertaking or rights or Central and Eastern Europe. A notification is
contracts that confer a decisive influence required where a transaction that qualifies
on the composition, voting or decision- as a concentration satisfies the following
making of the bodies of the undertaking. In thresholds:
cases of acquisitions of minority interests,
(i) The aggregate worldwide annual
the Commission can investigate whether
turnover of all the parties in the
the acquirer can still exercise legal or de
preceding accounting year exceeded
facto control over the undertaking through
EUR 10 million, and at least one of the
special rights attaching to shares or
parties has a registered presence in
granted in shareholders’ agreements, board
North Macedonia.
representation, ownership and use of assets
and related commercial issues. Since there (ii) The aggregate annual turnover of all
is no precise shareholding or any other test the parties to the concentration in
for assessing whether decisive influence North Macedonia exceeded EUR 2.5
over an undertaking has been obtained, the million in the preceding accounting
Commission decides each case on its facts. year.
Despite a contemplated permanent change (iii) One of the parties to the concentration
of control and the turnover and market has a market share in North Macedonia
share thresholds requirements being met, exceeding 40%, or the parties have a
merger clearance is not required where: combined market share exceeding 60%.
(i) A bank, an insurance company or The turnover of an undertaking is defined
another financial institution, whose as the amount derived from the sale of
business activity includes trading products or the provision of services
securities, temporarily acquires shares (excluding turnover taxes and rebates)
for their ensuing resale within a in the preceding financial year. In this

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context, the turnover of the whole group usually cover whether the concentration
of undertakings (to which the relevant is notifiable (especially for joint ventures),
undertaking belongs) is taken into account. any additional information that needs to be
In a merger involving the acquisition of an supplied by the parties in the notification,
undertaking, the turnover of the seller is and any issues of concern to the parties.
not taken into account, only the turnover
As a rule, the Competition Law does
of the undertaking being acquired. The
not allow the completion of notifiable
turnover of joint ventures is calculated by
transactions before the parties to the
taking into account the whole turnover of
transactions obtain merger clearance
the parents (and their groups) intending to
from the Commission. Exceptionally, the
share control of the joint venture.
obligation to suspend the transaction does
Notification of mergers that meet the not apply to public bids for the purchase
relevant turnover and market share of securities that are traded on the market,
thresholds set out in the Competition provided that (i) the notification is made by
Law is mandatory, and there are no the parties to the transaction without delay
exceptions. In the case of an acquisition and (ii) the acquirer exercises any voting
of joint control or of a merger that creates rights only to maintain the full value of the
a new undertaking, the notification must investment.
be jointly submitted by the parties to the
The parties to a concentration can file
merger or by the undertakings acquiring
substantiated requests for exemption
joint control. In the case of acquisition of
from the suspension obligations to the
sole control, the acquirer alone must notify
Commission at any time. However, these
the Commission.
exemptions are very rare in practice. When
The Competition Law does not set out a deciding on the requests, the Commission
specific deadline for the notification of a will, in particular, consider (i) the effect of
merger. However, it requires the parties to the suspension of the transaction on the
a concentration to notify the Commission undertakings concerned or on third parties
(i) before completing a transaction (and and (ii) the potential adverse effects on
following the conclusion of an acquisition competition caused by the concentration.
agreement), or (ii) when announcing Based on its review, the Commission can
a public bid, or (iii) when acquiring a also grant a conditional exemption from
controlling interest. A notification can the suspension obligations to ensure
also be made where the undertakings effective competition.
concerned demonstrate to the Commission
The Competition Law requires the
a good faith intention to enter into an
Commission to reach a (“Phase I”) decision
agreement or, in the case of a public bid,
on whether the merger is in compliance
where they have publicly announced an
with the Competition Law or whether a
intention to make such a bid.
more in-depth (“Phase II”) investigation
The Commission encourages and is is needed within 25 business days from
willing to provide informal guidance to receipt of a complete notification by the
parties before a notification is made. The parties to the transaction. This time limit
parties to a concentration are advised to can be extended by the Commission to
make pre-notification contact with the up to 35 business days if the parties to the
Commission as early as possible, preferably concentration undertake commitments
2 (two) to 3 (three) weeks before making to ensure compliance of the merger with
the notification. The discussions will the Competition Act. If the Commission

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launches a Phase II investigation, it must (vi) Consumers’ interests.

decide on the notification within 90
(vii) Technological and economic
business days from the launch date of
development, but only under the
the investigation. This time limit can be
condition this benefits the consumers
extended by the Commission at any time
and that the concentration does
during the Phase II investigation based
not constitute an impediment to
on an agreement with the parties to the
competition.
concentration. However, each extension
cannot exceed 20 business days. Apart from the assessment of whether joint
If the Commission fails to decide within the ventures will impede effective competition
above time limits (including any extensions, in the Macedonian market, they are also
if applicable), the concentration will be assessed on whether the object or effect
deemed to comply with the Competition of the joint venture is to co-ordinate the
Law. Exceptionally, the time limits can be competitive behavior of 2 (two) or more
waived where the Commission must carry parents to the joint venture. For example,
out a dawn raid or obtain information this includes 2 (two) or more parents
about the undertakings’ financial standing, retaining activities in the relevant markets,
business relationships and other relevant including the same market, or on an
details for its investigation from other upstream, downstream or closely related
sources (that is, state authorities, third neighboring market to that of the joint
parties and others). venture. In this context, the notification
to the Commission pertaining to joint
The Competition Act prohibits
ventures must contain full details of the
concentrations that significantly impede
overlapping activities of the parents in the
effective competition in the Macedonian
relevant markets.
market, or a substantial part of it, as a
result of the creation or strengthening of a Failure to notify the Commission about a
dominant position. The same substantive notifiable transaction is a grave offence,
test also applies to full-function joint and it can carry fines of up to 10% of
ventures. In its assessment, the Commission the worldwide (group) turnover of the
will consider: undertakings in the previous accounting
(i) The need to maintain and develop year. In addition, the Commission can also
effective competition, especially order the transaction to be unwound and/
in terms of structure and actual or or temporarily prohibit the activity of the
potential competition on the relevant undertakings involved (from 3 (three) to 30
market. days for legal entities and from 3 (three) to
15 days for natural persons), as measures
(ii) The market position of the parties to aimed at preventing the distortion of the
the concentration and their economic competition in the market. If the penalties
and financial power. imposed are not paid by the parties to the
(iii) The supply and alternatives available concentration, the Commission can enforce
to suppliers and users, as well as their them against their overall assets. The
access to the suppliers or markets. penalties for implementing a transaction
before obtaining approval or after
(iv) Barriers to entry or exit from the
prohibition can also carry fines of up to 10%
relevant market.
of the worldwide (group) turnover of the
(v) The supply and demand trends for the undertakings in the previous accounting
relevant goods and/or services. year.

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Filing a notification and providing a. companies that have made an IPO; or

inaccurate or misleading information
b. companies that have a share capital
(whether intentionally or negligently)
of at least EUR 1 million and at least
is considered a minor offence and can
50 shareholders.
carry a fine of up to 1% of the worldwide
group turnover of the undertakings in the The Takeover Act does not apply to
previous accounting year. takeover offers for shares in the ownership
of any governmental entities, such as public
16. Are there any specific rules
enterprises, agencies, funds or any other
applicable for acquisition of public
legal entities that carry out public service.
companies in your jurisdiction? The acquisition of shares in a company that
The principal mechanism to obtain control has been de-listed or a company which no
of a public company with dispersed longer has the status of a company with
ownership that is listed on the MSE is special disclosure obligations is subject to
a takeover offer (whether voluntary the takeover offer rules within 1 (one) year
or mandatory) to all the company’s from the de-listing or termination of special
shareholders to purchase their voting disclosure obligations of that company.
shares. Where a company has 1 (one) or 17. Is there a requirement to disclose
more major shareholders (in particular, a deal, for instance to regulatory
shareholders who own controlling stakes), authorities? Is it possible to keep a
takeovers are commonly structured as deal confidential?
voluntary takeover offers with the major
shareholders entering into bilateral The deal must be disclosed to the
conditional share purchase agreements (or regulatory authorities for the purpose of
undertakings to tender their shares) as the perfection of the transfer of the shares.
basis for parallel block trade transactions. 18. Can sellers be restricted from
In such cases, the consideration for the shopping around during a
shares in the takeover offer cannot be lower negotiation process? Is it possible
than the consideration for the shares in the to include break fee or other
block trade. Alternatively, a bidder and the penalty clauses in acquisition
majority shareholders can initially execute documents to procure deal
and finalize a block trade transaction which exclusivity?
would subsequently trigger the obligation
of the bidder to launch a mandatory offer Sellers can be restricted from “shopping
for the remaining shares of the company. around” during the negotiation process,
and there are several mechanisms to
Public takeovers are regulated by achieve this exclusivity. Before diving into
the Takeover Act. The Takeover Act is a detailed negotiation for a full-blown
enforced by the Securities and Exchange acquisition agreement, the parties might
Commission (SEC) and applies to takeover sign a letter of intent or term sheet. This
offers for: document can include an exclusivity clause
where the seller agrees not to pursue or
(i) Companies whose securities are
entertain offers from other potential buyers
admitted to trading on the MSE.
for a specified period. The duration is
(ii) Companies with so-called special often subject to negotiation, with periods
disclosure obligations under the ranging from a few weeks to several
Securities Act 2005 that is: months.

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The inclusion of break fees is also common. financial, legal, tax, operational, and
This acts as a deterrent to ensure that environmental due diligence.
the seller does not casually entertain
3) No material adverse change: The
other offers after granting exclusivity to
absence of a material adverse change
a particular buyer. Conversely, (reverse)
(MAC) or material adverse effect (MAE)
break fees can also be imposed on buyers
in the target company’s business,
if they decide not to proceed with an
assets, financial condition, or results
acquisition without a legitimate reason.
of operations between signing and
This is a penalty that the buyer agrees to
closing.
pay if they can’t complete the acquisition
due to reasons like failure to obtain 4) Accuracy of warranties and
financing. It provides the seller with some representations: Confirming that the
compensation for the opportunity cost of seller’s representations and warranties
being off the market during the exclusivity are true and accurate as of the closing
period. date.
19. What are the conditions precedent 5) No breach of covenants. The parties’
in a typical acquisition document? compliance with interim covenants or
Is it common to have conditions to obligations agreed upon in the SPA,
closing such as no material adverse which can include conduct of business
change? in the ordinary course or no disposal of
key assets.
The nature and extent of conditions
precedent can vary widely based on 6) Completion of pre-closing
the sector, nature, and size of the deal. reorganizations. Any structural or
However, some typical conditions internal reorganizations or adjustments
precedent in acquisition documents agreed upon by the parties should be
include: completed before closing.
1) Regulatory approvals: 7) Corporate approvals. Obtaining
relevant corporate approvals, such
• Obtaining necessary approvals or
as board resolutions or shareholder
clearances from regulatory bodies, such
approvals, if required.
as competition or antitrust authorities.
8) Documentation. Delivery of certain
• Where the company operates in a
documents, such as executed director
regulated industry (e.g., banking,
or shareholder resolutions, certificates
insurance, telecommunications),
of incorporation, or good standing
approval may be needed from the
certificates.
relevant regulatory body.
9) Settlement of outstanding litigation.
2) Consents and approvals:
Resolving specific disputes, claims,
• Obtaining consents from third parties, or litigations that might impact the
which could include key contractual transaction.
counterparties, landlords, or lenders,
10) Third-party financing. For transactions
especially if existing contracts have a
where the buyer requires external
change of control provisions.
financing, a typical CP would be the
• Due Diligence Satisfactory Results: securing of this financing on terms
The buyer’s satisfactory completion of satisfactory to the buyer.

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11) Other contract-specific conditions. 7) Intellectual property. Assurances

Depending on the specifics of the regarding the ownership, validity,
deal, other conditions could relate and non-infringement of intellectual
to intellectual property clearances, property rights held by the company.
employee matters (e.g., key employee
8) Employees and pensions. Warranties
retention),
regarding employee contracts, the
20. What are the typical warranties absence of labor disputes, and any
and limitations in acquisition pension or other post-employment
documents? Is it common to obtain obligations.
warranty insurance?
9) Tax. Confirmation that the company has
Typical warranties in acquisition documents paid all due taxes and that there are no
in North Macedonia include: ongoing tax disputes or investigations.
1) Title and capacity. Confirmation that 10) Environmental Issues. Warranties
the seller has the legal title to the shares concerning compliance with
or assets being sold and has the full environmental laws and the absence of
capacity and authority to sell them. environmental liabilities.
2) Financial statements. Assurances that Typical limitations on warranties include:
the company’s financial statements
1) Disclosure. Warranties can be qualified
are accurate, have been prepared in
by disclosures made by the seller, often
accordance with relevant accounting
contained in a disclosure letter that
standards, and present a true and
highlights exceptions to the warranties
fair view of the company’s financial
provided.
position.
2) Time limits. Warranties might be time-
3) Absence of undisclosed liabilities.
limited, meaning they expire after a
Assurance that there are no undisclosed
certain period post-completion.
liabilities or obligations of the company
which are not reflected in the financial 3) Monetary caps. There could be a cap on
statements. the amount the buyer can claim under
the warranties.
4) Assets. Assurance that the company
owns or has a valid license to all its key 4) De minimis limits. Claims might be
assets and that these assets are in good permissible only if they exceed a certain
condition, subject to normal wear and minimum threshold.
tear.
5) Knowledge and materiality
5) Contracts. Confirmation about the qualifications. Some warranties
validity and enforceability of key might be qualified by what the seller
contracts and that the company is not “knowingly” is aware of, or if a matter is
in breach of any significant contractual “material” to the business.
obligations.
Warranty and Indemnity (W&I) insurance,
6) Compliance with laws. Assurance also known as representations and
that the company has complied with warranties insurance, is a policy designed
all applicable laws and regulations to protect the buyer (or sometimes the
and that there are no ongoing seller) against breaches of warranties in the
or anticipated legal disputes or acquisition agreement. W&I insurance is not
investigations. common in North Macedonia.

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21. Is there a requirement to set a Macedonian law, like many jurisdictions

minimum pricing for shares of a following European Union directives and
target company in an acquisition? practices, has restrictions on companies
There are no requirements to set a providing financial assistance for the
minimum pricing for shares of a target purchase of their own shares or the shares
company in an acquisition. of their parent companies. Such restrictions
aim to protect the company’s capital and
22. What types of acquisition financing creditors. Typically, there are whitewash
are available for potential buyers in procedures or exceptions that might
your jurisdiction? Can a company allow financial assistance under certain
provide financial assistance to a conditions, such as obtaining approvals
potential buyer of shares in the from shareholders or ensuring that the
target company? assistance doesn’t prejudice the interests of
In North Macedonia, as in many countries, creditors. If a company in North Macedonia
there are several options available for provides unlawful financial assistance,
acquisition financing: it can face legal consequences, and the
involved transactions can be declared void.
1) Bank loans. Traditional bank financing
remains a prevalent source for 23. What are the formalities and
acquisitions. This might include term procedures for share transfers and
loans specifically for the purpose of how is a share transfer perfected?
funding the acquisition.
Documents commonly produced and
2) Private equity. Investors or private executed in a signing meeting for the
equity funds might provide capital for acquisition of a private company include
acquisitions in return for equity stakes (i) share purchase agreement; and (ii)
in the acquiring company or the target shareholder’s and/or board resolutions
company post-acquisition. of the seller and the buyer approving the
3) Mezzanine financing. This is a hybrid transaction and authorizing the directors
form of financing that combines to sign the share purchase agreement.
features of debt and equity. It might Documents commonly produced and
involve convertible debt or debt with executed at closing include:
attached equity warrants.
• Offer for the transfer of the shares
4) Bonds and notes. Larger companies and the statement of acceptance or
might issue bonds or notes in the rejection of the offer.
capital markets to raise funds for
acquisitions. • Share purchase agreement, executed by
a notary public.
5) Vendor financing. In some cases, the
seller might provide financing to the • Shareholder resolutions for the target
buyer, where a portion of the purchase (for example, approving the registration
price is deferred and paid over time. of the buyer as a shareholder).

6) Asset-based lending. Using assets (like • New articles, verified by a notary public.
receivables or inventory) as collateral to • Statement by the new shareholder
secure loans.
of the company that there is no legal
7) Equity financing. Raising capital for the obstacle for it to be a shareholder of the
acquisition by issuing new shares or company; this must also be verified by a
other equity instruments. notary public.

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• Statement by the directors of the Translations should be performed by

company that all of the required actions certified translators registered in North
have been carried out to allow for the Macedonia to ensure their acceptability by
registration of the corporate changes official entities. The translated document
related to the registration of the new often carries the stamp and signature of
shareholder. the certified translator, attesting to the
accuracy of the translation.
Upon closing, the buyer is required to
report the transfer of the shares to the In cross-border transactions, parties often
Central Registry of the Republic of North include a “choice of language” clause
Macedonia and the Direct Investments specifying which version (i.e., language)
Register (if a foreign entity) for the purpose of the agreement will prevail in case of
of recording of the title of ownership on the any discrepancies or misunderstandings
acquired shares. between the translated versions. Even if the
main acquisition document is in a foreign
24. Are there any incentives (such language, ancillary documents required for
as tax exemptions) available for registration, regulatory approval, or other
acquisitions in your jurisdiction? formal procedures in North Macedonia
There are no incentives (such as tax (like board resolutions, approvals, and
exemptions) available for acquisition in notifications) should preferably be in
North Macedonia. Macedonian or accompanied by an official
translation.
F. Enforceability
26. Can acquisition documents be
25. Can acquisition documents be governed by a foreign law?
executed in a foreign language?
Parties in a cross-border transaction
Acquisition documents in North Macedonia involving North Macedonia can choose
can be executed in a foreign language, a foreign law to govern their acquisition
especially when 1 (one) or more of documents. The principle of “party
the parties involved are from foreign autonomy” in Macedonian private
jurisdictions. However, while parties can international law allows parties in a
execute documents in a foreign language, contract to select the governing law, even if
it is generally required that an official it’s a foreign law. While the choice of foreign
translation into Macedonian be attached if law is generally respected, any application
the document is to be used for any official of that law that contravenes the public
purposes in North Macedonia. This is policy of North Macedonia or its mandatory
particularly important for documents that legal provisions may not be enforceable.
need to be registered with public registries For instance, certain aspects related to
or submitted to government authorities. Macedonian corporate law, real estate
If an acquisition document (e.g., a share transfers, or competition regulations might
purchase agreement involving shares still need to adhere to local Macedonian
of a limited liability company) requires legal provisions. Choosing a foreign law
notarization by a notary public, the notary can have practical implications, including
will typically require a Macedonian version potential complexities in understanding
of the document or, at the very least, a and applying that law. Local Macedonian
certified translation. The notary needs authorities or third parties might be
to ensure that all parties understand more accustomed to Macedonian law, so
the document they’re executing. there could be challenges or delays when

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interacting with them under an agreement simple, advanced, and qualified. Only the
governed by foreign law. The nature of the qualified electronic signature has the same
transaction might influence the feasibility legal effect as a handwritten signature.
of choosing foreign law. For instance, To use a qualified electronic signature,
in transactions purely related to assets a person needs a qualified electronic
located in North Macedonia or regulatory signature certificate, which can be obtained
matters, it might be more practical to have from accredited certification bodies in
Macedonian law as the governing law. North Macedonia. However, while many
documents can be signed digitally, certain
27. Are arbitration clauses legally
key transaction documents, especially
permissible or generally included in
those requiring notarization, might still
acquisition documents?
need to be executed in person before a
North Macedonia recognizes the notary public.
validity and enforceability of arbitration
agreements, including those in acquisition
G. Trends and Projections
documents. Arbitration clauses are 29. What are the main current trends in
generally included in acquisition M&A in your jurisdiction?
documents for cross-border transactions
North Macedonia’s aspirations to join
involving a Macedonian entity and a
the European Union have significantly
foreign entity since arbitration offers a
influenced its economic and legal reforms.
neutral ground that might be preferable
This ongoing process often plays a role in
over local courts in either party’s
M&A activity, as businesses anticipate the
jurisdiction. As a signatory to the New
implications of potential EU membership,
York Convention on the Recognition and
which might increase foreign investments
Enforcement of Foreign Arbitral Awards
and cross-border transactions. There
(1958), North Macedonia is required to
is a growing interest in infrastructure
ensure the recognition and enforcement of
development, including transportation and
foreign arbitral awards.
energy projects. Foreign investments in
28. Are there any specific formalities these sectors are leading to M&A activities,
for the execution of acquisition especially as North Macedonia aims to
documents? Is it possible to enhance its connectivity and energy
remotely/digitally sign documents? security. Like many countries in the Balkans,
North Macedonia saw growth in its tech
Depending on the type of acquisition
and startup sectors. Foreign investors
(e.g., shares in a limited liability company),
showed interest in tech companies, leading
the acquisition document might require
to potential M&A opportunities.
notarization. Notarization ensures that the
parties are correctly identified, that they The government’s efforts to improve the
understand the contents of the document, business environment and streamline
and that they are signing it voluntarily. regulatory procedures influenced the
North Macedonia has made strides in M&A landscape. Simplified administrative
adopting electronic governance and procedures and tax incentives could attract
digital transactions. The Law on Electronic more foreign investors. The consolidation
Documents and Electronic Signature trend in the banking and financial services
governs the use of electronic signatures sector was noticeable in many parts of
in North Macedonia. As per the law, there Europe, and North Macedonia was no
are 3 (three) types of electronic signatures: exception. This trend could result in

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mergers or acquisitions among local and

foreign banks or financial institutions. Given
North Macedonia’s natural beauty and
historical sites, investments and interest in
the tourism and real estate sectors could
lead to M&A activities.
30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
Economic challenges, such as
unemployment or external economic
pressures, could create opportunities
for acquisitions, especially of distressed
assets or companies seeking strategic
partnerships for growth. Regional stability
and geopolitical developments in the
Balkans can influence M&A activity.

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POLAND
ADDLESHAW GODDARD

Daniel Cousens Michał Szperzynski

Partner Managing Associate
daniel.cousens@ michal.szperzynski@
aglaw.com aglaw.com

A. General • The Polish Accounting Act dated

September 29, 1994 (as amended)
1. What is the main legal framework
applicable to companies in your 2. What are the most common types
jurisdiction? of corporate entities (e.g., joint
stock companies, limited liability
The primary source of Polish company law companies, etc.) used in your
is the Commercial Companies Code (“CCC”) jurisdiction? What are the main
(Kodeks spółek handlowych) of September differences between them (including
15, 2000 which provides a comprehensive but not limited to with regard to the
framework of company law in Poland. Other shareholders’ liability)?
legislation important for the operation of
companies in Poland includes: The most common types of corporate
entities are:
• The Entrepreneurs’ Act of March 6, 2018
• Limited liability company
• The Act on the rules of participation of
(“LLC”) (spółka z ograniczoną
foreign entrepreneurs and other foreign
odpowiedzialnością or sp. z o.o.) – this
persons in the economic trade on the
is the most common form of corporate
territory of Poland of March 6, 2018
entity used in Poland.
• The Act on the National Court Register
• Joint stock company (“JSC”) (spółka
(KRS) of August 20, 1997
akcyjna or S.A.) – this is a more
• The Law on Bankruptcy of February 28, regulated form of company used mainly
2003 in connection with larger businesses.
Both companies have separate legal

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personalities and the liability of their including (i) acquisitions of 20% or more
members (shareholders) is limited to the of shares, voting rights or rights to profits
amount of their capital contributions. in a protected entity or acquisitions that
result in crossing 20% or 40% threshold of
The main differences relate to the respective entitlement (voting rights, shares
mandatory initial capital contributions or share in the profits) in a protected entity;
(PLN 5,000 for the LLC and PLN 100,000 or (ii) transactions leading to acquisition of
for the JSC) and the corporate governance dominance over a protected entity.
structure which tends to be more
complicated for the JSC (e.g. it is mandatory Protected entities are entities domiciled in
for the JSC to have a supervisory board Poland and:
which is not always the case for the LLCs). • publicly listed in Poland;
Since July 2021, it is also possible to set up • active in key sensitive sectors (such
a new type of company, a simple joint-stock as, amongst others, energy, defense,
company (“SJSC”) (prosta spółka akcyjna), chemical, software, pharmaceutical,
which is mainly aimed at start-ups. It is the food and beverage sectors, stevedoring
most flexible corporate vehicle in Polish in Polish ports and cloud computing);
corporate law and has a minimal joint-stock
• developing software to operate
capital of PLN 1. It remains to be seen,
specified systems; or
however, how popular it will prove for
investors in Poland. • holding assets considered as critical
infrastructure;
Other types of entities can also be
used for conducting business (e.g. a which generated more than EUR 10
limited partnership but these are much million turnover in Poland in at least one
less common in the context of M&A of the last two financial years preceding
transactions). the transaction (excluding intra-group
turnover).
B. Foreign Investment
Notification is required in most cases prior
3. Are there any restrictions on foreign to closing. Post-closing approval is required
investors incorporating or acquiring in case of indirect acquisition of a protected
the shares of a company in your entity.
jurisdiction?
The regime was previously COVID-19
On top of the merger control obligations related, but has been extended until July
at the Polish and EU level (see section 15 24, 2025.
below) restrictions on foreign investors in
Poland include the following regimes: (i) Strategic entities FI regime: in addition,
sensitive sectors FI, (ii) strategic entities acquisitions of more than 20% of shares
or votes of entities that are considered
FI, (iii) regulated sectors, and (iv) the EU
to be strategic entities seventeen Polish
Foreign Subsidies Regulation (“FSR”).
companies as at March 2024), regardless of
Sensitive sectors FI regime: acquisitions by domicile of the acquirer, requires clearance
all non-European Economic Area (“EEA”)/ from the relevant authority, in most cases
European Union (“EU”)/OECD investors of prior to closing. The list of strategic entities
Polish protected entities require consent is updated annually by the Council of
from the Office of Competition and Ministers, and it is up to the discretion of
Consumer Protection (“OCCP”). The regime ministers which companies will be included
covers a broad range of transactions, on the list.

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Other regulated regimes: additionally, the C. Corporate Governance

Polish law sets out restrictions regarding
foreign ownership of shares in companies 6. What are the standard management
operating in certain regulated sectors (for structures (e.g., general assembly,
example television and radio operators). board of directors, etc.) in a corporate
Special clearance is also required for entity governed in your jurisdiction
acquisitions of real estate in Poland by non- and the key liability issues relating
EEA and non-Swiss investors. to these (e.g., liability of the board
members and managers)?
FSR regime: additionally, the FSR regimes
gives the European Commission (“EC”) The bodies that control an LLC/JSC are the
powers to address distortive effects of management board and the shareholders
non-EU subsidies on the EU market. The through the shareholders’ meeting. The
FSR imposes a mandatory notification management board may consist of one or
requirement for deals where the EU more members and is responsible for the
turnover of the target (for acquisitions), the day-to-day management of the company.
joint venture or one of the merging parties
Additionally, a supervisory board is
(for mergers) is €500m or more and the
required (i) in all JSCs and (ii) in the case
companies involved have received at least
€50m in combined financial contributions of LLCs, where the share capital exceeds
from non-EU countries. Additionally, the PLN 500,000 and the LLC has more than 25
EC has general power to investigate all shareholders. In the case of an LLC, an audit
other market situations where there may committee with narrower powers may be
have been foreign subsidies from non-EU established instead of a supervisory board.
countries. However, this solution is not often used in
practice.
4. Are there any foreign exchange
restrictions or conditions applicable A member of the management board is
to companies such as restrictions to liable to the company for any damage
foreign currency shareholder loans? caused as a result of acts or omissions
in breach of the applicable laws and the
Generally, not. company’s articles of association. Members
5. Are there any specific considerations of the board may also incur specific
for employment of foreign liabilities for corporate breaches (such
employees in companies as providing false information in their
incorporated in your jurisdiction? representation that contributions towards
the share capital of the company have been
In general, foreigners from countries made by all shareholders when filing for
outside of the EU and EEA must hold a work
registration of the company) and liability
permit to work in Poland (subject to some
for criminal offences (for example, if they
exceptions, e.g., in respect of individuals
fail to file for bankruptcy when required to
working for less than six months per year as
do so under applicable laws).
a member of the management board of a
Polish company). 7. What are the audit requirements in
corporate entities?
Annual financial statements of all JSCs and
entities in certain sectors (such as banks
and insurance companies) must be audited.

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In addition, certain other entities (such as 10. Is it possible to impose restrictions

LLCs), must have their annual statements on share transfers under the
audited if they satisfy certain conditions corporate documents (e.g., articles
(e.g. they have balance sheet assets above of association or its equivalent in
EUR 2,500,000 and have a staff headcount your jurisdiction) of a company
of at least 50 people per year). incorporated in your jurisdiction?

D. Shareholder Rights It is possible to include certain restrictions

on share transfers in the company’s articles
8. What are the privileges that can of association (such as a requirement
be granted to shareholders? In for consent to transfer of the company’s
particular, is it possible to grant supervisory board or the shareholders’
voting privileges to shareholders for meeting). However, limiting transferability
appointment of board members? of shares cannot result in an absolute
Shareholders can also be granted additional prohibition on their disposal as any such
rights and these can be granted either as restriction would be ineffective. In addition,
personal rights (for example the right to there may be certain time limits for such
appoint board members) or be attached to restrictions (e.g., in respect of a JSC).
shares (for example an enhanced dividend 11. Are there any specific concerns or
right). other considerations regarding the
9. Are there any specific statutory rights composition, technical bankruptcy
available to minority shareholders and other insolvency cases in your
available in your jurisdiction? jurisdiction?

While there is no definition of a minority The board must convene a shareholders’

shareholder in the CCC, it does give certain meeting if the balance sheet drawn up
rights to minority shareholders (such as by the management board shows a loss
the right to request the company to call exceeding the aggregated supplementary
an extraordinary shareholders’ meeting, and reserve capitals and half of the share
include certain items in the agenda of a capital.
shareholders’ meeting etc.). It is a criminal offence for the management
These rights can be enjoyed by board to fail to file for bankruptcy.
shareholders representing at least 10% (or Generally, liability of an LLC will not
in the case of the inclusion of items on a attach to the board members. However,
shareholders’ meeting agenda, 5%) of the if enforcement proceedings against the
company’s share capital (in respect of LLCs) company will be ineffective, then the board
or 5% of the company’s share capital (in members are jointly liable with the LLC for
respect of JSCs). the company’s liabilities. Board members
may discharge themselves from liability if
In addition, in certain circumstances, a they can demonstrate that:
minority shareholder of a JSC has a right to
(i) a petition for bankruptcy was filed
demand the purchase of its shares.
at the appropriate time, a decision
Separately, each shareholder (including on opening the restructuring
minority shareholders) is authorized proceedings (otwarcie postępowania
to challenge resolutions adopted at a restrukturyzacyjnego) or a decision
shareholders’ meeting (e.g., if any such on approving the arrangement
resolution violates the law). (zatwierdzenie układu) was issued; or

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(ii) they were not responsible for not filing requirement for consent from the company,
a petition for bankruptcy, or contain pre-emption rights for the existing
shareholders or set out other restrictions
(iii) the circumstances specified in point (i)
previously agreed among shareholders.
above did not cause any damage to the
creditors. Spousal consent is generally required in
respect of any transactions where the
E. Acquisition
subject of such transaction is part of a joint
12. Which methods are commonly used marital estate.
to acquire a company, e.g. share
transfer, asset transfer, etc.? In an asset sale which is classified as the
sale of a business or part of a business, the
Both share and asset acquisitions are consent of shareholders is required.
commonly used for acquiring businesses in
Poland, with share acquisitions being the 15. What are the regulatory
most common structure. competition law requirements
applicable to private acquisitions in
13. What are the advantages and your jurisdiction?
disadvantages of a share purchase
as opposed to other methods? Both EU and Polish competition laws apply
to acquisitions of companies in Poland
As in other jurisdictions, share acquisitions (deciding which laws apply largely depends
tend to be simpler as they do not require on the size and geographic reach of the
individual assets to be listed (all of the parties’ businesses).
company’s assets transfer automatically
with the company), there is no need for If competition laws are triggered, regardless
consent to transfer individual agreements of which laws apply, the transaction must
(though there may be change of control be notified to the competent authority,
provisions that are triggered) etc. and it is unlawful to complete it before
Share acquisitions may also be more clearance is obtained.
advantageous from the tax perspective.
According to Polish competition law, a
On the other hand, as in other jurisdictions, merger notification must be filed if:
share purchases involve acquiring the
target company with all of its assets and • the combined worldwide turnover of
liabilities. all the undertakings involved in the
financial year preceding the year of the
14. What are the approvals and notification exceeds EUR 1 billion; or
consents typically required (e.g.,
corporate, regulatory, sector • the combined Polish turnover of all
based and third-party approvals) the undertakings involved in the
for private acquisitions in your financial year preceding the year of the
jurisdiction? notification exceeds EUR 50 million.

In general, other than the FDI consents The de minimis exemption applies if the
set out above and the merger control turnover generated by target or assets
clearances set out below, no third party did not exceed the equivalent of EUR 10
consents are required in respect of the million in either of the two financial years
acquisition of shares in LLCs and JSCs. preceding the notification.
The articles of association of the target Creation of a JV (including investments
company may, however, include a in minority shareholding stake) may also

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trigger the filing obligation and should be 18. Can sellers be restricted from
analysed on a case-by-case basis. shopping around during a
negotiation process? Is it possible
Pursuant to competition laws completing
to include break fee or other
a transaction prior to clearance does not
penalty clauses in acquisition
render the transaction void but may result
in heavy fines. documents to procure deal
exclusivity?
Under Polish merger control rules, a
transaction is also deemed to have been Exclusivity agreements are frequently
cleared if OCCP fails to issue a decision entered into in respect of M&A transactions
within the prescribed time limits. in Poland. These may include break fees
which, while not very common, are allowed
16. Are there any specific rules provided they comply with the legal
applicable for acquisition of public requirements (such as not exceeding a
companies in your jurisdiction? reasonable estimate of costs etc.).
Yes, there are special rules that apply to 19. What are the conditions precedent
acquisitions of shares in listed companies in a typical acquisition document?
(when such acquisitions exceed certain Is it common to have conditions to
thresholds). These include, amongst others, closing such as no material adverse
rules relating to mandatory tender offers, change?
minimum price requirements, disclosure
obligations, notification requirements and A typical acquisition document would,
squeeze out procedures. if applicable, include conditions relating
to merger control approvals and third
17. Is there a requirement to disclose
party consents having been obtained,
a deal, for instance to regulatory
completion of pre-closing reorganizations
authorities? Is it possible to keep a
etc.
deal confidential?
It is common to see no material adverse
The transaction needs to be disclosed
change conditions.
if any mandatory consents or approvals
(including any regulatory consents if the 20. What are the typical warranties
target is a regulated entity) are required and limitations in acquisition
or if the target is a listed entity. Separately, documents? Is it common to obtain
the identities of shareholders of LLCs warranty insurance?
holding more than 10% of share capital are
disclosed in the National Court Register. In As in a number of jurisdictions, the scope
contrast, in respect of JSCs, only the identity of representations and warranties would
of the sole shareholder (if there is one) is primarily depend on the bargaining
disclosed in the National Court Register. position of the seller and the buyer (e.g.
private equity funds are unlikely to provide
However, the registration records of both warranties beyond title and capacity). In
LLCs and JSCs are publicly available and can general, the scope of warranties in Poland
be viewed in court by anyone (such records is similar to those seen in other European
may include details of shareholders). markets.
Typical limitations include maximum
liability cap, time limitations for bringing
a claim, de minimis and basket. The
warranties tend also to be qualified by

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matters that have been disclosed to the example towards the company) that need
buyer. to be complied with in relation to the
transfer.
Warranty and indemnity insurance has also
become more popular in Poland and is now 24. Are there any incentives (such
widely available, even for relatively smaller as tax exemptions) available for
deals. acquisitions in your jurisdiction?
21. Is there a requirement to set a There are no specific tax exemptions
minimum pricing for shares of a available for share or asset acquisitions in
target company in an acquisition? Poland.
Only in respect of listed companies. F. Enforceability
22. What types of acquisition financing 25. Can acquisition documents be
are available for potential buyers in executed in a foreign language?
your jurisdiction? Can a company Yes in most cases. The exception are asset
provide financial assistance to a deals, which involve real estate. In such
potential buyer of shares in the cases the agreement must be executed in
target company? the form of a notarial deed, which is drawn
In general, there is no prohibition on the up in Polish.
target providing financial assistance and it 26. Can acquisition documents be
may advance funds, provide loans or grant governed by a foreign law?
security in connection with the acquisition
of its shares by a potential buyer (as long Yes (though certain mandatory provisions
as such financing is provided on market of the CCC will apply regardless of the
terms and after it has analysed its solvency governing law choice). In the case of an
position). However, there are some asset deal concerning assets (including real
limitations on financial assistance with estate) located in Poland, Polish property
respect to acquisition of shares in a JSC. law applies, irrespective of the law chosen
for the contract.
23. What are the formalities and
procedures for share transfers and 27. Are arbitration clauses legally
how is a share transfer perfected? permissible or generally included in
acquisition documents?
As noted below, in respect of LLCs, in order
to be effective, share transfer agreement Yes, they are legally permissible and
must be in writing with the signatures commonly included, in particular in larger
certified by a notary public present at or cross border transactions.
the signing. In order for the transfer to be 28. Are there any specific formalities
recognized by the target company, it needs for the execution of acquisition
to be notified to it alongside evidence of documents? Is it possible to
valid transfer. remotely/digitally sign documents?
In respect of JSCs, the transfer is perfected Transfers of shares in LLCs must be in
when the purchaser of the shares is entered writing with the signatures certified by
into the electronic share register of the a notary public present at the signing (a
target company, maintained by a third weaker form than a notarization).
party (usually brokerage houses).
In the case of share transfers in JCCs,
There are also certain notifications (for notarization is not required.

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A sale of a business or a part of a business

must be in writing with the signatures
certified by a notary public present at the
signing. A sale of a business or a part of a
business or a sale of assets that include real
estate requires notarization.
It is possible to sign documents
electronically through the use of qualified
electronic signatures (which have to be
issued by a provider listed in the register of
the National Certification Center). However,
such signatures cannot be used where
there is a requirement for the document to
be in a particular form (for example notarial
deed execution for acquisition of real estate
or where the signatures need to be certified
by a notary public (as in case of the LLC
share transfers)).
G. Trends and Projections
29. What are the main current trends in
M&A in your jurisdiction?
Despite a challenging macroeconomic
climate in Poland, the country’s M&A
market persists as the major market within
the CEE region. Activity is notably vibrant
within the energy, healthcare and TMT
sectors. It is also worth noting that the
ESG considerations are capturing greater
investor interest.
The use of warranty and indemnity
insurance is also on the rise, becoming
relatively standard in major transactions.
This trend reflects a growing sophistication
in the market for these insurance products.
30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
No.

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QATAR
SULTAN AL-ABDULLA & PARTNERS

Omar Qouteshat
Senior Associate
[email protected]

A. General shareholding in the capital. Tradable shares

certificates shall not be issued to partners
1. What is the main legal framework for their stakes in the company.
applicable to companies in your
jurisdiction? Holding Companies:

The law that is governing all types of A holding company is a shareholding,

companies in Qatar is Law No. 11 of 2015 limited liability or sole proprietorship
(“Companies Law”). company that financially and managerially
controls one or more other companies. The
2. What are the most common types controlled companies, when owned by at
of corporate entities (e.g., joint least (51%) in share or stakes by the holding
stock companies, limited liability company, shall become subsidiaries of the
companies, etc.) used in your holding company.
jurisdiction? What are the main
Public Shareholding Company:
differences between them (including
but not limited to with regard to the Public Shareholding Company is a
shareholders’ liability)? company, comprising of at least five
shareholders, where its capital is divided
The most common types of corporate into transferrable shares of equal value.
entities are Limited Liability Companies, The shareholders shall only be liable to
Holding Companies, Public Shareholding the extent of their contributions to the
Companies and Private Shareholding company’s capital. The founders shall
Companies. We describe a brief explanation subscribe to shares not less than (20%), and
for each type of these companies. no more than (60%) of the company’s share
Limited Liability Companies: capital. The company shall offer shares for
public subscription within 60 days of the
A limited liability company is a company, date of its incorporation. The company
consisting of 1 to 50 partners. Partners shall be managed by an elected board of
are responsible only to the extent of their directors. The foreign shareholding will

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be subject to the oversight of the Qatar board resolution and a business plan. The
Financial Market Authority and the type of same process applies for acquiring more
activities conducted by the company (for than 49% shares in an established entity
example, foreign investors are prohibited in Qatar, except for the submission of the
from investing in insurance companies, business plan.
banks, and commercial agencies). A non-
Qatari investor may own 49% of the share 4. Are there any foreign exchange
capital of companies that are listed on the restrictions or conditions applicable
Qatar stock exchange, upon the approval to companies such as restrictions to
of the Ministry of Commerce and Industry; foreign currency shareholder loans?
or more than 49% of the share capital of
There are no foreign exchange restrictions
such companies, upon the approval of the
Council of Ministers. or conditions.

Private Shareholding Company: 5. Are there any specific considerations

for employment of foreign
The private shareholding company is employees in companies
a company, comprising of at least five incorporated in your jurisdiction?
shareholders. Such company may not
All employees are required to enter into
offer its shares for public subscription.
an employment contract in Qatar with a
The minimum capital requirement for the
local entity and obtain a residency permit.
company is QAR 2 million. Such a company
However, the Executive Regulation No. 25
shall be managed by an elected board
of 2019 of the Law No. 21 of 2015 (“Expats
of directors and may be converted into a
Law”) provides several visa categories for
public shareholding company upon the
each applicant based on the nature of
fulfillment of certain conditions. The liability
the visit. In our view, volunteers fall under
of the shareholders shall be limited to their
the visa category of the visitor to attend a
respective shareholding in the company’s
business meeting or mission (Article 42 of
capital.
the Executive Regulation). Visas issued for
B. Foreign Investment business purposes shall have the following
validity periods:
3. Are there any restrictions on foreign
investors incorporating or acquiring 1- Single entry for a period of 30 days, or
the shares of a company in your 60 days, as the case may be.
jurisdiction?
2- Multiple entry for a period of six
Under Law No. 1 of 2019 (“Foreign months, provided that the maximum
Investment Law”) it is permitted to permitted length of stay for each entry
establish a 100% foreign entity subject to is of 90 days.
the approval of the Foreign Investment
3- Multiple entry for a period of one year,
Department at the Ministry of Commerce
provided that the maximum permitted
and Industry (“MoCI”). For incorporating a
length of stay for each entry is of 90
foreign investment entity that owns more
days.
than 49% of the shares, the applicant will
need to complete a special form issued by It will be at the discretion of the
the MoCI and submit the constitutional Immigration Department to determine the
documents of the applicant, shareholder’s/ period of the visa.

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C. Corporate Governance v Right to vote: Shareholders have the

right to vote on important corporate
6. What are the standard management matters, such as the election of
structures (e.g., general assembly, directors and approval of corporate
board of directors, etc.) in a corporate transactions.
entity governed in your jurisdiction
and the key liability issues relating vi Right to receive dividends: Shareholders
to these (e.g., liability of the board have the right to receive a portion of
members and managers)? the company’s profits in the form of
dividends.
The standard management structures
include general assembly and director(s) vii Right to inspect company books:
based on the type of the company. For Shareholders have the right to inspect
Limited Liability Companies, it is the the company’s financial records and
general assembly. It may also have board books.
of managers depending on the Articles viii Right to participate in company
of Association. For Public Shareholding meetings: Shareholders have the right
Companies, it is mandatory to have a board
to attend and participate in annual
of directors.
shareholder meetings.
7. What are the audit requirements in
ix However, each shareholder will
corporate entities?
have the right to vote based on his
Each company must appoint an auditor, shareholding in the company.
obtain a tax card and register at the
9. Are there any specific statutory rights
Dhareeba portal.
available to minority shareholders
D. Shareholder Rights available in your jurisdiction?
8. What are the privileges that can No, there are no specific statutory rights for
be granted to shareholders? In minority shareholders.
particular, is it possible to grant
10. Is it possible to impose restrictions
voting privileges to shareholders for
on share transfers under the
appointment of board members?
corporate documents (e.g., articles
In Qatar, shareholders typically have the of association or its equivalent in
following privileges: your jurisdiction) of a company
incorporated in your jurisdiction?
i Approval of the manager’s report on
the business of the company for that Yes, articles of association may impose
year and its financial position; restrictions on share transfers.
ii Approval report of the company’s 11. Are there any specific concerns or
auditors; other considerations regarding the
composition, technical bankruptcy
iii Approval of the balance sheet and
and other insolvency cases in your
profit and loss account;
jurisdiction?
iv The election of auditors for the next
There are no specific concerns.
year and the fixing of such auditors’
responsibilities and remuneration;

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E. Acquisition Competition Protection Department

requirement is not an objective one, but
12. Which methods are commonly used this will depend on the corporate structure,
to acquire a company, e.g., share before and after, and the impact of the sale
transfer, asset transfer, etc.? on the market and the purchaser’s market
The common methods are share transfer share.
and asset transfer. 16. Are there any specific rules
13. What are the advantages and applicable for acquisition of public
disadvantages of a share purchase companies in your jurisdiction?
as opposed to other methods? Yes. The Qatar Financial Markets Authority
There are no other methods for share (“QFMA”) rules will apply to the acquisition
purchase other than the share transfer of public shareholding companies.
method stated in our response above.
17. Is there a requirement to disclose
14. What are the approvals and a deal, for instance to regulatory
consents typically required (e.g., authorities? Is it possible to keep a
corporate, regulatory, sector deal confidential?
based and third-party approvals)
for private acquisitions in your For public shareholding companies, it is
jurisdiction? required to disclose the deal to the QFMA.
In accordance with Articles 14 and 15 of
The steps and approvals for share transfer the Merger and Acquisition Rules issued
in a limited liability company are as follows: by the QFMA (the “Rules”), the concerned
i Obtaining tax clearance on the Share parties must comply with the timeline of
Purchase Agreement (“SPA”) from the the merger transaction and if the offeror is
General Tax Department; unable to comply with the timeline of the
transaction, the QFMA must be notified
ii Obtaining approval on the SPA from the
immediately to take the necessary action.
Ministry of Labor;
18. Can sellers be restricted from
iii Obtaining approval on the SPA from the
shopping around during a
Commercial Registration Department;
negotiation process? Is it possible
iv Authenticating the SPA from the to include break fee or other
Ministry of Justice; penalty clauses in acquisition
v Updating the commercial registration; documents to procure deal
and exclusivity?

vi Amending the articles of association to Yes. These are contractual clauses that can
reflect the new shareholders. be agreed upon among the parties.

15. What are the regulatory 19. What are the conditions precedent
competition law requirements in a typical acquisition document?
applicable to private acquisitions in Is it common to have conditions to
your jurisdiction? closing such as no material adverse
change?
The law related to competition is Law No.
19 of 2006 (“Anti-Competition Law”). The parties may agree on the conditions
The criteria for the notification to the that will govern the acquisition.

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20. What are the typical warranties No. Only acquisitions made between
and limitations in acquisition entities fully owned by Qataris are
documents? Is it common to obtain exempted from capital gains tax.
warranty insurance?
F. Enforceability
There is no requirement under the law and
this can be agreed upon among the parties. 25. Can acquisition documents be
executed in a foreign language?
21. Is there a requirement to set a
minimum pricing for shares of a Yes. However, the official Share Purchase
target company in an acquisition? Agreement that will be submitted to the
authorities in Qatar must be in Arabic.
No. However, the tax authority may not
The Share Purchase Agreement can be
accept the sale consideration. In this
in dual (Arabic and any other language).
case, the tax authority will ask for a third-
Any document to be submitted to the
party evaluation of the fair value of the
sold shares. The capital gains tax will be authorities in Qatar must be in Arabic. In
calculated based on the fair value of the case of a dispute before the Qatari courts,
sold shares. all documents need to be translated into
Arabic.
22. What types of acquisition financing
are available for potential buyers in 26. Can acquisition documents be
your jurisdiction? Can a company governed by a foreign law?
provide financial assistance to a
Yes. However, the official Share Purchase
potential buyer of shares in the
Agreement that will be submitted to the
target company?
authorities in Qatar must be governed by
Yes. There are several types of acquisition Qatari law.
financing such as debt financing which
is the most common form of financing 27. Are arbitration clauses legally
for acquisitions in Qatar, and includes permissible or generally included in
loans from banks, bonds, and other debt acquisition documents?
instruments. Yes. The parties have the right to refer the
23. What are the formalities and dispute to arbitration.
procedures for share transfers and 28. Are there any specific formalities
how is a share transfer perfected?
for the execution of acquisition
The parties usually enter into a detailed documents? Is it possible to
share transfer agreement that will include remotely/digitally sign documents?
all the details and conditions of the share
The Share Purchase Agreement has to
transfer. In addition, the parties will enter a
short form of a Share Transfer Agreement be signed before the Documentation
which will be submitted to the authorities Department at the Ministry of Justice in
in Qatar to complete the share transfer. The Qatar. Document required from non-Qatari
formalities and procedures are provided in entities has to be notarized/apostilled and
our response to question 14 above. attested by the Ministry of Foreign Affairs
and the embassy of Qatar abroad.
24. Are there any incentives (such
as tax exemptions) available for Any other documents can be signed
acquisitions in your jurisdiction? remotely or by digital signature.

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G. Trends and Projections 30. Are any significant development

or change expected in the near
29. What are the main current trends in
future in relation to M&A in your
M&A in your jurisdiction?
jurisdiction?
The Qatari government has been focusing
on diversifying its economy away from oil We are not aware of any significant changes
and gas, and towards other sectors such in the near future.
as tourism, real estate, and healthcare.
This has increased M&A activity in these
sectors. Furthermore, private equity firms
have been showing an increased interest
in Qatar, with several large deals being
announced in recent years.

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ROMANIA
ȚUCA ZBÂRCEA & ASOCIAȚII

Horia Ispas
Partner
[email protected]

A. General Both types of companies afford

shareholders the limitation of liability to the
1. What is the main legal framework value of their subscribed share capital.
applicable to companies in your
jurisdiction? As an exemption, the concept of “piercing
of corporate veil” is regulated by the
The main legal enactment governing Companies Law in a very limited manner.
companies in Romania is represented Essentially, in case of voluntary dissolution
by the Companies Law No. 31/1990 (the and liquidation of the company (either LLC
“Companies Law”). or JSC), shareholders’ liability for unpaid
debts of the company becomes unlimited if
2. What are the most common types shareholders acted in a fraudulent manner
of corporate entities (e.g., joint detrimental to the creditors. Shareholders’
stock companies, limited liability liability may also be aggravated in case
companies, etc.) used in your the company undergoes insolvency/
jurisdiction? What are the main bankruptcy procedures, as per the special
differences between them (including statutory rules.
but not limited to with regard to the
LLCs may have up to 50 shareholders. LLCs
shareholders’ liability)?
with only one shareholder are permitted by
The most common types of corporate the Companies Law, and such companies
entities in Romania, due to the flexible rules are governed by the same rules applicable
governing their running, are: to LLCs with two or more shareholders.

• the limited liability companies LLCs may have a share capital of at

(Romanian: societăți cu răspundere least RON 1 (approximately EUR 0,20)
limitată) (the “LLCs”) and consisting in contributions in kind or cash.
Contributions in receivables held towards
• the joint stock companies (Romanian: third parties are not accepted for the
societăți pe acţiuni) (the “JSCs”). purpose of setting up LLCs. The Companies

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Law provides that 30% of the subscribed Pursuant to Regulation No. 4/2005, in
capital must be paid no later than 3 (three) regard to transactions between residents,
months from the date of registration of payments, receipts, transfers and any
the LLC, but before commencing any other such transactions arising from the
operations. The remaining balance of sale of goods and provision of services
the subscribed share capital must be between residents, irrespective of the legal
paid: (i) within 12 months, in case of cash relationship governing them, shall be made
contributions and (ii) within two years from only in national currency (RON), with the
the registration of the company, in case of exception of the transactions referred to in
contributions in kind. Annex 2 of Regulation No. 4/2005, which
may also be carried out in foreign currency.
JSCs must have at least two shareholders
and a share capital of at least RON 90,000 Payments, receipts, transfers and any other
(approximately EUR 18,500). such operations between residents arising
from remuneration for work performed,
The share capital may be comprised of regardless of the legal relationship that
contributions in kind, in cash and/or in regulates them, shall be made only in the
receivables (admitted only where the JSC is national currency (RON).
established by simultaneous subscription).
Cash contributions are always mandatory All other operations between residents can
be carried out freely, either in the national
upon registration. If the JSC is established
currency (RON) or in foreign currency. These
by simultaneous subscription, at least 30%
operations include, but are not limited to,
of the subscribed capital must be paid
operations representing financial flows
upon incorporation, while the remaining
generated by the granting of loans, the
70% must be paid: (i) within 12 months, in
creation of deposits, securities transactions
case of cash contributions and (ii) within
and the distribution of dividends. The
two years from the registration of the
aforementioned operations and those
company, in case of contributions in kind.
referred to in Annex 2 of Regulation No.
B. Foreign Investment 4/2005 can be carried out in foreign
currency only with the agreement of the
3. Are there any restrictions on foreign parties.
investors incorporating or acquiring
the shares of a company in your In regard to transactions between residents
jurisdiction? and non-residents, current and capital
foreign exchange operations, as provided
As a general rule there are no restrictions for in Annex 1 of Regulation No, 4/2005
applicable to foreign investments. (which includes loans), can be carried out
4. Are there any foreign exchange freely between residents and non-residents,
restrictions or conditions applicable in foreign currency and in national currency
to companies such as restrictions to (RON).
foreign currency shareholder loans? 5. Are there any specific considerations
There are no special foreign exchange for employment of foreign
restrictions applicable to companies, employees in companies
incorporated in your jurisdiction?
however the general rules provided by NBR
Regulation No. 4/2005 on foreign exchange For this specific issue, it is important to
regime must be observed (the “Regulation distinguish between EU, EEA and Swiss
No. 4/2005”). nationals and non-EU, non-EEA and non-

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Swiss nationals. Citizens of EU/EEA/Swiss in Romania. Hence, approval is granted

Confederation and their family members if the open position within the company
benefit from simplified approval process, cannot be filled in by a Romanian/EU/
as they can work on the Romanian territory EEA individual or permanent resident in
dependently/ independently under the Romania.
same conditions as Romanian citizens
Moreover, the company must prove
(based on an individual employment
that the activities carried out on the
agreement, assignment contract, etc.) and
Romanian territory are compatible
no work authorization must be obtained
with the job position for which it
for them, pursuant to the provisions of
requests the employment of the foreign
applicable legal framework. However,
citizen, that it has not been finally
they are required to obtain a certificate of
convicted for a crime provided under
registration/residence card. In this regard,
the Labour Code or for an intentional
they must submit to the territorial units of
crime against a person provided under
the General Inspectorate for Immigration
the Criminal Code, that it has paid
in the county where they live, a number
its contributions to the state budget
of documents, depending on the purpose
regularly throughout the last quarter, it
of the stay in Romania, within the period
has not been sanctioned for undeclared
prescribed by the law of 3 (three) months.
work or illegal employment in the last
For non-EU, non-EEA and non-Swiss 6 (six) months, and that the number of
nationals, working in Romania is permitted admitted workers stays did not reach
only for those who obtain a visa and a the limits of the yearly contingency
working permit, unless they fall under approved by government decision
the exceptions provided by the law. The (the number of work permits issued
main legal requirements for employing every year is limited and determined by
foreigners in Romania include obtaining government decision; for the year 2024,
a work permit, complying with specific a quota of 100,000 foreign workers
employment conditions and obtaining a newly admitted to the Romanian
residence permit, as follows: labour market is established by G.D. No.
1338/2023).
(a) Foreigners who wish to work in
Romania must first obtain a work (b) Employers must comply with specific
permit from the General Inspectorate employment conditions when
for Immigration. Work permits are employing foreigners in Romania.
issued for a specific job position and are These conditions include granting
typically valid for a period of one year the same rights and benefits as
but can be renewed if the employment Romanian employees, ensuring
relationship continues. There are several that the employment relationship is
categories of work permits, including documented in writing by concluding
temporary, permanent, and intra- and registering an individual
company transfer permits. employment agreement/secondment
agreement, and ensuring that the
If employing a foreigner citizen, the
foreign employee complies with the
company must prove, among others,
legal requirements.
that the vacant positions cannot be
filled in by Romanian citizens, citizens The foreign employees must, thus,
of EU Member States/EEA/Swiss fulfil all the legal requirements
Confederation or permanent residents regarding their entry and staying on

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the Romanian territory, fulfil special matter which does not fall under the
conditions regarding professional exclusive competence of the ordinary GMS).
qualifications, experience and
The Companies Law provides for two types
authorization required by the employer
of management systems available for JSCs:
according to the legal provisions (in
case of highly qualified employees), • the one-tier management system,
prove that their state of health is such where the effective management
as to enable them to carry out the is entrusted to a board of directors
relevant activity, and that they have (Romanian: consiliu de administraţie)
not been convicted for crimes that which can, or in certain cases is obliged
are incompatible with the activity to, delegate management powers to
they carry out or intend to carry out in several executives (Romanian: directori)
Romania, as well as, effectively perform and
the activity for which they obtained the
• the two-tier management system,
working permit.
where the effective management of the
(c) In addition to the work permit, company is ensured by an executive
foreigners must also obtain a residence committee (Romanian: directorat)
permit. The residence permit is issued under the control of a supervisory
by the General Inspectorate for board (Romanian: consiliu de
Immigration and is valid for the same supraveghere).
period as the work permit. Foreigners
In practice, the majority of the Romanian
must apply for the residence permit
joint stock companies prefer the one-tier
within 30 days of entering Romania.
management system.
Hiring non-EU, non-EEA or non-Swiss
The governing body of a limited
nationals without a working/secondment
liability company is the GMS without
permit constitutes misdemeanor and is
thesplit of powers between ordinary
punished by a fine.
and extraordinary meetings. However,
C. Corporate Governance shareholders may establish through the
articles of association the two types of
6. What are the standard management
GMS with different duties and voting
structures (e.g., general assembly,
requirements. The LLC is managed by one
board of directors, etc.) in a corporate
or several directors.
entity governed in your jurisdiction
and the key liability issues relating As a rule, directors are jointly liable
to these (e.g., liability of the board towards the company for the following:
members and managers)? (i) payments made by the shareholders;
(ii) payment of dividends; (iii) existence
The governing body of the JSC is the
and correct maintenance of company
General Meeting of Shareholders (the
ledgers as required by law; (iv) appropriate
“GMS”). Depending on agenda, the GMS
enforcement of the resolutions of the GMS;
may be either ordinary (e.g., approval of
(v) strict fulfilment of the duties imposed by
annual financial statements, distribution
the law and the articles of association.
of dividends, appointment or dismissal of
directors or auditors, etc.) or extraordinary If the company faces difficulties, the
(e.g. increase/decrease of the share capital, directors/managers must consider at least
changes in the company’s legal form, the following: (i) the interests of creditors,
mergers, spin-offs, as well as for any other equity holders and other interested

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parties; (ii) the need to take reasonable • The average number of employees
and appropriate measures to avoid within the financial year is 50.
insolvency and to minimize losses suffered
The same obligation applies to the annual
by creditors, employees, equity holders
financial statements of medium-sized and
and other interested parties; and (iii) the
large-sized companies, companies of public
need to avoid conduct, whether intentional
interest, as well as companies operated
or grossly negligent, that threatens the
under the two-tier management system.
viability of the enterprise.
For companies who do not meet the above
Also, the directors may be held criminally
criteria, auditing requirements are more
liable in certain cases.
flexible, as shareholders may decide in
Directors are liable towards the JSCs for GMS to contract external financial audit or
the prejudices caused by the actions of appoint internal auditors.
the managers or of the hired staff when D. Shareholder Rights
the damage would not have taken place
if they had exercised the supervision 8. What are the privileges that can
imposed by the duties of their position. be granted to shareholders? In
Moreover, directors will be jointly liable particular, is it possible to grant
with their immediate predecessors if, voting privileges to shareholders for
having knowledge of the violations appointment of board members?
committed by their predecessors, they fail JSCs can issue preferred shares which
to disclose them to the in-house auditors give right to preferential distribution of
or to the financial auditors, as the case may dividends. Shareholders of preferred shares
be. Also, in the case of JSCs managed by a can participate in the GMS, but they do not
number of directors, the liability for actions benefit of the voting rights. In case of delay
or omissions does not extend to directors in the payment of dividends, preferred
who have had their opposition to such shares shall acquire voting rights, starting
action/omission recorded in the registry of from the due date of the obligation to pay
resolutions of the board of directors and dividends to be distributed during the
who notified such opposition in writing following year or, if in the following year
to the in-house auditors or the internal the GMS resolves that no dividends shall
auditors and the financial auditor. be distributed, starting from the date of
7. What are the audit requirements in publication of the respective resolution of
corporate entities? the GMS, until the actual payment of the
outstanding dividends.
Auditing of financial statements is
mandatory for companies (irrespective Although the law does not contain specific
whether JSC-type or LLC-type) who meet rules in this respect and in principle the
majority rule is applicable, it is possible to
for a period of two consecutive years at
include in the shareholders’ agreement
least two of the following criteria:
or in the articles of association special
• The aggregate value of the assets is at rules regarding the appointment of board
least RON 16,000,000 (approximately members or set forth a certain structure for
EUR 3.3 million) the governing bodies of the company.
• Net turnover amounts to RON 9. Are there any specific statutory rights
32,000,000 (approximately EUR 6.6 available to minority shareholders
million) or available in your jurisdiction?

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The minority shareholders in JSCs have the 10. Is it possible to impose restrictions
following main rights: on share transfers under the
corporate documents (e.g., articles
• The shareholders holding at least 5%
of association or its equivalent in
of the share capital may request that
your jurisdiction) of a company
a GMS be called, or that the agenda
incorporated in your jurisdiction?
of an already-convened GMS be
supplemented. In JSCs, shares may be transferred freely.
However, the shareholders may impose
• Any shareholder may request the
restrictions on the transfer of shares
auditors to review any act or operation
through the corporate documents of the
of the company.
company or shareholders agreements.
• One or several shareholders holding,
In LLCs, shares may be freely transferred
severally or jointly, at least 10% of the
among shareholders. The transfer to
share capital may request the court
persons outside the company is only
to appoint one or several experts for
allowed if approved by the shareholders
analyzing certain operations in the
representing at least ¾ of the registered
management of the company and
share capital, however the articles of
draft a report to be submitted to the
association may provide otherwise.
board of directors, directorate and the
supervisory council, respectively, as Additional restrictions can be imposed for
well as to the in-house auditors and the LLCs under the articles of association of the
internal auditors of the company, as the company or shareholder agreements.
case may be, for analysis and in order to
11. Are there any specific concerns or
propose adequate measures;
other considerations regarding the
• In certain limited cases, the composition, technical bankruptcy
shareholders that did not vote in favor and other insolvency cases in your
of one of the resolutions of the GMS jurisdiction?
have the right to withdraw from the
The Romanian legislation concerning the
company and request the purchase of
pre-insolvency procedures – restructuring
their shares by the company.
agreements and composition – provide the
• The shareholders representing, possibility that the agreement drafted by
separately or jointly, at least 5% of the debtor can contain certain measures to
the share capital, may file an action help him recover from the state of financial
for damages, in their own name but difficulty amongst which is modifying the
on behalf of the company against the structure of the capital by way of increasing
founders, directors or managers of the it through co-opting new shareholders
company for damages they caused the or conversion of debt into shares. The
company. proposed agreement should be approved
by the creditors and confirmed by the
Most of the above rules are equally
syndic judge under certain conditions
applicable to LLCs, unless otherwise
provided by law.
provided in the Companies Law (for
example, the shareholders of an LLC Also, in case of insolvency procedures, the
holding ¼ of the share capital may request following aspects should be taken into
the call of the GMS). consideration:

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• Once the insolvency procedure is in certain cases an asset deal involves

opened, a special administrator should certain execution formalities (for example,
be appointed by the GMS; after the in a real estate purchase the agreement
insolvency procedure is opened and must be notarised by the parties and the
the special administrator is appointed, appropriate registration must be performed
the GMS suspends its activity and in the land book register).
can be later convened by the judicial
The share deal involves the direct
administrator, in the express cases
acquisition of the target together with all
provided by the Romanian insolvency
its assets and liabilities, while the asset
law.
deal involves entering into contractual
• During the insolvency procedure, until arrangements for the acquisition of the
a reorganization plan is approved, the assets. As such, the parties can usually
shares of the companies listed on the select which assets are to be bought and
stock exchange are suspended from liabilities do not usually automatically
trading. transfer to the buyer.
• There are extensive debates regarding The asset deals may involve further
the possibility to make transactions formalities which hindrance the timely
with the shares during the insolvency completion of the deal, such as formal
procedure. approval from contractual partners for the
transfer of key agreements and the transfer
• A reorganization plan can provide
of intangible assets/immovable property.
specific restructuring measures such as
changes in the articles of incorporation, Depending on the selected structure,
changes in the structure of the capital the taxation regime may be substantially
by way of increasing it through co- different.
opting new shareholders or conversion
14. What are the approvals and
of debt into shares, if the legal
consents typically required (e.g.,
conditions are met.
corporate, regulatory, sector
E. Acquisition based and third-party approvals)
for private acquisitions in your
12. Which methods are commonly used
jurisdiction?
to acquire a company, e.g., share
transfer, asset transfer, etc.? Depending on the type of deal and the
provisions of the articles of association, a
The most commonly used methods to
corporate approval such as board approval
acquire a company are, indeed, share
or GMS approval is required. In certain
transfers and asset transfer deals. A special
cases, the approval or notification of a third
type of assets transfer is the business
party (such as creditors with security over
transfer structure, whereby a stand-alone
the asset, banks) or regulator (such as the
business is transferred as a going concern,
Competition Council) may be required.
13. What are the advantages and
15. What are the regulatory
disadvantages of a share purchase
competition law requirements
as opposed to other methods?
applicable to private acquisitions in
The share deal is typically easier to your jurisdiction?
implement than the asset deal.
In Romania, M&A transactions might
In a share deal, there is no mandatory require prior clearance from (a) the
form for the transfer agreement, whereas Romanian Competition Council (the “RCC”)

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Global Mergers & Acquisitions Guide 2025

under the merger control regime and/or • The target (company and/or business)
(b) the Committee for the Examination of and all companies/businesses
Foreign Direct Investments (the “CEFDI”) controlled by the target (if any) and
under the mechanism for screening falling within the transaction scope.
transactions with the aim to ensure the
Transactions requiring the prior RCC
protection of state security.
clearance may not be implemented in
a. Prior merger control of the RCC absence of the mandatory clearance
decision (standstill obligation). Conversely,
A M&A transaction falls within the
the RCC would impose administrative fines
jurisdiction of the RCC if the following of up to 10% of the turnover achieved in
quantitative turnover thresholds are the year preceding the issuance of the
cumulatively met by reference to the sanctioning decision by the party having
financial year preceding the transaction: the notification obligation (normally, the
i. The combined worldwide turnover of party gaining control post/transaction) for
the parties concerned exceeds EUR implementing the transaction in breach of
10,000,000 (ten million euro); and the standstill principle.
For transactions where the quantitative
ii. At least two of the parties concerned
thresholds reach those triggering the
have a turnover in Romania exceeding
prior review competence of the European
EUR 4,000,000 (four million euro).
Commission, based on the one-stop-shop
To be mentioned that the principles of principle, the Commission would remove
computing the turnover thresholds are the competence of local competition
quite complex and should be assessed on a authorities, inclusively, of the RCC.
case-by-case basis. As a matter of principle, Finally, mention should be made that the
the following main rules (non-exhaustive EU principles on merger control apply to a
list) apply: significant extent in Romania, as well.
i. The applicable EUR/RON exchange rate b. Foreign direct investment screening
for the computation of the turnover
thresholds is that communicated by the Transactions (1) qualified as (i) foreign
direct and EU investments and (ii) new
National Bank of Romania for the last
investments (jointly, FDIs) which (2) have
business day of the year preceding the
as scope certain strategic areas of activity
transaction.
are subject to mandatory screening and
ii. The Romanian turnover is represented authorization in Romania by the CEFDI
by sales of products and/or services to before implementation (the procedure
Romanian customers irrespective of the is handled through the RCC performing
nationality of the seller (a Romanian secretarial duties for the CEFDI). Conversely,
based company or a company an administrative fine of up to 10% in
headquartered outside Romania). the year preceding the issuance of the
sanctioning decision would be applied by
iii. The parties concerned are usually the relevant authority for breach of the
represented by: standstill obligation.
• Each party holding control in the target In theory, as an exception, FDIs not
post-transaction together with each of exceeding a value EUR 2,000,000 would
their respective groups; not be subject to screening unless such,

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by nature or potential effects, by reference A foreign direct investor is defined as 1.

to the criteria set out in Article 4 of the EU natural person, who is not a citizen of a
FDI Regulation may have an impact on or Member State of the European Union,
present a risk to public security or public who has made or intends to make a direct
order. Hence, such transaction would foreign investment in Romania; 2. a legal
require a self-assessment that could not person, whose registered office is not
be performed by the parties, rendering located in a Member State of the European
the threshold ineffective. Also, there is Union, which has made or intends to make
no clarity on the manner in which the a foreign direct investment in Romania;
3. a legal person whose registered office
threshold should be evaluated as norms
is in a Member State of the European
elaborating upon the methodology for
Union, which has made or intends to make
computing the contemplated threshold are
a foreign direct investment in Romania,
pending.
in which control is exercised directly or
FDIs currently include: indirectly by: a natural person who is not a
national of a Member State of the European
i. Foreign direct investments and EU Union, a legal person whose registered
investments: office is not in a Member State of the
Foreign direct investments are: European Union or another legal entity,
without legal personality, organized under
• investments of any nature carried out the laws of a State which is not a Member
by a foreign investor (see definition State of the European Union; 4. a trustee
below) with the aim of establishing or of an entity without legal personality
maintaining lasting and direct links which has made or intends to make a
between the foreign investor and direct foreign investment in Romania or a
the entrepreneur or the enterprise to person in a similar position, if this person
whom these funds are made available is not a citizen of the European Union, in
for carrying out an economic activity the case of a natural person, or if this entity
in Romania including investments that does not have its registered office in a
allow an effective participation in the Member State of the European Union, in
management or control of an enterprise the case of a legal person, or if this entity
that performs economic activities.. has been incorporated under the laws of
a State which is not a Member State of the
• A foreign direct investment is also European Union;
carried out when there is a change in
• EU investments are defined as
the ownership structure of a foreign
investment of any kind carried out
legal person investor, if this change
by an investor from the European
with regard to the legal person makes Union (see definition below) with the
it possible to exercise control, directly aim of establishing or maintaining
or indirectly, by a: 1. natural person lasting and direct links between the
who is not a citizen of a member state investor from the European Union
of the European Union; 2. legal person and the entrepreneur or enterprise to
whose registered office is not in a whom these funds are intended for
member state of the European Union; carrying out an economic activity in
or 3. another legal entity, without legal Romania, including investments that
personality, organized under the laws allow effective participation in the
of a state that is not a member of the management or control of an enterprise
European Union. carrying out an economic activity.

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• An EU investor is defined as 1. natural change in the overall production

person, who is a citizen of a member process of an existing enterprise. The
state of the European Union, who made setting up of a new enterprise is the
or intends to make an investment creation of a new site for carrying
in Romania; 2. legal person, whose out the activity for which funding is
registered office is in a member state of requested, technologically independent
the European Union, which has made of other existing establishments.
or intends to make an investment Expansion of the capacity of an existing
in Romania; 3. legal entity, whose enterprise is an increase in production
registered office is in a member state of capacity at the existing site due to an
the European Union, which has made unfulfilled demand. Diversification of
or intends to make an investment in the production of an existing enterprise
Romania, in which control is directly or is the production of products or
indirectly exercised by: a natural person services not previously produced in
who is a citizen of a member state of that establishment. In the case of new
the European Union, a legal person investments, there is no difference
whose registered office is in a member made between EU or non-EU investors.
state of the European Union or another
legal entity, without legal personality, The relevant sectors include: (i) security
organized under the laws of a state of citizens and communities; (ii) security
that is a member of the European of borders; (iii) security of energy; (iv)
Union; 4. fiduciary administrator of security of transportation; (v) security of
an entity without legal personality vital resource supply systems; (vi) security
that has made or intends to make an of critical infrastructure; (vii) security of IT
investment in Romania or a person in (information systems) and communications
a similar position, if he is a citizen of systems; (viii) security of financial, fiscal,
the European Union, in the case of a banking and insurance activities; (ix)
natural person, or if he is based social in security of manufacturing and traffic
a member state of the European Union, of arms, ammunition, explosives and
in the case of a legal entity, or if this toxic substances; (x) industrial security;
entity was established under the laws (xi) protection against disasters; (xii)
of a state that is a member state of the the protection of agriculture and the
European Union. environment; and (xiii) the protection of
• To be noted that EU investors include privatizations of state owned companies or
also Romanian investors in the the management of such.
opinion of the authority as there is no 16. Are there any specific rules
discrimination between EU investors, applicable for acquisition of public
including national individuals/entities. companies in your jurisdiction?
ii. New investments are defined as: Yes, acquisitions of listed companies are
• Initial investment in tangible and governed in Romania by several laws and
intangible assets related to the setting- regulations, such as Law No. 24/2017
up of a new enterprise, the expansion concerning the issuers of financial
of the capacity of an existing enterprise, instruments and market operations, Law
the diversification of an enterprise’s No. 126/2018 on financial instruments
production into products not previously markets, Law No. 297/2004 on the capital
manufactured, or a fundamental market.

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Public M&A deals are usually structured Also, there are several other special rules
as public takeover bids (voluntary or related to matters such as disclosure
mandatory) and are significantly more requirements and pricing mechanism,
complex than private M&A deals. which should be observed.
A voluntary takeover bid is a public 17. Is there a requirement to disclose
purchase offer, addressed to all holders of a deal, for instance to regulatory
securities, for all their holdings, launched by authorities? Is it possible to keep a
a person who is not so obliged, with a view deal confidential?
to acquiring more than 33% of the voting
In principle, there are no requirements
rights in the public company. under the Romanian law to disclose a deal.
In case of a voluntary takeover bid, However, certain transactions may also
the bidder must obtain approval from be governed by specific legislation, which
the Romanian Financial Supervision could regulate the obligation to notify
Authority (the “FSA”) for the preliminary the authorities of the deal, such as merger
announcement regarding the offer. After control legislation.
the FSA issues its approval, the bidder shall Save for the scenarios above, it is possible
publish the preliminary announcement to keep a deal confidential and usually
in newspapers and send it to the target the parties conclude a non-disclosure
company and to the relevant stock agreement before entering into
exchange market. Within 5 days, the board negotiations.
of directors of the target shall send to the
FSA, the bidder and the stock exchange 18. Can sellers be restricted from
market a document highlighting its input shopping around during a
on the offer which must contain certain negotiation process? Is it possible
specific information as provided by the law. to include break fee or other
penalty clauses in acquisition
Within 30 days of publication of the documents to procure deal
preliminary announcement, the bidder exclusivity?
submits to the FSA the documents for the
approval of the offer and the FSA issues Yes, the seller and potential buyer may
its decision regarding the offer within 10 conclude an exclusivity agreement
business days. After the FSA approves the whereby the potential buyer is granted
offer, the bidder may publish the offer exclusivity to negotiate with the seller
announcement in the conditions set out in for a specific period of time. It is possible
the law. to include in the exclusivity agreement a
penalty in case of breach of exclusivity.
A public mandatory takeover bid is an
offer made by a person who holds more 19. What are the conditions precedent
in a typical acquisition document?
than 33% of the voting rights of a public
Is it common to have conditions to
company and must therefore launch a
closing such as no material adverse
public offering to all existing holders
change?
of securities. In principle, the same
mechanism described above applies to There are several conditions precedent
mandatory takeover bids. Mandatory which may be included in typical
takeovers should be initiated within two acquisition documents, such as: (i) the
months of exceeding the 33% shareholding approval of the GMS for the sale of shares;
threshold. (ii) the approval of or notification to a

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regulator (e.g., merger control clearance); way of bank debt, provided by local or
(iii) any relevant third-party notification or international credit institutions to the
consents. It is common to have conditions buyers, in the form of secured acquisition
to closing such as no material adverse loans or credit lines; (ii) financing through
change. bonds issued to private or public investors;
(iii) financing provided by private investors
20. What are the typical warranties
or investment funds, on a secured or
and limitations in acquisition
unsecured basis (either as shareholder
documents? Is it common to obtain
loans or as third party loans, subject to
warranty insurance?
professional lending restrictions); and more
In a share deal, the warranties usually recently (iv) equity crowdfunding.
relate to seller’s ownership title to the
The Companies Law expressly prohibits
shares, capacity to transfer the shares free
a JSC from advancing funds, extending
of encumbrances, matters relating to the
business of the target company, such as loans or providing security for the purpose
its legal existence, lack of debt, assets, of the acquisition of its shares by a third
employees, etc. In an asset deal, warranties party. The interdiction is however not
typically relate to the seller’s ownership title applicable to (i) transactions performed
to the asset, and disputes and litigations by credit institutions and other financial
concerning the asset. Limitations on institutions in their ordinary course of
warranties typically include limitations on business, and (ii) transactions intended
damage, overall cap, time limits. for the acquisition of shares by or for the
company’s employees, provided in both
Still, it is not common to obtain warranty cases that such transactions do not cause
insurance. the company’s net asset worth to fall below
21. Is there a requirement to set a the threshold of the cumulated value of the
minimum pricing for shares of a subscribed share capital and the reserves
target company in an acquisition? that cannot be distributed according to the
law or under the articles of association.
The parties may set the price of shares
of a target company. However, the price Absent an express interdiction, in practice,
of the shares should not be significantly it has been considered that an LLC may
lower than their market value, as the sale advance funds, extend loans, or provide
purchase agreement might be annullable. security for the purpose of the acquisition
of its shares by a third party.
22. What types of acquisition financing
are available for potential buyers in 23. What are the formalities and
your jurisdiction? Can a company procedures for share transfers and
provide financial assistance to a how is a share transfer perfected?
potential buyer of shares in the The transfer of shares in JSCs is free and
target company? in case of shares issued in dematerialized
There are no specific regulatory restrictions form is performed by registration in the
for acquisition financing structures, other shareholders register, which shall be signed
than the financial assistance restrictions by the assignor and the assignee. In case of
applicable to JSC (as detailed below). On shares issued in material form, the transfer
this basis, the most common acquisition shall be performed by registration in the
structures used on the Romanian market shareholders register and in the share
are (i) LBO structures and other forms certificate, signed by the assignor and the
of leveraged acquisitions, including by assignee. For JSCs, the registration of the

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transfer of shares in the trade registry is not In principle, there are no specific formalities
mandatory. for the execution of acquisition documents.
The acquisition documents may be signed
In LLCs, shares may be freely transferred with the simple wet-ink signature of the
among shareholders. The transfer to parties. The parties may sign the acquisition
persons outside the company is only documents in counterparts. The law may
allowed if approved by the shareholders provide for special formalities in certain
representing at least ¾ of the registered cases, for example, a sale agreement over
share capital, however, the articles of an immovable asset must be signed by the
association may provide otherwise. In case parties in front of a notary public.
of LLCs, the transfer of shares becomes
opposable towards third parties as from its Pursuant to Law No. 455/2001 on electronic
registration with the Trade Registry. signatures, a document to which an
extended electronic signature has been
24. Are there any incentives (such incorporated, attached, or logically
as tax exemptions) available for associated, based on a qualified certificate
acquisitions in your jurisdiction? which has not been suspended or revoked
at the time and which is generated by
To our knowledge, there are no state aid
means of a secure electronic signature
incentives specific for M&A transactions creation device, is assimilated, as regards
implemented in Romania. There may its conditions and effects, to a document
be various sectors that could benefit of signed with wet-ink. As such, it is possible
support for development of investments, to digitally sign the documents, save for
but such should be assessed on a case-by- the cases when the document must be
case basis. concluded in a specific form.
F. Enforceability G. Trends and Projections
25. Can acquisition documents be 29. What are the main current trends in
executed in a foreign language? M&A in your jurisdiction?
Yes, the acquisition documents can be Although the Romanian M&A market
executed in a foreign language. recorded a slight decrease last year in the
overall number of transactions. The market
26. Can acquisition documents be
maintained its value. Real estate has gained
governed by a foreign law?
the title of the most active sector by deal
Yes, subject to mandatory provisions of count replacing technology from the top
Romanian law. position. The overall numbers reflect a
continued interest of Romanian investors to
27. Are arbitration clauses legally execute cross-border transactions.
permissible or generally included in
acquisition documents? 30. Are any significant development
or change expected in the near
Yes, arbitration clauses are lawful and may future in relation to M&A in your
be included in the acquisition documents. It jurisdiction?
is quite common for acquisition documents
to include arbitration clauses. One can expect an increase in the number
of transactions coming to the Romanian
28. Are there any specific formalities M&A market this year. The energy and
for the execution of acquisition technology sectors are expected to be
documents? Is it possible to amongst the most dynamic sectors in the
remotely/digitally sign documents? market.

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SENEGAL
GENI & KEBE

Boubacar Diakité Cécilia G Ahouadi Ruth L Balounga

Senior Associate Junior Associate Junior Associate
[email protected] [email protected] [email protected]

A. General 2. What are the most common types

of corporate entities (e.g., joint
1. What is the main legal framework stock companies, limited liability
applicable to companies in your companies, etc.) used in your
jurisdiction? jurisdiction? What are the main
In Senegal, companies are mainly governed differences between them (including
by the following: but not limited to with regard to the
shareholders’ liability)?
- Organization for the Harmonization
of Business Law in Africa (“OHADA”) The common types of corporate entities
Company Act (“The Company Act”), used in Senegal are Joint stock companies
(“JSC”) and Limited liability companies
- OHADA Uniform Act on General
(“LLC”).
Commercial Law,
- OHADA Insolvency Act, The main differences between them are as
follows:
- Penal Code of Senegal,
- Tax Code,
- Finance Act.

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Joint stock companies Limited Liability Companies

Minimum Share - XOF 10,000,000 if the The law does not provide for a
capital Company does not launch minimum share capital
public offering.
But the usual LLC share capital
- XOF 100,000,000 if the is XOF 1,000,000
Company launches public
offering
Shareholders’ Liable for the debts of the Liable for the debts of the
liability company only up to the company only up to the
number of their contributions number of their contributions
and whose rights are and whose rights are
represented by shares. represented by shares.
Minimum share XOF 10,000,000 circa Euro
paid capital 15,244. At least ¼ of the capital
XOF 100,000 circa Euro 152
must be released at the time of
the incorporation.
Management Board of Directors, General General Manager
Director
Auditors Mandatory Not mandatory
*
The appointment of at least
one auditor is required if the
company meets at least two
of the following conditions:
if the total balance sheet
exceeds XOF 125,000,000, if the
annual turnover exceeds XOF
250,000,000.

B. Foreign Investment 4. Are there any foreign exchange

restrictions or conditions applicable
3. Are there any restrictions on foreign to companies such as restrictions to
investors incorporating or acquiring foreign currency shareholder loans?
the shares of a company in your
There are no specific restrictions for
jurisdiction?
currency issues, especially for currency
Generally, incorporating or acquiring the issues regarding shareholder loans.
shares of a local company by foreigners is
As for foreign exchanges in general, the
free of restrictions.
Change legislation provides that foreign
However, in some specific sectors such as exchange transactions, capital flows
oil & gas and mining, the law requires a (issuance of transfers and/or receipt
minimum of local ownership. of funds), and settlements of any kind

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between a West African Economic and 5. Are there any specific considerations
Monetary Union (“WAEMU”) Member State for employment of foreign
and a foreign country or between a resident employees in companies
(individuals who have their main center of incorporated in your jurisdiction?
interest in a WAEMU Member State, public It is required for the expatriate worker to
servants assigned abroad, and foreign hold a work permit. However, nationals
legal entities established in a WAEMU of Economic Community of West African
member state) and a non-resident may States (ECOWAS) member countries are
only be carried out through the Central exempt from this procedure.
Bank of West African States, national post
The expatriate contract must necessarily
office, authorized intermediary (any credit be a fixed-term contract and must be
institution (including banks) established on submitted to the Director General of Labor
the territory of a WAEMU Member State and and Social Security for approval prior to its
having received the status of an authorized execution.
intermediary, by approval of the Minister
in charge of Finance) or an authorized C. Corporate Governance
manual exchange agent (Article 2 of Rule 6. What are the standard management
N°09/2010/CM UEMOA/ relating to the structures (e.g., general assembly,
external financial relations of the member board of directors, etc.) in a corporate
states of the WAEMU). entity governed in your jurisdiction
and the key liability issues relating
However, such legislation also provides to these (e.g., liability of the board
that payments to foreign countries in members and managers)?
respect of capital transactions, other than
the following capital operations, must be There is no standard management structure
under our jurisdiction, the Corporate
the subject of an application for foreign
Governance depends on the type of
exchange authorization, submitted to the
corporate entities.
Minister in charge of Finance.
The types of management of a JSC are:
- the transfer of amounts required for
the contractual amortization of debts - Board of Directors with a Chairman and
and the repayment of short-term loans a General Manager
granted to finance commercial and - Board of Directors with a CEO and a
industrial operations commercial and Deputy General Manager
industrial operations;
- General Administrator with or without
- the transfer of income from the a deputy
liquidation of assets or the sale of
LLCs are managed by one or more
foreign securities by non-residents;
Managers.
- settlements required for either foreign
exchange derivative transactions or
commodity derivative transactions
commodities (Article 7 of Rule
N°09/2010/CM UEMOA/ relating to
the external financial relations of the
member states of the WAEMU).

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490
MANAGEMENT SHAREHOLDERS

Joint stock CIVIL LIABILITIES CIVIL LIABILITIES

companies
Any damage suffered by a third party as a result of the cancellation of the constitutive - Any damage caused either
General Assembly. by the failure to mention a
- Any damage caused either by the failure to mention a mandatory provision mandatory provision in the
in the articles or by the omission or irregular performance of a formality articles or by the omission
prescribed for the incorporation of the company. or irregular performance
PENAL LIABILITIES of a formality prescribed
for the incorporation of the
Issuance of shares before registration or at any time when registration is obtained by company.
Global Mergers & Acquisitions Guide 2025

fraud, or the company is irregularly incorporated.

Distribution of fictitious dividends. PENAL LIABILITIES
Publication or presentation of financial statements that do not give a true and fair view
of the transactions, financial position, and assets and liabilities. - Obstruction of
Abuse of Company assets. participation in an
Failure to file financial statements with Trade Register within one month of approval. assembly
Obstruction of participation in an assembly.
Offence of issuing shares or cutting off shares.
Failure to draw up the minutes of general meetings in the form required by the Uniform
Act.
- Failure to appoint auditors or to convene them to the AGMs.
Obstruction to the exercise of the functions of the auditors.
Issue of securities without prior publicity.
Submission to the notary or the depositary of a list of shareholders or subscription and
payment forms mentioning fictitious subscriptions or payments of funds which have not
been definitively placed at the disposal of the company.
Failure to convene the meeting within 4 months or to file and publish the dissolution of
the company, when the equity falls below half of the capital.
 MANAGEMENT SHAREHOLDERS

CIVIL LIABILITIES CIVIL LIABILITIES

- Any infringements of the legislative or regulatory provisions applicable to limited
liability companies, breaches of the articles of association or misconduct in their
management.
PENAL LIABILITIES
- Distribution of fictitious dividends.
- Publication or presentation of financial statements that do not give a true and fair
view of the transactions, financial position, and assets and liabilities.
- Failure to file financial statements with Trade Register within one month of approval.
- Obstruction of participation in an assembly.
- Failure to draw up the minutes of general meetings in the form required by the
Uniform Act.
- Failure to convene the meeting within 4 months or to file and publish the dissolution
of the company when the equity falls below half of the capital.
Any damage caused either
by the failure to mention a
mandatory provision in the
articles or by the omission or
Limited irregular performance of a
Liability formality prescribed for the
Companies incorporation of the company.
PENAL LIABILITIES

- Obstruction of
participation in an
assembly

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7. What are the audit requirements in voting privileges for the appointment
corporate entities? of board members, especially by they
can inter alia grant double voting rights,
Public Limited Companies that do not make
in accordance with Article 778-1 of the
public offerings are required to appoint at
Company Act.
least 2 (two) auditors (one auditor and an
alternate auditor). 9. Are there any specific statutory rights
available to minority shareholders
For those making public offerings, they
available in your jurisdiction?
should appoint at least 4 (four) auditors
(2 (two) auditors and 2 (two) alternate The Company grant to minority
auditors). shareholders the following rights:
When auditors are appointed in the Articles - The right of information: They must
of Association or by the constitutive general be informed about the life course of
meeting the duration of their mandate shall the company and be provided with
be 2 (two) financial years. corporate documents such as minutes,
When auditors are appointed by the regulated agreements concluded by
ordinary general meeting, the duration is 6 the company, financial statements, and
(six) financial years. any other document provided for by
the articles of association;
For LLCs, only those that meet 2(two) of the
3 (three) following conditions are required - The right to vote: They must
to appoint an auditor at the end of their participate in General Meetings and
fiscal year: vote;

- Balance sheet total of more than 125 - The right to alert: As per Article 157
million CFA Franq; of the Company Act, they are allowed
to trigger an alert procedure by asking
- Annual turnover of more than 250 written questions to the company’s
million CFA Franq; directors about any fact that could
- Permanent workforce of more than 50 jeopardize the company’s continuity.
people. The violation of these minority
Auditors may be appointed and or shareholders’ rights can give rise to a
replaced during a general assembly, with litigation action for abuse of the majority.
the votes of shareholders holding shares 10. Is it possible to impose restrictions
corresponding to more than half of the on share transfers under the
share capital. corporate documents (e.g., articles
D. Shareholder Rights of association or its equivalent in
your jurisdiction) of a company
8. What are the privileges that can incorporated in your jurisdiction?
be granted to shareholders? In
particular, is it possible to grant Yes, Article 319 of the Company Act
voting privileges to shareholders for provides that the Article of Association may
appointment of board members? freely organize the terms of shares and
the transfer conditions either between the
The Company Act provides for the creation
shareholders or to the third parties.
of preferential shares, with special rights
of any kind, on a temporary or permanent Also, pursuant to Article 2-1 of the
basis. Such preferential shares do not grant Company Act, the shareholders of a

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Company may enter into agreements provided by the articles of association or

aside from the Article of Association i.e., the shareholders’ agreements i.e., approval
shareholders agreement, to organize access or pre-emption clauses.
to the share capital.
14. What are the approvals and
11. Are there any specific concerns or consents typically required (e.g.,
other considerations regarding the corporate, regulatory, sector-
composition, technical bankruptcy, based and third-party approvals)
and other insolvency cases in your for private acquisitions in your
jurisdiction? jurisdiction?
Under OHADA law, pursuant to Article
Corporate perspective
57 of the OHADA Insolvency Act, when
a company in bankruptcy is subject to a - Capital companies: The shares are in
winding-up or liquidation of assets, it may principle freely transferable. However,
only transfer its shares, equity securities, the articles of association or other
or securities giving access to the capital corporate documents of the company
with the authorization of the bankruptcy may provide for limitations, under
judge and under the conditions fixed by Articles 318 and 764 of the Company
the bankruptcy judge. Any transfer made in Act.
violation of such provisions incurs nullity.
- Partnerships: Transfer requires the
E. Acquisition unanimous consent of the shareholders
12. Which methods are commonly used in accordance with Articles 274 and 296
to acquire a company, e.g., share of the Company Act.
transfer, asset transfer, etc.?
Regulatory or sector-based approvals: In
The common methods to acquire a principle, share transfer does not require
company in Senegal are share transfer and approvals. However, certain sector rules
mergers. such as insurance and mining provide for
13. What are the advantages and authorization by the relevant ministries.
disadvantages of a share purchase 15. What are the regulatory
as opposed to other methods? competition law requirements
Compared to other acquisition methods, applicable to private acquisitions in
such as asset purchase and merger, share your jurisdiction?
purchase is a straightforward process that As per Article 4.1 of Rule No. 2/2002/
involves the transfer of ownership from CM/WAEMU relating to anti-competitive
one shareholder to another, thus a less- practices within the WAEMU, in the WAEMU
time consuming and cost-effective way of zone, mergers that create or strengthen
acquiring, limiting the buyer’s involvement a dominant position, held by one or
in the company’s liabilities.
more firms, as a result of which effective
However, in contrast to mergers or sales of competition is significantly impeded within
assets which take place after the decision of the Common Market, are prohibited.
the control bodies of the target companies,
This includes, in particular
the transfer of shares only comes from the
will of the owner whose right to transfer the - The merger between two or more
shares can be restricted by the restrictions previously independent undertakings;

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- Any operation by which, one or more a public majority shareholding thus it is

persons (legal entities or individuals), governed by the provisions of the Company
who already control one or more Act as common private companies.
companies, acquire direct or indirect
control of all or part of, whether by way However, each public company is created
of equity participation or purchase of by a law which may provide for specific
assets, contract or otherwise, as per rules regarding the ownership of the
Article 4.3 of Rule No. 2/2002/CM/ company to be incorporated.
WAEMU relating to anti-competitive
17. Is there a requirement to disclose
practices within the WAEMU.
a deal, for instance to regulatory
16. Are there any specific rules authorities? Is it possible to keep a
applicable for acquisition of public deal confidential?
companies in your jurisdiction?
In general, it is possible to keep a
Under Senegalese law, there are two types transaction confidential. However, in
of public companies, which are national sectors where the law requires a declaration
companies and companies with a public or authorization of acquisition operations, it
majority shareholding. will be required to disclose the deal.
National companies are private capital
Also, pursuant to Article 57 of the Finance
companies where the capital is fully
Act of July 05, 2021 / Article 633.1 of the Tax
subscribed by the State or other public
Code, it is mandatory for all the companies
law entities. Pursuant to Article 9 of Act
No. 2022-08 of April 19, 2022, relating to in our jurisdiction to file an Ultimate
the para-public sector, the management Beneficial Owner (UBO) Register. Such
of the State’s portfolio and the control of register must be updated in case of a share
legal entities governed by private law and transfer. Such requirement may limit the
supported by the public authorities, the confidentiality of a deal.
private sector does not have access to the
18. Can sellers be restricted from
ownership of these companies.
shopping around during a
As for the acquisition of Companies negotiation process? Is it possible
with a public majority shareholding, the to include break fee or other
law provides especially that they must penalty clauses in acquisition
have more than 50% of direct or indirect documents to procure deal
participation of the State or other public exclusivity?
entities. The minimum participation of
private persons is not explicitly provided Nothing prevents parties to agree on such
but we can assume that the private restrictions or break fees. They can freely
shareholding cannot exceed 49%, in enter into an agreement that procures the
accordance with Article 10 of Act No. exclusivity of the deal to one or another
2022-08 of April 19, 2022, relating to the and provides for penalties in case of a
para-public sector, the management of breach.
the State’s portfolio and the control of 19. What are the conditions precedent
legal entities governed by private law and
in a typical acquisition document?
supported by the public authorities.
Is it common to have conditions to
There are no specific rules relating to the closing such as no material adverse
process of acquisition of Companies with change?

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In general, the condition precedent is the It is effective with regard to the company
satisfaction of the Due Diligence made on when one of the following formalities are
the target company. completed
20. What are the typical warranties - Notice of the transfer to the company
and limitations in acquisition by a bailiff or by any means allowing
documents? Is it common to obtain the recipient to acknowledge receipt;
warranty insurance?
- Approval of the transfer by the
General protection mechanisms in company in a notarized document;
acquisition documents are:
- Filling of an original copy of the transfer
- Indemnity clauses in the event of
deed at the registered office in return
default after closing;
for a certificate of such deposit issued
- Insurance to cover risks; by the manager.
- The buyer depositing the purchase
price in an escrow account for a certain As per Articles 275, 297, 317, 763-1 of the
time to ensure a proper closing; Company Act, a share transfer is effective
with regard to third parties when one of
- Termination clause in the acquisition
document, in the event of default after the above formalities is completed and the
the closing. Articles of Association have been amended
and published in the Trade Register.
However, the parties may freely agree on
other warranties as the above list is not 24. Are there any incentives (such
exhaustive. as tax exemptions) available for
acquisitions in your jurisdiction?
21. Is there a requirement to set a
minimum pricing for shares of a Capital gains (except those realized on
target company in an acquisition? goods) resulting from the allocation of
shares or shares following the merger of
The Company Act provides for minimum
pricing for shares in certain companies such JSCs and LLCs are exempt from corporate
as LLCs. income tax, in accordance with Article 20 of
the Tax Code.
22. What types of acquisition financing
are available for potential buyers in F. Enforceability
your jurisdiction? Can a company 25. Can acquisition documents be
provide financial assistance to a
executed in a foreign language?
potential buyer of shares in the
target company? Acquisition documents cannot be executed
in a foreign language. In practice, drafts
Potential buyers looking to acquire a
company can typically obtain acquisition in foreign languages are translated by a
financing through a combination of debt certified translator for their execution.
and equity financing. 26. Can acquisition documents be
23. What are the formalities and governed by a foreign law?
procedures for share transfers and In principle, acquisition documents that are
how is a share transfer perfected? to be executed and registered in Senegal
The transfer of shares must be recorded in are governed by OHADA Law and the local
writing. tax legislation.

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27. Are arbitration clauses legally G. Trends and Projections

permissible or generally included in
acquisition documents? 29. What are the main current trends in
M&A in your jurisdiction?
Yes, arbitration clauses are permissible and
often included in acquisition documents. Based on our experience as well as insight
into our clients’ current deals, mergers tend
28. Are there any specific formalities
to slow. As for straightforward acquisitions,
for the execution of acquisition
they are more commonly performed in the
documents? Is it possible to
mining and energy sectors.
remotely/digitally sign documents?
30. Are any significant development
Here are the key formalities that must be
done for the execution of the acquisition: or change expected in the near
future in relation to M&A in your
- Registration of the share transfer jurisdiction?
agreement to the Tax Authorities;
We are not aware of any such intentions.
- Notification of the transfer of shares to
the target company;
- Mention the share transfer in the
company’s register of registered shares
if any.
Yes, it is possible to digitally sign
documents under our legislation.

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SERBIA
VP LAW FIRM

Dejan Plamenac Igor Joksovic Nikolina Dubroja

Partner Attorney at Law Attorney at Law
[email protected] [email protected] [email protected]

A. General
1. What is the main legal framework Limited liability company:
applicable to companies in your
- Minimum share capital amounts to
jurisdiction?
RSD 100 (ca. EUR 1);
The main legal framework is Law on
Companies, but the relevant regulations - Less complex legal form;
are also Law on Takeovers of Joint Stock - Simpler incorporation procedure;
Companies, Competition Law and Law on
Capital Market. - Shares in LLC are not securities and
financial instruments
2. What are the most common types
of corporate entities (e.g., joint Joint stock companies:
stock companies, limited liability
companies, etc.) used in your - Minimum share capital amounts to
jurisdiction? What are the main RSD 3,000,000 (ca. EUR 25,000)
differences between them (including - More complex legal form;
but not limited to with regard to the
shareholders’ liability)? - More complex incorporation
procedure;
The most common type of corporate entity
is limited liability company (“LLC”), while - Shares in joint stock companies are
the second place belongs to joint stock securities and financial instruments;
companies. Regarding the limitation of
liability, similar rules are applicable on both - In some situations, represents a
corporate entities. However, please find mandatory legal form (e.g., in case of
below some main differences: banks).

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B. Foreign Investment When it comes to liability issues, the

main rule is that the company itself is
3. Are there any restrictions on foreign responsible for all obligations while the
investors incorporating or acquiring company’s asset is separate from the
the shares of a company in your shareholders’ assets. However, the Law on
jurisdiction? Companies prescribes exception in case
No. Every individual and legal entity can of shareholders and legal representatives
incorporate a company and/or acquire who abuse the rule of limited liability.
shares in other companies in Serbia. In that situation, the shareholder/legal
representative will be responsible for the
4. Are there any foreign exchange
obligations of the company with all of his/
restrictions or conditions applicable
her personal assets.
to companies such as restrictions to
foreign currency shareholder loans? 7. What are the audit requirements in
No. corporate entities?

5. Are there any specific considerations Audit of financial statements is a

for employment of foreign verification process of financial statements,
employees in companies as well as the data and methods used in the
incorporated in your jurisdiction? preparation of financial statements. In this
way, an independent professional opinion
Foreign employees shall obtain residence is given on whether the financial reports
and work permits in order to establish give a true and objective presentation
employment in Serbia. of the financial state and results of the
C. Corporate Governance company’s business. This procedure is
regulated by several acts, but the most
6. What are the standard management important are Audit Law and Accounting
structures (e.g., general assembly, Law.
board of directors, etc.) in a corporate
entity governed in your jurisdiction D. Shareholder Rights
and the key liability issues relating
8. What are the privileges that can
to these (e.g., liability of the board
be granted to shareholders? In
members and managers)?
particular, is it possible to grant
The management of the company may be voting privileges to shareholders for
organized through a one-tier or two-tier appointment of board members?
management system. In case of one-tier
management system, the company’s bodies It is possible to grant some voting
are general meetings and 1 (one) or several privileges to shareholders, along with
directors, i.e., a board of directors. In two- other rights such as right to pay dividends,
tier management system, management right to participate in distribution of the
structure presents general meeting, 1 liquidation surplus or bankruptcy estate,
(one) or several executive directors, i.e., the pre-emption right to acquire common
executive board and supervisory board. stocks, etc.
In most cases, the management of the 9. Are there any specific statutory rights
company is organized through a one-tier available to minority shareholders
system, but in some situations, the law
available in your jurisdiction?
prescribes two-tier management system
as mandatory (e.g., in case of insurance Regardless of the number of shares, all
companies). shareholders are treated in the same

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way under equal circumstances, which is E. Acquisition

also applicable to minority shareholders.
However, in order to protect shareholder 12. Which methods are commonly used
rights, shareholder has the possibility to to acquire a company, e.g., share
submit the following lawsuits to the court: transfer, asset transfer, etc.?

(i) lawsuit to claim compensation for the Share transfer is the most commonly used
damage shareholder possibly sustained method.
due to the violation of special duties by 13. What are the advantages and
persons who have such duties in the disadvantages of a share purchase
company; as opposed to other methods?
(ii) lawsuit to challenge the resolutions of Share purchase is a simpler process and has
the general meeting; a lot of advantages, such as continuation
of contracts with all partners, as well as
(iii) shareholders who own at least 20%
with the employees of the company. On
of shares in the share capital can file
the other hand, this procedure also carries
a lawsuit against the company for the
more risks regarding obligations of the
dissolution of the company;
company. However, this is mitigated with
(iv) a dissenting shareholder can claim adequate warranties and also with different
payment of the difference up to the full types of reports such as a due diligence
value of his/her shares with a lawsuit report.
filed against the company, in the case of 14. What are the approvals and
a share purchase procedure carried out consents typically required (e.g.,
in one of the ways provided for by law; corporate, regulatory, sector
(v) and other rights. based and third-party approvals)
for private acquisitions in your
10. Is it possible to impose restrictions jurisdiction?
on share transfers under the
corporate documents (e.g., articles The most typical approvals are (i) approvals
of association or its equivalent in of the remaining shareholders (in case
your jurisdiction) of a company of disposal of assets of high value), (ii)
incorporated in your jurisdiction? approval from National Bank of Serbia,
in case of share transfer in banks and
Yes, it is possible. In practice, this situation insurance companies and (iii) competition
is usually resolved by Shareholders’ approval from Serbian Competition Agency.
Agreement, contracting tag-along and
drag-along right. 15. What are the regulatory
competition law requirements
11. Are there any specific concerns or applicable to private acquisitions in
other considerations regarding the your jurisdiction?
composition, technical bankruptcy
According to the Competition Law, the
and other insolvency cases in your
obligation to report the concentration to
jurisdiction?
the Serbian Competition Agency arises in
No. the following situations: (i) the combined
global turnover of the parties exceeds
EUR 100 million and at least 1 (one) party’s
Serbian turnover exceeds EUR 10 million

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or (ii) the combined Serbian turnover of 20. What are the typical warranties
the parties exceeds EUR 20 million and at and limitations in acquisition
least 2 (two) parties each have a Serbian documents? Is it common to obtain
turnover of more than EUR 1 million. warranty insurance?
16. Are there any specific rules The typical warranties are warranties on
applicable for acquisition of public ownership of shares, warranties on good
companies in your jurisdiction? standing of the company, warranties
Yes. Specific rule concerns the publication related to the employment, business
of an offer to the company’s shareholders operations of the company etc, while
for the purchase of all remaining voting limitations are most often related to
shares in that company. This obligation the duration of the guarantee and the
exists for a person who acquired 25% or limitation of liability. Obtainment of
more voting shares in that company. In warranty insurance is not common.
accordance with the Law on Takeovers of
21. Is there a requirement to set a
Joint Stock Companies, the publication of
minimum pricing for shares of a
the offer exists in additional cases as well,
target company in an acquisition?
while the Law also prescribes exceptions to
this rule. No.
17. Is there a requirement to disclose 22. What types of acquisition financing
a deal, for instance to regulatory are available for potential buyers in
authorities? Is it possible to keep a your jurisdiction? Can a company
deal confidential? provide financial assistance to a
Yes, this requirement can come from potential buyer of shares in the
authorities such as Tax Administration, target company?
Serbian Competition Agency and Serbian The most standard type of financing is
Business Registration Agency. loans.
18. Can sellers be restricted from 23. What are the formalities and
shopping around during a
procedures for share transfers and
negotiation process? Is it possible
how is a share transfer perfected?
to include break fee or other
penalty clauses in acquisition The share transfer in limited liability
documents to procure deal companies includes the conclusion of the
exclusivity? Share Transfer Agreement and registration
Yes, this restriction can be agreed on of change of ownership structure before
between the parties. Serbian Business Registration Agency. In
the case of public joint-stock companies,
19. What are the conditions precedent the transfer is carried out on the stock
in a typical acquisition document? exchange, with the help of a broker, as
Is it common to have conditions to well as before Serbian Central Securities
closing such as no material adverse Depository and Clearing House. The share
change? transfer procedure in non-public joint-
Conditions to closing depend on certain stock companies is carried out only before
cases and may include the following: paid Central Securities Depository and Clearing
tax obligations, salaries, paid debts to House and also requires the participation of
creditors etc. a broker.

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24. Are there any incentives (such G. Trends and Projections

as tax exemptions) available for
acquisitions in your jurisdiction? 29. What are the main current trends in
M&A in your jurisdiction?
No, as we are familiar with.
There is a lot of M&A activity in Serbia,
F. Enforceability due to the increase in the number of
25. Can acquisition documents be foreign investors who are interested in
executed in a foreign language? doing business in Serbia. According to our
experience, this procedure is most often
The documents must be in Serbian, but a carried out in the IT industry. We emphasize
bilingual form is also allowed. that the stock market is not developed in
26. Can acquisition documents be our country. This is why the largest number
governed by a foreign law? of transactions are carried out in limited
liability companies.
Yes.
30. Are any significant development
27. Are arbitration clauses legally or change expected in the near
permissible or generally included in future in relation to M&A in your
acquisition documents? jurisdiction?
Arbitration clauses are legally permissible We expect an increase in M&A takeovers in
and usually included in acquisition the near future.
documents.
28. Are there any specific formalities
for the execution of acquisition
documents? Is it possible to
remotely/digitally sign documents?
Serbian law allows qualified e-signatures.
However, certain documents which need to
be submitted to the competent authorities
must be notarized (such as Articles of
Association and Share Transfer Agreement).

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SLOVAKIA
EFRIM ROŞCA ASOCIAȚII LAW FIRM

Bruno Štefánik
Partner
bruno.stefanik@
wolftheiss.com

A. General transformations, such as spin-offs or cross-

border changes of legal form, which were
1. What is the main legal framework not available prior to adoption of the
applicable to companies in your Merger Act.
jurisdiction?
2. What are the most common types
Slovakia has a statute-based civil law of corporate entities (e.g., joint
system. The jurisprudence produced
stock companies, limited liability
by the general courts is not binding
companies, etc.) used in your
beyond the parties to that lawsuit, but the
jurisdiction? What are the main
interpretation of the law contained in the
differences between them (including
rulings of the Constitutional Court and the
but not limited to with regard to the
Supreme Court have significant persuasive
shareholders’ liability)?
value in the lower courts. Company law is
codified in statute by Act No. 513/1991 Coll. The most common types of capital-
(the “Commercial Code”). Furthermore, generating corporations used for the
with the transposition of EU Directive pursuit of business in Slovakia are limited
2017/1132 relating to certain aspects of liability companies (spoločnosť s ručením
company law by means of Act No. 309/2023 obmedzeným) (“SRO”) and private
Coll. (the “Merger Act”), mergers and spin- companies limited by shares (akciová
offs have also been codified in Slovak law. spoločnosť) (“AS”). There are also other
The Merger Act has substantially taken types of business entities, including simple
effect on March 1, 2024. joint stock companies, partnerships, limited
The new Merger Act provides for more partnerships and forms of European legal
flexibility in corporate transformations entities such as the societas europaea,
and makes available cross-border However, these are uncommon in practice.

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The SRO is a type of business entity owned capital of EUR 25,000. An AS must form
by between 1 (one) and 50 shareholders. a board of directors (although the board
The company does not issue shares and of directors can be composed of a single
each shareholder owns a share in the chairman) and a supervisory board. The
company’s registered capital, each referred governance body of the AS is its board
to as the “ownership interest”. The minimum of directors, but a single chairman of the
registered capital of an SRO is EUR 5,000 board of directors may also be appointed to
and the minimum ownership interest is EUR oversee the company.
750. The SRO has a rather simple corporate
governance with 1 (one) or more executive While the corporate governance of SROs
directors. There is no requirement to and Ass are substantially similar in their
create a board of directors or supervisory level of complexity, the governance of
board. The legal regulation of the SRO an AS does entail additional complexities
implied in the Commercial Code does not in certain areas, most notably in the
support frameworks such as priority stock area of financing, where restrictions on
or negotiability of ownership interests, financial assistance and the requirement of
although ownership interests can be additional corporate approvals apply.
transferred (subject to certain restrictions) As far as shareholder liability is concerned,
and priority dividends can be agreed while the shareholders of an AS are
contractually in the articles of association
generally not liable for the company’s
and/or in a Shareholders’ Agreement
liabilities, the shareholders of an SRO are
(“SHA”).
liable for the company’s liabilities up to
One specific feature of the rules applicable their unpaid contribution to the company’s
to SROs is the “chaining restriction”. This registered capital.
stems from the Slovak transposition of
On January 1, 2018, a new shareholder
the EU Companies Directives and, at
liability framework came into effect,
present, is somewhat unique within the
allowing the piercing of the “corporate
EU. The rule provides that where an SRO
has a single shareholder which itself is an veil” of a company (including an SRO or
SRO or an equivalent foreign entity (e.g. AS) where a direct or indirect controlling
a Gesellschaft mit beschränkter haftung shareholder has significantly contributed
or another foreign equivalent), then the to the insolvency of that company. In those
latter shareholder must itself have more situations, the controlling shareholder
than 1 (one) shareholder. In practice, this would be liable to the company’s
restriction means that an SRO owned by shareholders up to the value of their
another SRO (or its foreign equivalent) must insolvency claims which could not be paid
have more than 1 (one) shareholder or else from the insolvency estate. However, this
its sole shareholder must have more than framework has not been used in practice
1 (one) shareholder. The consequences since its implementation.
of not complying with this restriction B. Foreign Investment
vary according to circumstances but may
include the mandatory dissolution of the 3. Are there any restrictions on foreign
company or the title to the company being investors incorporating or acquiring
declared void. the shares of a company in your
jurisdiction?
The AS can be owned by an unlimited
number of shareholders and can be In principle, Slovakia is open to foreign
incorporated with a minimum registered investment and there are no specific

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restrictions on foreign investors clearance and for other violations. Financial

incorporating or acquiring shares in a sanctions may be levied up to the value
company. Certain rules apply with respect of the foreign investment itself (i.e.,
to the nationality of the company’s the purchase price), or up to 2% of the
directors, in some cases requiring a director foreign investor’s aggregate net turnover
to have residency in Slovakia. generated in the last accounting period
(the FDI Regime allows the sanctioning
On March 1, 2023, Act No. 497/2022 on
authority to look through the turnovers
the Screening of Foreign Investments (the
of the investors’ parent and subsidiary
“FDI Regime”) took effect, introducing
entities and pick the highest turnover).
a complex framework for the review,
The imposition of a fine will not prevent
assessment and clearance of foreign direct
the Ministry of Economy from ordering the
investment in Slovakia. Slovakia had a
reversal of the transaction.
provisional FDI Regime in place between
2020 and 2022, but it was rather limited In its judgment in Case C-106/22 (Xella
and the new FDI Regime for the first time Magyarország Építőanyagipari Kft.), the
introduced a regime similar to other EU Court of Justice of the European Union
countries. (“CJEU”) has ruled, among others, that
provisions of the Treaty on the Functioning
The FDI Regime applies to non-EU investors
of the European Union (“TFEU”) on
(both natural as well as legal persons)
freedom of establishment preclude such
acquiring targets with their registered
foreign investment filtering mechanisms
office in the Slovak Republic. Targets
of Member States by means of which a
without legal personality (such as branch
resident company which is a member
offices) also fall within the scope of the FDI
of a group of companies established in
Regime. Under certain circumstances, the
several Member States controlled by non-
FDI Regime also applies to certain financing
EU undertaking, may be prohibited from
transactions, notably where a security
acquiring ownership of another resident
interest is created over the material assets
company. Because the Slovak FDI screening
of an eligible target.
regime is, too, based on such a premise
The FDI Regime recognises 2 (two) types of which the CJEU describes as incompatible
filing: (i) mandatory, applicable to targets with the TFEU, it was expected that the
operating in certain industries or otherwise CJEU’s judgment would have an effect
qualifying as “critical foreign investment” on Member States’, including Slovakia’s,
and (ii) voluntary, which is not required ability to effectively screen FDI. However,
before the closing of a transaction, but no substantial changes of the Slovak FDI
gives the investor peace of mind that their screening regime were introduced so far.
transaction will not be scrutinised after
closing. 4. Are there any foreign exchange
restrictions or conditions applicable
The thresholds triggering the FDI Regime to companies such as restrictions to
are (i) the acquisition of 25% direct or foreign currency shareholder loans?
indirect control or (ii) the acquisition of
A company’s registered capital must be
10% direct or indirect control when the
denominated in euros. However, there
transaction qualifies as a critical foreign
are generally no restrictions on foreign
investment.
currency shareholder loans. Certain
The FDI Regime stipulates a range of restrictions may apply in limited emergency
sanctions for closing a transaction without circumstances declared by the government.

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5. Are there any specific considerations SRO, supervisory board is optional. In some
for employment of foreign cases, the creation of a supervisory board
employees in companies in an SRO is mandated by statute (e.g. it is
incorporated in your jurisdiction? mandatory for licensed consumer credit
providers).
EU citizens can be employed in the Slovak
Republic without having to obtain a work In both an AS and SRO, the most common
or other permit. role of the general meeting is to approve
the financial statements and pass
The employment of non-EU citizens
resolution on the distribution of profits,
(third-country nationals) requires specific
the appointment and removal of directors
requirements to be met and the obtaining
and other matters implied by statute or
of work and residence permits. In general, provided by the company’s articles of
a third-country national may be employed association.
in Slovakia if he or she (i) has an EU “blue
card” and (ii) secures temporary residence An SRO has no formal board of directors,
for employment purposes (which requires but the company can have 1 (one) or more
confirmation that the job vacancy cannot executive directors. The executive directors
be filled by an existing resident) or, decide on matters of the company’s day-
alternatively, if he or she obtains both a to-day operations by simple majority,
work permit and a temporary residence but no formalities are prescribed by
permit for employment purposes. Before statute for their deliberations. The default
a work permit is issued, the employer position of law is that in case of 2 (two) or
must demonstrate that there is no suitable more executive directors, each executive
Slovak or EU candidate for the job, and the director can sign on behalf of the company
employer in Slovakia must advertise the independently. This can be changed to
joint signing, but any other restrictions on
position locally.
a director’s agency (e.g., value thresholds or
The executive directors of a foreign types of agenda) are unenforceable against
company who are citizens of non-OECD third parties.
countries must obtain a residence permit
An AS, on the other hand, is required to
in Slovakia in order to be appointed as
have a mandatory board of directors with
director.
1 (one) or more members. Similar rules
C. Corporate Governance apply as those applicable to directors in
an SRO, albeit there are greater formalities
6. What are the standard management required in the deliberations of the board
structures (e.g., general assembly, of directors.
board of directors, etc.) in a corporate
entity governed in your jurisdiction As far as director liability is concerned,
and the key liability issues relating similar general rules apply to managing
to these (e.g., liability of the board directors in an SRO and board members in
members and managers)? an AS. In general, directors have the duty
to act with professional care, to obtain
The main management structures in an sufficient information in order to make
SRO include the general meeting and informed decisions, and to avoid conflicts of
the executive directors. In an AS, the interest. The more specific responsibilities
management structures include the of directors include, among other things,
general meeting, the board of directors the duties to maintain bookkeeping and
and a mandatory supervisory board. In an to draw up financial statements in line

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with law and the applicable standards. statements are drawn up and in the
Any directors who breach their duties can immediately preceding financial year:
be liable for damages to the company,
its shareholders and, in some cases, the (1) the total amount of assets exceeded
company’s creditors. EUR 4,000,000;

There is no law or doctrine making (2) the net turnover exceeded EUR
any compliance or regulatory breach 8,000,000; or
automatically attributable to the company’s (3) the average number of employees in
directors. However, some case law and 1 (one) accounting period exceeded
judicial practice shows that directors may 50, or the entity has securities listed on
be generally liable, including criminally a regulated market of an EU Member
liable, for various operational violations. State.
In some cases, statutes imply that
administrative liability is borne by the D. Shareholder Rights
directors in addition to the administrative
8. What are the privileges that can
liability of the company. This includes the
administrative liability of directors for be granted to shareholders? In
employment law breaches, which can result particular, it is possible to grant
in directors being fined a percentage of voting privileges to shareholders for
their salary. appointment of board members?

In addition, directors have a special set With respect to SROs, shareholders enjoy
of liabilities in the realm of insolvency. fairly broad liberty to deviate from the
Directors have the duty to monitor the provisions implied by statute. For instance,
company’s solvency and, when the an SRO’s shareholders can attach dividend
company finds itself insolvent under an distribution rights to their ownership
applicable insolvency test, they must file a interests that are different to those implied
timely petition of bankruptcy. Failure to file by their share of the company’s registered
for bankruptcy in a timely manner may give capital. The articles of association can
rise to liability of the director towards the prevent shareholders from transferring
creditors, which is enforceable in insolvency their ownership interest outside the
proceedings. In addition to liability, the existing shareholding without the general
statute provides for a penalty of EUR meeting’s consent or from transferring
12,500 for any director who fails to file for
their ownership interest at all. Right of
insolvency in a timely manner.
first refusal can also be attached to an
There is limited possibility to release a ownership interest. However, it is not
director from liability and, in general, a possible to exclude certain shareholder
company cannot release a director from rights that are attached to an ownership
liability upfront. Some risks can be, and interest, such as the right to vote on the
typically are, mitigated by Directors & appointment of directors. Such restrictions
Officers Liability Insurance (D&O). are typically agreed contractually in an SHA.
7. What are the audit requirements in With respect to Ass, the articles of
corporate entities? association may specify that a specific type
The requirements for a company to have its of share will be issued with priority rights
financial statements audited applies where regarding dividends (priority shares). The
at least 2 (two) of the following conditions total face value of these priority shares
are met on the date on which the financial cannot exceed half of the company’s

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total registered capital. The articles of 10. Is it possible to impose restrictions

association may also stipulate that priority on share transfers under the
shares will be issued without the right to corporate documents (e.g., articles
vote at general meetings. Nevertheless, of association or its equivalent in
the owners of these shares retain all other your jurisdiction) of a company
shareholder rights. In an AS, therefore, it is incorporated in your jurisdiction?
also not possible to grant voting privileges With respect to an SRO, ownership interests
to specific shareholders when it comes to are generally transferable if the company’s
appointing board members. articles of association allow it. In such an
event, shareholders are free to agree in the
9. Are there any specific statutory rights
company’s articles of association that the
available to minority shareholders
transfer of an ownership interest may or
available in your jurisdiction?
may not be subject to the prior consent of
Slovak law specifically recognises minority the general meeting. Statute dictates that
shareholder rights in an AS. A shareholder an ownership interest cannot be transferred
must not exercise its rights to the detriment where the company is being wound-up or
of the rights and legitimate interests of is subject to insolvency or restructuring
other shareholders, and the company must proceedings or if civil enforcement
treat all shareholders equally under the proceedings are pending in Slovakia.
same conditions. With respect to an AS, the articles of
association may limit, but not exclude,
In the context of an AS, shareholders who
the transferability of shares. If the articles
hold shares with an aggregate face value of
of association make the transferability
least 5% of the company’s registered capital
of registered shares conditional on the
are awarded certain protections, including company’s consent, they must also set
the right to (a) request the convening out the reasons for which the company
of an extraordinary general meeting for may refuse its consent and the period in
the purpose of discussing the matters which the company must decide whether
proposed by them, (b) require that certain to consent to the transfer and to notify the
matters be included in the agenda of the shareholder of such decision. The decision
general meeting, (c) require the supervisory on whether to consent to a transfer of
board to review the actions of the board shares is made by the board of directors,
of directors, (d) require the company to but this authority can be vested with
recoup from shareholders benefits which another company’s body in the company’s
the company had provided to them in by-laws. The transferability of listed shares
violation of the Commercial Code, or (e) cannot be restricted.
demand that the company’s supervisory 11. Are there any specific concerns or
board pursue the company’s directors for other considerations regarding the
liability. composition, technical bankruptcy
With respect to an SRO, while there is no and other insolvency cases in your
formal framework for the protection of jurisdiction?
minority shareholders, each shareholder Insolvency proceedings in Slovakia are
has the right to file a petition with the primarily regulated by Act No. 7/2005
court to invalidate any resolution of the Coll. on bankruptcy and restructuring,
company’s general meeting that is contrary as amended (“Insolvency Code”). The
to the law or the company’s articles. Insolvency Code sets out procedures for

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various forms of insolvency, including transfer of an enterprise (or a part thereof )

bankruptcy and restructuring proceedings. as a going concern. Other traditional
methods such as mergers are also available,
The Insolvency Code provides for a rather
although they are less commonly used.
broad directors’ liability, which we discuss
under Question 6. A framework is also in The Merger Act took effect on 1 March
place whereby a shareholder can be found 2023 and, in addition to previously existing
liable for the insolvency of a subsidiary, corporate transformations such as merger
which in specific circumstances allows the or demerger, it introduced a new forms of
piercing of corporate veil, as we discuss corporate transformation, the domestic
under Question 2. and cross-border corporate spin-off. Unlike
transfer of enterprise, corporate spin-off
In addition, Slovak law is quite strict when allows the cherry-picking of assets and
it comes to insolvency claims of affiliated liabilities, while preserving a partial legal
entities. Generally speaking, a receivable succession on the part of the acquirer.
which at any point in time since its This option opened route to previously
origination belonged to an entity directly unavailable corporate reorganizations.
or indirectly linked with the company Among other things, the new corporate
through a stake of 5% or more in equity spin-off framework allows for the transfer
or voting rights (thus including direct and of state subsidies, an option which was
indirect parent entities, subsidiaries and previously otherwise not available.
affiliates) is considered to be subordinated,
and will automatically rank junior to all 13. What are the advantages and
other creditors. Any security interest disadvantages of a share purchase
over the company’s assets securing such as opposed to other methods?
a subordinated receivable will be set From the perspective of Slovak law, the
aside in the insolvency or restructuring main advantages of a share transfer over
proceedings. an asset transfer (going concern) are as
Furthermore, from the moment a company follows:
becomes insolvent (i.e., when the directors - Less complexity. A share transfer is
learn or ought to have learned that more straightforward and requires
the company falls foul of an applicable less documentation and post-closing
insolvency test), the directors become liable actions. The acquirer acquires shares in
to satisfy all of the company’s liabilities as the entire company with all its assets
if the company were already in insolvency and liabilities. In the context of an asset
proceedings (i.e., pari passu among equally transfer, additional documents (acts
ranking creditors). Breach of this duty may recording the transfer of the company’s
result in civil and criminal liability on the assets and employees) and formalities
part of directors. with various registries (e.g., land
registry), are required to complete the
E. Acquisition
transfer of title;
12. Which methods are commonly used
- No operational impediment. Acquiring
to acquire a company, e.g., share
shares in a company typically requires
transfer, asset transfer, etc.?
no additional steps for the company
The most typical methods of acquiring to continue operating on a day-to-day
control over a company or its substantial basis. A transfer of assets, on the other
assets are (i) acquisition of its shares or (ii) hand, will not automatically transfer

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public law authorisations, licences, framework of corporate spin-off seems to

registrations and other formalities be a good alternative to transfer of assets
which are required to operate a as a going concern because, in particular,
business from a legal and practical it supports cherry-picking of assets and
perspective. The acquirer of assets liabilities. The main advantage of transfer
as a going concern will have to set of assets as a going concern remains the
up the transferred business with the relatively low transaction cost and shorter
required business licenses, operational timeframe for implementation compared to
permits and licences, VAT and EORI corporate spin-off.
registrations, and various other permits
and licences that will allow the business 14. What are the approvals and
to operate. By a similar token, any consents typically required (e.g.,
transfer of assets as a going concern corporate, regulatory, sector
will require notification to be given to based and third-party approvals)
the company’s business partners, who for private acquisitions in your
in turn can petition the court to carve jurisdiction?
them out of the transfer;
In terms of regulatory approvals, the most
- Employee consultation is not required. typical approvals required are merger
The transfer of shares in a company control clearance issued by the Slovak
will not generally trigger the provisions Competition Authority or the European
of the Labour Code (Act No. 311/2001 Commission, and FDI clearance issued
Coll.) concerning the transfer of an by the Ministry of Economy. In addition,
undertaking and generally will not various sectoral regulations apply with
generally trigger a seller’s or buyer’s respect to acquiring stake in regulated
obligation to consult employees. On the entities, such as in financial services where,
other hand, the transfer of a business depending on the target, either pre-closing
as a going concern does trigger such clearance by or post-closing notification
transfer of undertaking rules, resulting
to the National Bank of Slovakia may be
in added complexity and extended
required.
timelines and potentially giving the
employees the right to terminate their In terms of corporate approvals, the
employment with additional severance consent of the target’s general meeting is
pay. typically required for a shareholder to sell
For the above reasons, an asset transfer as an interest in the company.
a going concern remains the less frequent In addition, additional complexities may
option of acquiring a business. However, it arise from any change of control provisions
does retain some advantage over a share included in the target’s critical contracts,
acquisition. For instance, while a transfer of as well as from any potential external
assets as a going concern does not allow for financing or public subsidies provided
the transfer of public law licences, permits to the target, in which the consent of the
and authorizations, it also does not allow respective lenders and/or security agent,
for the transfer of public law liabilities. and the relevant public authority, as the
Therefore, where diligence reveals there case may be, will typically be required.
to be substantial public law liabilities
or irregularities, such as in tax matters, 15. What are the regulatory
structuring the transaction as a transfer competition law requirements
of assets as a going concern may be the applicable to private acquisitions in
preferred option. The newly available your jurisdiction?

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In addition to the EU Merger Regulation – In addition, pre-transaction and pre-closing

which lays down the thresholds and rules exchanges of information should observe
applicable to the control by the European all competition law constraints. In some
Commission of certain transactions – the specific industries, such as banking, the
Slovak merger control rules laid down in exchange of information through due
Act No. 187/2021 Coll. on the protection diligence may also require prior regulatory
of competition, as amended, also apply. A approval.
transaction is subject to mandatory review 16. Are there any specific rules
by the Slovak Competition Authority if the applicable for acquisition of public
following criteria are met: companies in your jurisdiction?
a) he combined aggregate turnover of Where, as a result of a share acquisition by a
the undertakings concerned is at least public company listed on a stock exchange
EUR 46,000,000 for the accounting in Slovakia, the acquirer of those shares
period preceding the concentration reaches or falls below the shareholding
in the Slovak Republic and at least 2 thresholds of 5%, 10%, 15%, 20%, 25%,
(two) of the undertakings concerned 30%, 50% or 70%, the acquirer must notify
generated a turnover of at least EUR the company (issuer) accordingly.
14,000,000 each in the Slovak Republic
In addition, mandatory takeover bids may
for the accounting period preceding
apply if the acquiror acquires a qualified
the concentration, or
holding in the listed company.
b) for the accounting period preceding
17. Is there a requirement to disclose
the concentration:
a deal, for instance to regulatory
1. in the case of a merger or an authorities? Is it possible to keep a
amalgamation of 2 (two) or more deal confidential?
independent undertakings, the
There is no general legal requirement to
aggregate turnover generated in the
disclose a deal. However, there are various
Slovak Republic by at least 1 (one) of
regulatory avenues resulting in disclosure
the undertakings concerned is at least to regulatory authorities. Where merger
EUR 14,000,000 and, at the same time, control or mandatory FDI filing is required,
the worldwide aggregate turnover the transaction will need to be disclosed
generated by another undertaking to the competent authority after signing
concerned is at least EUR 46,000,000, or and before closing. Sectoral regulations
2. in the case of an acquisition of direct may require disclosure and sometimes also
or indirect control over an undertaking approval by a competent authority, notably
or undertakings or parts thereof, the in the field of financial institutions such
aggregate turnover generated in the as banks, insurance companies, consumer
Slovak Republic by at least 1 (one) credit providers, payment services
of the undertakings over which, or providers or financial brokers.
over part of which, the control will be In addition, the shareholder structure of
acquired is at least EUR 14,000,000 all SROs is registered with the Commercial
and, at the same time, the worldwide Registry and, therefore, a direct acquisition
aggregate turnover generated by of an SRO will find disclosure in a
another undertaking concerned is at publicly accessible online database. The
least EUR 46,000,000. Ultimate Beneficial Ownership (“UBO”)

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of all companies is also registered in • To the extent that due diligence reveals
various databases and is to some degree external financing, any steps required
publicly available, Therefore, where the by the Finance Documents, such
UBO changes as a result of a transaction, as the consent of Lenders/Security
publicity often follows. If the target does Agent, and/or entering into Security
business with the government or otherwise Confirmation Agreement.
receives public funds or operates in some
specific regulated industries, its UBOs must However, we are increasingly seeing that
be registered and maintained with a special the transaction-specific risks revealed
online Public Sector Partner Registry, which through due diligence are being addressed
creates an additional avenue for publicity. through Warranty and Indemnity Insurance
(“W&I”).
18. Can sellers be restricted from
shopping around during a With respect to conditions precedent more
negotiation process? Is it possible generally, in our experience the conditions
to include break fee or other precedent in most transactions typically
penalty clauses in acquisition include at least the following:
documents to procure deal
• Obtaining the required corporate
exclusivity?
consents;
Exclusivity can be granted and frequently
• Obtaining the required regulatory
is granted by the seller for a limited period
consents (e.g., merger control, FDI
of time. It is possible to secure exclusivity
through a penalty or breakage fee, which and/or any other sectoral regulatory
would typically be agreed in a term consent);
sheet or a side letter. If the breakage fee • Completion of due diligence to buyer’s
is structured as a penalty, the court has reasonable satisfaction;
the discretionary right to reduce such
contractual penalty under Slovak law. • Representations and warranties being
true and complete at signing and at
19. What are the conditions precedent closing;
in a typical acquisition document?
Is it common to have conditions to • Resignation of directors on closing, and
closing such as no material adverse release of the company.
change?
In our experience, a material adverse
Typical conditions precedent include (i) the change clause might typically be included
conditions precedent usually prompted where the transaction anticipates
by due diligence outcomes and (ii) the appreciable time between signing and
conditions precedent typically found in closing. However, we are not frequently
most transactions. seeing MAC clauses in transactions.
In our experience, the most typical 20. What are the typical warranties
transaction-specific conditions precedent and limitations in acquisition
include: documents? Is it common to obtain
• Contractual partners’ consent as warranty insurance?
required under a material agreement; In terms of warranties, we are typically
• Resolving material due diligence seeing both seller and target warranties,
findings, to the extent they can be although the typical set of seller warranties
resolved (e.g. a chaining issue); (e.g., capacity, corporate approvals, etc.)

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would likely be rather difficult to enforce 21. Is there a requirement to set a

under Slovak law in the event of a breach. minimum pricing for shares of a
target company in an acquisition?
In terms of target warranties, these most
commonly include: There is no requirement for minimum
pricing of shares in the context of private
• Good corporate standing;
transactions. In an intra-group context, the
• Valid title to shares free of applicable tax rules may require a transfer
encumbrance; pricing assessment.
• Valid title to material assets free of 22. What types of acquisition financing
encumbrance; are available for potential buyers in
• Validity and no breach of material your jurisdiction? Can a company
contracts; provide financial assistance to a
potential buyer of shares in the
• Validity and material compliance of target company?
licences and permits;
In our experience, we are most frequently
• Employment matters and GDPR; seeing cash and somewhat less frequently
• Intellectual property rights (notably no equity consideration. In case of leveraged
infringement); acquisitions, we are most typically seeing
traditional syndicated financing. Earn-outs
• Litigation; are frequently seen on transactions.
• Tax issues. Financial assistance is unrestricted in SROs.
Typical limitations include: As at the date of this publication, financial
assistance is prohibited with respect to AS,
• Data room disclosures (disclosures and that includes providing security over
solely by disclosure letter are less a company’s shares. There is currently no
frequent); whitewash procedure, but new whitewash
• De minimis thresholds (tipping baskets rules have been adopted and will enter into
are becoming typical); effect on March 1, 2024.

• Time limitations to bringing claims 23. What are the formalities and
(typically, the statutory limitations procedures for share transfers and
period for tax warranties, and limitation how is a share transfer perfected?
periods of between 12 and 36 months In the context of an SRO, in addition to
for all other warranties); identifying the parties and the ownership
• Liability caps (typically 10-15% of the interest(s) being transferred, any written
purchase price, except for certain ownership interest transfer agreement
liabilities such as tax); must, if the acquirer is not an existing
shareholder, adhere to the company’s
• No double recovery clauses.
articles of association and must bear the
We are seeing W&I insurance with an notarised (and legalised or apostilled,
increasing frequency, although still in if applicable) signatures of both the
fewer than 20% of transactions. It is, transferor and the acquirer. Appropriate
however, a growing trend and brokers and corporate consents must be also obtained
underwriters are active on the market to (please refer to Question 10 for more
raise awareness of their products. detail). The ownership interest transfer

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agreement may be governed by foreign F. Enforceability

law and/or be drawn up in a language
other than Slovak. However, following 25. Can acquisition documents be
the transfer of the ownership interest, the executed in a foreign language?
new shareholder must be registered with Acquisition documents can be executed in
the Slovak Commercial Registry. For that a foreign language. However, as discussed
reason, it is common practice to execute, on under Question 23 local formalities
closing, a short-form multilingual (in Slovak will require the translation of certain
and possibly another language) ownership documents into Slovak. For that reason,
interest transfer agreement which will it is recommended to have at least (i) the
serve as the basis for the local registration. shareholder resolution and (ii) the short-
Because the Slovak-law requirements on form SPA in a bilingual format, with the
the notarisation of signatures applies, for Slovak version governing. Depending on
the sake of enforceability the prevailing other closing actions, additional documents
practice is for both the master SPA and in Slovak may be required (e.g. director’s
the short form SPA to carry notarised resignation letter and/or the new director’s
signatures. appointment documents). In the absence
In addition. for the transfer of ownership of an original Slovak version, translations
interest to be enforceable against the by a sworn translator registered to practice
company, the company must acknowledge in Slovakia will be required for the post-
receipt of the ownership interest transfer closing registrations.
agreement. Confirmation to this effect As far as enforcement is concerned, the
is typically included as a schedule to the same as above substantially applies. Where
agreement. an action is pursued before a Slovak court
and the original documents were not
With respect to transfers of shares in an
drawn up in Slovak, sworn translations will
AS, the formal requirements depend on
be required.
the type of shares. In addition to other
formalities, any share certificate transfer 26. Can acquisition documents be
requires endorsement and an update of governed by a foreign law?
the shareholders’ register maintained by
Acquisition documents can be governed
the Central Depository of Securities. For
by a foreign law but need to comply with
transfers of book-entry shares, the shares
the minimum requirements of Slovak law.
must be transferred between the transferor
Please refer to Question 23 for more details.
and the transferee securities accounts kept
by the Central Depository of Securities. 27. Are arbitration clauses legally
permissible or generally included in
24. Are there any incentives (such
acquisition documents?
as tax exemptions) available for
acquisitions in your jurisdiction? In a transactional context, arbitration
clauses are permissible, and arbitration
Transaction as such are not subject to
is often used as a dispute resolution
tax or stamp duty. However, the impact
mechanism. In the context of Slovak law
on corporate income tax will depend on
governed transaction documents, it is
various factors and should be assessed on a
recommended to specifically consider the
case-by-case basis. Participation exemption
dispute resolution mechanism in each case.
applies under certain circumstances.
Based on public sources, there have been
only limited instances of disputes arising

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from international M&A transactions being G. Trends and Projections

brought before the Slovak courts, which
in turn means that Slovak judges do not 29. What are the main current trends in
have substantial experience in hearing M&A in your jurisdiction?
disputes arising from international M&A In terms of trendsetting legal developments
transactions. From those limited instances, and their impact on the transaction market,
the Slovak courts would seem to favour 2 (two) major changes in the past year
a somewhat formalistic approach to have had impact on making transactions in
interpreting frameworks which are standard Slovakia: (i) the introduction of the new FDI
in international transaction practice (e.g. Regime and (ii) the Merger Act, which will
representations and warranties, disclosures, enter into effect on March 1, 2024. Some
limitation of liability, etc.). Therefore, an commentators suggest that the Merger Act
arbitration clause is often considered will act as a catalyst for the transactional
with a view to mitigating the risk of an market and change the way transactions
unforeseeable court decision. are done.

28. Are there any specific formalities Also, in 2022, minor changes to the
for the execution of acquisition Commercial Code had important impacts
documents? Is it possible to on deal-making. Before July 17, 2022,
remotely/digitally sign documents? the transfer of a majority ownership
interest in an SRO only took effect upon
For transfers of ownership interests in an registration with the Commercial Registry,
SRO, the signatures of both the transferor which created additional transactional
and the transferee appearing on the complexities, notably with respect to
ownership interest transfer agreement purchase price payment and escrow. From
must be notarised. Depending on the July 17, 2022, the transfer of an ownership
jurisdiction of the notary and the governing interest takes effect upon the signing of
law of the contract, this may require a wet- the ownership interest transfer agreement
ink signature, or a digital signature may (unless the parties agree otherwise), which
suffice. A Slovak-law governed document has removed the complexity and facilitated
or a document notarised by a Slovak notary the closing of transactions.
will require a wet-ink signature. In addition, as discussed under Question
As far as other documents are concerned 20, we are experiencing an increasing
(e.g., corporate consents), a qualified volume of W&I insurance in transactions.
electronic signature (QES) is sufficient. 30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
Please refer to Question 29 above.

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SLOVENIA
KARANOVIC PARTNERS

Marko Ketler Maja Kreča

Senior Partner Senior Associate
marko.ketler@ maja.kreca@
karanovicpartners.com karanovicpartners.com

A. General 2. What are the most common types

of corporate entities (e.g., joint
1. What is the main legal framework stock companies, limited liability
applicable to companies in your companies, etc.) used in your
jurisdiction? jurisdiction? What are the main
The Companies Act represents the differences between them (including
main legal framework for companies in but not limited to with regard to the
Slovenia. Other relevant regulations cover shareholders’ liability)?
different aspects of M&A. Takeovers of The most common types of corporate
public companies are regulated by the entities in Slovenia are limited liability
Takeovers Act, regulation of the capital companies and joint stock companies.
markets is provided in the Markets in The limited liability company is more
Financial Instruments Act and Ljubljana common of the 2 (two) and is made up of
Stock Exchange Rules. The Slovenian capital contributions by the shareholders
M&A framework is also formed by the which are divided into business shares
Prevention of Restriction of Competition in proportion to the value of their capital
Act, Investment Promotion Act, the contributions. A joint stock company is a
Employment Relationship Act, the Code corporation in which the share capital is
of Obligations, the Book-Entry Securities divided into shares (stocks). Both types of
Act, the Law of Property Code, Register of corporate entities (i) are their own legal
Companies Act, Decree on the registration entities (ii) obtain this status upon court
of companies and other legal entities in the registration and (iii) are liable with all of
register of companies, etc. their assets, whereas the shareholders

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have limited liability for the company’s industrial sectors must be notified to the
obligations. Only in certain cases provided Ministry of the Economy, Tourism and
in the Companies Act are the shareholders Sport. After the notification, a notification
liable for the company’s obligations (lifting committee established by the said
the corporate veil). The Companies Act Ministry issues an opinion in a preliminary
also provides for a minimum share capital procedure and can also initiate a review
amount, which is different for limited procedure in relation to the concrete
liability companies (EUR 7,500) and joint notification.
stock companies (EUR 25,000). The 2 (two) 4. Are there any foreign exchange
types of corporate entities are different also restrictions or conditions applicable
in operation and management structure. to companies such as restrictions to
B. Foreign Investment foreign currency shareholder loans?

3. Are there any restrictions on foreign No.

investors incorporating or acquiring 5. Are there any specific considerations
the shares of a company in your for employment of foreign
jurisdiction? employees in companies
There are no general restrictions on foreign incorporated in your jurisdiction?
investors incorporating or acquiring the Foreign employees employed in a
shares of a Slovenian company, however, Slovenian company are subject to the same
certain specific restrictions may apply, such legislation as the Slovenian employees.
as: However, foreign employees, meaning non-
- restrictions under the Prevention EU/EEA citizens, must first obtain a single
of Money Laundering and Terrorist residence and work permit to legally work
Financing Act, and stay in Slovenia.

- restrictions in the case of acquisition C. Corporate Governance

of real estate in Slovenia by non-EU 6. What are the standard management
companies (asset deals), structures (e.g., general assembly,
- sector-specific regulations (such as board of directors, etc.) in a corporate
insurance, banking, media and fund entity governed in your jurisdiction
management) may impose additional and the key liability issues relating
conditions, such as the need to obtain to these (e.g., liability of the board
authorisations from the competent members and managers)?
authority. Joint stock company
In addition, certain restrictions have been - A joint stock company may choose
imposed on companies and individuals a two-tier management system by
domiciled in the Russian Federation (EU appointing a management board
sanctions regime against the Russian and a supervisory board or a one-tier
Federation). management system by appointing
a board of directors. Both tier
In any case, transactions (any investment by
management systems also have a
which a foreign investor, meaning a non-
general meeting of shareholders.
EU investor, acquires at least 10% of the
share capital or voting rights in a Slovenian - The composition and the number
company) concerning certain strategic of members of the management or

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supervisory bodies is laid down by the act. Members of a management

the Companies Act and the articles of or supervisory body are jointly and
association (statute). A management severally liable to the company for
or supervisory body are composed damage arising from the breach of their
of at least 3 (three) members, unless duties unless they can demonstrate that
otherwise provided. If a management they fulfilled their duties honestly and
or supervisory body has several conscientiously.
members, 1 (one) of them is appointed
Limited liability company
chair.
- The standard management structure
- The management board directs the for a limited liability company with
business operations of the company several shareholders consists of the
independently and at its own liability, it director(s) and the general meeting of
also represents the company and acts shareholders.
on its behalf. If the management board
has more than 1 (one) member, the - In a limited liability company, there are
members represent the company jointly 1 (one) or more directors who manage
and adopt decisions unanimously the company’s affairs and represent it
unless otherwise provided in the on their own responsibility.
articles of association. - Shareholders adopt resolutions at a
- The supervisory board oversees the general meeting.
management of a company’s affairs. - A limited liability company may
- The board of directors, which is only also appoint a supervisory board
in one-tier management systems, who oversees the management of a
performs the functions of both company’s affairs.
the management board and the - Regarding the liability of the directors,
supervisory board. It manages a mutatis mutandis the same applies as
company, supervises its operations, with respect to joint stock company
represents the company and acts on its (last item above).
behalf.
7. What are the audit requirements in
- In performing their duties on behalf corporate entities?
of the company, members of the
management or supervisory body must All business entities registered in the
act with the diligence of a conscientious Slovenian Business Register must submit an
and honest businessperson and annual report to the Agency of the Republic
safeguard the trade secrets of the of Slovenia for Public Legal Records and
Related Services (AJPES). However, the size
company. Members of a management
of the company is important in terms of the
or supervisory body are not obliged to
scope of the annual report.
compensate the company for damage
if the act by which damage was caused Micro and small companies (based on
to the company is based on a lawful criteria defined in the Companies Act)
general meeting resolution. The are required to submit data only once
liability for damages of the members for the following purposes: for statistics,
of the management is not excluded publication, and tax purposes. Annual
even though the supervisory board accounts for micro and small companies
or the board of directors approved should include a balance sheet, statement

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of profit and loss and notes to the D. Shareholder Rights

financial statements. Medium-sized and
large companies must submit the data 8. What are the privileges that can
for statistical purposes and publication be granted to shareholders? In
particular, is it possible to grant
purposes separately and their annual
voting privileges to shareholders for
account should include balance sheets,
appointment of board members?
profit and loss statement, statement of cash
flows, statement of capital movements, Shareholders have in general the right
statements of other comprehensive to receive dividends (if distributed), the
income, appendices with explanations to right to be informed, the right to voting
the statement, and the business report. rights and the right of disposal of their
shares. The voting rights of shareholders
A company with its registered office in the are exercised in accordance with the
Republic of Slovenia which is the parent proportion of share capital that their shares
company of 1 (one) or more companies represent. Depending on whether the
with their registered offices in the Republic joint stock companies are one or two-tier
of Slovenia or outside the Republic of management system, there is difference in
Slovenia (subsidiaries) must also prepare appointment of board members. In two-
a consolidated annual report if the parent tier joint stock companies, the supervisory
company or 1 (one) of its subsidiaries is board appoints the members of the
organized as a limited liability company, management board. In one-tier joint stock
as a dual-control company or as another companies, the shareholders appoint the
similar legal form under the law of the board of directors. Similarly, this applies to
country of the company’s registered office. a limited liability company. If the limited
The annual reports of large and medium- liability company has a supervisory board,
sized capital companies and dual capital the supervisory board appoints the
companies shall be audited by an auditor in director(s); if the company does not have
the manner and under the conditions laid a supervisory board, the shareholders
down by the law governing auditing. appoint the director(s).

The recent amendment to the Companies 9. Are there any specific statutory rights
available to minority shareholders
Act also requires certain types of companies
available in your jurisdiction?
to disclose information on environmental,
social and governance (ESG) factors and to Under Slovenian jurisdiction, every
prepare a sustainability report. In addition, shareholder in a joint stock company and
certain companies are required to publicly a limited liability company has certain
disclose income tax information. rights, such as the right to information, the
right to vote, the right to equal treatment
A listed company must publish and file its of all shareholders and similar. Minority
annual report with the Securities Market shareholder whose shareholding represent
Agency and the Ljubljana Stock Exchange at least one tenth of the share capital, rights
within 4 (four) months following the end include also rights relating to:
of the financial year. It shall also publish
and file with the same authorities its half- • convening of the general meeting,
year report for the first 6 (six) months of its the agenda and the conduct of the
meeting;
financial year as soon as possible, but no
later than within 2 (two) months after the • judicial installation or removal of the
end of this period. company’s corporate bodies;

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• preservation and enforcement of the E. Acquisition

company’s claims;
12. Which methods are commonly used
• request for special audits or to acquire a company, e.g., share
investigations; and transfer, asset transfer, etc.?
• winding-up of the company. The most common method is a share deal.
10. Is it possible to impose restrictions
on share transfers under the
corporate documents (e.g., articles
of association or its equivalent in 13. What are the advantages and
your jurisdiction) of a company disadvantages of a share purchase
incorporated in your jurisdiction? as opposed to other methods?
Pursuant to the Companies Act, in case of The main advantage of a share purchase is
share transfer in a limited liability company, that the entire target entity is purchased,
shareholders have pre-emptive rights, with all its rights and obligations. On the
unless the articles of association provide other hand, an asset purchase needs to
otherwise. In the articles of association, it is be planned carefully, so that all relevant
possible to exclude pre-emptive rights or rights and obligations are included in the
impose further restrictions such as consent sale. In an asset acquisition, in some cases
of a majority or all the shareholders etc. a purchaser might be held jointly and
In joint stock companies, shares are freely severally liable for debts relating to the
transferable, unless otherwise provided assets, which means that the purchaser of
by law (Takeovers Act), however, it is also the assets may be held liable, in addition
possible to impose restrictions on share to the seller, for all liabilities relating to the
transfer (pre-emption right or approval of assets, including those that have already
the management board for such transfer) in arisen before the transaction. If an asset
the articles of association (statue). deal includes real estate, there may be
11. Are there any specific concerns or specific requirements or limitations for non-
EU companies. Asset deals also usually tend
other considerations regarding the
to take a longer time to be concluded than
composition, technical bankruptcy
share deals as each right and each contract
and other insolvency cases in your
must be assigned (and approval of the
jurisdiction?
other contracting party must be obtained)
The Insolvency Act sets out obligations as it does not automatically transfer, unlike
of the management upon insolvency or a share deal, where the entire shareholding
risk of insolvency. The management and and all its rights are transferred.
other bodies of a company should keep
14. What are the approvals and
under constant review developments that
consents typically required (e.g.,
could jeopardize the continued existence
corporate, regulatory, sector
of the company. Upon the insolvency of a
based and third-party approvals)
company, the management is required to
for private acquisitions in your
initiate insolvency proceedings within 1
jurisdiction?
(one) month of the occurred insolvency.
For private acquisitions, the Companies
Act provides for a default statutory pre-
emptive right of the existing shareholders

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in a limited liability company. However, • The economic condition is met if:

additional set of rights, consents and
o the total annual turnover of
approvals might be provided in the
participants in the concentration
articles of association. Furthermore,
together with other undertakings
depending on the business activity of the
company, different regulatory, foreign in the group in the previous
direct investment (“FDI”) and merger financial year on the market of the
approvals might be required. Furthermore Republic of Slovenia exceeded EUR
sector-specific regulations (e.g., insurance, 35,000,000, and at the same time
banking, media and fund management) o the annual turnover of the
may impose additional conditions, such as acquired undertaking together
the need to obtain authorisations from the with other undertakings in the
competent authority. group exceeded EUR 1,000,000 in
15. What are the regulatory the previous financial year on the
competition law requirements market of the Republic of Slovenia.
applicable to private acquisitions in The Agency may also assess concentrations
your jurisdiction? which do not meet the thresholds referred
The obligation to notify the concentration to above if the undertakings concerned,
to the Slovenian Competition Protection together with the other undertakings in the
Agency occurs when two conditions - legal group, have a market share in the relevant
and economic - are met at the same time. market in the Republic of Slovenia of more
than 60%.
• The legal condition is met if more
permanent change of control over the 16. Are there any specific rules
company is acquired, which is the result applicable for acquisition of public
of: companies in your jurisdiction?
o the merger of 2 (two) or more Yes. The Takeovers Act applies:
previously independent
• if the offeree company is a listed
undertakings or parts of
company and its shares with voting
undertakings, or
rights are admitted to trading on a
o the acquisition of direct or indirect regulated market or
control over the whole or parts
• if the offeree company is a joint
of one or more undertakings by
stock company whose shares are not
1 (one) or more natural persons
admitted to trading on a regulated
who already control at least 1 (one)
market if such company has:
undertaking, or by 1 (one) or more
undertakings who acquire control o at least 250 shareholders on the last
through the purchase of securities, day prior to the year relevant in the
assets, by contract or otherwise, or assessment of the application of the
Takeovers Act, or
o establishment of a joint venture,
which performs all the functions of o more than four million euros of
an independent company with a total equity as shown in its most
longer duration, by 2 (two) or more recent annual report published in
independent companies (i.e., full- compliance with the Takeovers Act
function joint venture). governing companies.

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The Takeovers Act lays down the terms, parties, it is possible to contractually restrict
conditions and procedures relating to the seller from shopping around during the
takeover bids. A takeover is a situation in negotiation process. The parties can agree
which the offeror alone or together with to certain penalties or remedies in case of a
persons acting in concert with him or breach of the exclusivity agreement.
her achieves the takeover threshold. The 19. What are the conditions precedent
takeover threshold in the offeree company in a typical acquisition document?
is one third (1/3) of the voting rights in such Is it common to have conditions to
company. closing such as no material adverse
change?
17. Is there a requirement to disclose
a deal, for instance to regulatory In practice it is very common to include
authorities? Is it possible to keep a conditions precedent in acquisition
deal confidential? documents and there are no specific
restrictions. Often conditions precedent
As a rule, disclosure of transaction
includes obtaining consents and approvals
documents in full is not required. A
from governmental authorities (e.g.,
requirement to disclose a deal arises
obtaining merger or FDI clearance) or third
in certain cases, for example when the
parties (e.g., obtaining the consents of the
acquisition triggers the obligation to
creditor in cases where its loan agreements
notify a FDI, or to obtain merger clearance.
include change of control provisions). In
Furthermore, in relation to joint stock
some transactions, the sellers may agree
companies to which the Takeovers Act
to commit to specific agreements prior to
applies they are required to follow the
the sale of the shares, with the conclusion
provisions on the publicity of offers and the
of these agreements being set out as a
share purchase process itself.
condition precedent to closing. It is also
18. Can sellers be restricted from common to include “no material adverse
shopping around during a change” clause.
negotiation process? Is it possible
20. What are the typical warranties
to include break fee or other
and limitations in acquisition
penalty clauses in acquisition
documents? Is it common to obtain
documents to procure deal
warranty insurance?
exclusivity?
Warranties and indemnities are usually
Generally, negotiations between the parties
drafted by the buyer based on due
must proceed in good faith. Negotiations
diligence, or the information received.
prior to the conclusion of a contract are not
Warranties cover different areas, such as
binding and may be terminated by either of
corporate, finance, tax, labour, material
the parties whenever the party so desires.
agreements, litigation, data protection,
However, a party that has negotiated
regulatory and similar. Indemnities depend
without the intent to conclude a contract is
on the specific due diligence findings. The
liable for any damage incurred by the other
seller’s liability can be limited in terms
party. Furthermore, a party that negotiated
of monetary value if they acted without
with the intent to conclude a contract but
gross negligence and intent. It is also
abandons the intent without justifiable
common to agree on the de minimis and
grounds, thus inflicting damage on the
basket provisions. Over the last few years,
other party, is also liable for such damage.
warranty insurance is common in cases of
With an exclusivity agreement between the transactions of higher value.

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21. Is there a requirement to set a stock company for the acquisition of

minimum pricing for shares of a its own shares is prohibited, except for
target company in an acquisition? exemptions provided in the Companies
Act. It is also prohibited to receive financial
Yes, but only for joint stock companies to
assistance through fictitious transactions
which the Takeovers Act applies.
between the joint stock company and its
A takeover offer must be made in relation shareholders. In the case of limited liability
to all securities in the target and the companies, it is a well-established rule
offer price (i) must be the same for all the that it is not permissible to pay out to the
securities in the target company/all the members those assets which are necessary
securities in the target company falling into to preserve the share capital and the
a certain class, and (ii) may not be lower tied-up reserves. The legal requirement to
than the highest price paid for the same preserve capital applies not only to share
securities by the offeror in the period of capital but also to (i) capital reserves and
12 months prior to the announcement of (ii) legal reserves, i.e., to all the company’s
such bid. Furthermore, if within 1 (one) tied-up capital.
year of the expiry of the time allowed for 23. What are the formalities and
the acceptance of a successful takeover procedures for share transfers and
bid the offeror purchases securities at a how is a share transfer perfected?
price higher than the offer price, the offeror
is obliged to pay the accepting party the The share transfer agreement by which a
difference in price, in cash, within 8 (eight) business share in a limited liability company
days following such acquisition. Similarly, is validly completed and perfected must
if a takeover is followed by a squeeze- be concluded in the form of a notarial
out within 3 (three) months, the cash deed, followed by a registration of the new
compensation to be paid to the minority shareholder in the court register for the
shareholders to fully exercise their rights.
shareholders must be at least equal to the
Additionally, if there are more shareholders
price per share paid to the shareholders
in the company, the other shareholders
during the takeover bid.
have according to the law a pre-emptive
22. What types of acquisition financing right, meaning that the selling shareholder
are available for potential buyers in must notify the other shareholders about
your jurisdiction? Can a company the intended sale and offer the business
provide financial assistance to a shares to the other shareholders first. In
potential buyer of shares in the the articles of association, a limited liability
target company? company can also impose consent of a
majority or all the shareholders and the
Acquisition financing in Slovenia is usually conditions for the consent.
provided by banks or other financial
institutions. Acquiring shares in a joint-stock company
and gaining legal ownership of those
The Companies Act provides 2 (two) shares is subject to the transfer of shares
different sets of rules regarding acquisition in the central registry of dematerialised
financing and legal transactions between securities. Ownership of the shares is
a company and its shareholder. The conferred upon the buyer after the
provisions governing limited liability registration of the transfer in this registry.
companies are less restrictive compared Additionally, acquiring shares in joint
to the provisions related to joint stock stock company might be regulated by the
companies. Financial assistance of a joint Takeovers Act or not.

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24. Are there any incentives (such 1. is not a member of the European Union,
as tax exemptions) available for 2. has a corporate tax rate below 12.5%,
acquisitions in your jurisdiction? and
In Slovenia, there is no stamp duty or 3. appears on a list published by the
share transfer tax levied upon acquiring Ministry of Finance.
shares. There are several other tax
• Interest, royalties, and certain service
beneficial treatments available for investor
fees paid to foreign entities are
in accordance with the Slovenian tax
generally subject to withholding tax.
legislation framework. However, exemptions or reduced rates
• Slovenian tax law provides tax might apply, especially if the recipient
neutrality for reorganizations such as resides in a country that has a valid
mergers, divisions, and exchanges of Double Tax Treaty with Slovenia.
shares. This means that no capital gains • Value Added Tax (“VAT”): typically,
tax is charged provided the transaction the sale of shares is exempt from
meets specific criteria and is also VAT in Slovenia. However, some M&A
notified to the tax authorities. transactions may be structured in a way
• Acquiring a company with carried- that they fall within the scope of VAT
forward tax losses can be beneficial. The (especially asset deals).
losses may, to a certain extent, offset F. Enforceability
the future profits of the merged entity.
However, there are restrictions on the 25. Can acquisition documents be
use of such losses, especially if there executed in a foreign language?
is a significant change in the business Slovenian law recognizes the principle of
activity or ownership structure of the freedom of contract and as a rule, a specific
loss-making company. form or language is not required. Some
• Interest expenses related to the agreements are specifically required to
acquisition financing can be deductible, be in writing and a notarial deed is also
but they are subject to certain required in case of share transfer in the
limitations. Anti-abuse rules and limited liability company. The notary may
interest barrier rules (safe-harbour rule, draw up a document in a foreign language,
arm’s length requirements and thin but only if he/she is certified as a court
capitalization rule) might apply, limiting interpreter.
the amount of interest that can be However, foreign language documents
deducted in a given year. which are required for official registrations,
• Participation exemption: dividends such as a share transfer agreement must
and comparable income received be concluded in the Slovenian language
by a Slovenian taxpayer are typically or translated into Slovenian language by a
95% tax-exempt, provided that the certified translator.
distributing entity was subject to
26. Can acquisition documents be
Slovenian corporate income tax or a
governed by a foreign law?
similar profits tax. However, exceptions
apply if the dividends come from the Yes (in case of limited liability company,
distributor’s untaxed reserves or if the they must be concluded in a form of
distributor is tax resident in a country a notarial deed in order to be used for
that: registration purposes).

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27. Are arbitration clauses legally After the verification of the validity of the
permissible or generally included in qualified electronic signatures has been
acquisition documents? completed, the notary shall electronically
sign the document with his/her qualified
Arbitration clauses are legally permissible electronic signature, secure it with a
and are generally included in acquisition qualified electronic seal and affix a
documents. qualified electronic time stamp. However,
28. Are there any specific formalities is should be pointed out that this is a
for the execution of acquisition new amendment and has not yet been
documents? Is it possible to introduced in practice.
remotely/digitally sign documents? G. Trends and Projections
As a rule, there are no specific formal 29. What are the main current trends in
requirements for the validity of documents, M&A in your jurisdiction?
however, acquisition documents are
subject to stricter formalities, for example A current trend in M&A in Slovenia
share transfer agreements for limited has been a higher number of privately
liability companies must be executed in a negotiated deals without auction
form of a notarial deed, while some other processes. The M&A activity has increased
related documentation must be notarized. due to many deals related to succession in
The evidential value of a certified secure companies established in the 1990s, where
electronic signature is equivalent to a current owners are looking for partial or full
handwritten signature. exits from their companies.

Following the amendments, the Notariat 30. Are any significant development
Act now also allows for the signature of or change expected in the near
notarial deeds in electronic form with future in relation to M&A in your
a qualified electronic signature in a jurisdiction?
direct secure video link with the notary. Currently, we don’t expect any significant
The validity of the qualified electronic changes in this respect.
signatures is verified by the notary by
means of a certified validation process.

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SOUTH KOREA
BAE, KIM & LEE

Sky Yang Mark M. Cho Alan Peumjoo Lee

Partner Senior Foreign Attorney Partner
[email protected] [email protected] [email protected]

A. General • the yuhan hoesa (commonly described

as a “limited company”).
1. What is the main legal framework
applicable to companies in your The chusik hoesa is the typical form of
jurisdiction? incorporation, with limited liability for its
shareholders. Shareholders of the chusik
Private companies are primarily governed hoesa are only liable up to an amount equal
by the Korean Commercial Code (the to their share subscription and do not
“KCC”). In addition to the KCC, listed bear any personal liability for the debts of
companies are also governed by the the company. The chusik hoesa is typically
Financial Investment Services and Capital appropriate for a large enterprise that will
Markets Act (the “Capital Markets Act”). need substantial capital. For example, the
2. What are the most common types chusik hoesa is the only type of legal entity
of corporate entities (e.g., joint eligible to list its shares on the Korea Stock
stock companies, limited liability Exchange or that may issue corporate
companies, etc.) used in your bonds. A board of directors is required for a
jurisdiction? What are the main chusik hoesa (except where the company’s
paid-in capital is less than Korean Won
differences between them (including
(“KRW”) 1 billion and only one or two
but not limited to with regard to the
directors are appointed).
shareholders’ liability)?
The yuhan hoesa is the form of a closely
The two most common types of legal
- held limited liability company, which
entities under the KCC are:
can be described as a mixture of a joint-
• the chusik hoesa (commonly described stock company and a partnership. Like a
as a “joint-stock company”) and joint-stock company, the liability of each

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member of a yuhan hoesa is limited to the it must obtain prior permission from the
amount of such member’s contribution Ministry of Trade, Industry and Energy
to the company. In the case of a yuhan (“MOTIE”).
hoesa, the personal relationship among
Other approvals and their procedural
the members is taken more into account
requirements may be specified in the laws
with respect to incorporation procedures,
and regulations governing the industry
organization, management and, other
in question, e.g., MOTIE’s approval is
matters. A yuhan hoesa is typically
required for a foreign company to operate
appropriate for small or medium-sized
passenger or cargo air transport services,
businesses owned by a small number
while approval from the Financial Services
of individuals or entities. Unlike a chusik
Commission (the “FSC”) is needed for a
hoesa, a board and a statutory auditor are
foreign bank to establish or close branches
not required for a yuhan hoesa, although
or engage in the banking business in Korea.
one can be created at the option of the
members. 4. Are there any foreign exchange
restrictions or conditions applicable
We note that foreign investors have
to companies such as restrictions to
increasingly utilised the yuhan hoesa
foreign currency shareholder loans?
structure over the last few decades mainly
because of potential tax advantages in The Foreign Exchange Transactions Act sets
their home countries. In addition, a yuhan forth reporting obligations in relation to
hoesa allows greater flexibility in terms of transactions between residents and non-
corporate governance compared to a chusik residents, transactions between residents
hoesa because it has fewer requirements in which the amount is denominated in a
under the KCC. foreign currency or which involve securities
in a foreign currency, and transactions
B. Foreign Investment between non-residents in which the
3. Are there any restrictions on foreign amount is denominated in KRW or which
investors incorporating or acquiring involve securities in KRW.
the shares of a company in your
For example, in the case of foreign currency
jurisdiction?
shareholder loans, it is generally the case
In general, there are few restrictions that (i) a domestic company borrowing
on foreign investment in Korea. Some from a foreign company may have an
sectors and businesses, such as public obligation to report to the designated
administration and diplomatic affairs are bank for foreign-exchange transactions or
closed entirely to foreign investment; to the Ministry of Economy and Finance
others, such as power generation, are depending on the amount of the loan;
open to foreign investment as long as the and (ii) a domestic company lending to a
investment meets certain conditions under foreign company may have an obligation to
the Foreign Investment Promotion Act (the report to the designated bank for foreign-
“FIPA”). exchange transactions and to the Bank
of Korea depending on its equity in the
In addition to the foreign investment
foreign company.
report, investments in certain industries
may require approval from the relevant 5. Are there any specific considerations
oversight body. For example, under the for employment of foreign
FIPA, if a foreign investor intends to acquire employees in companies
shares of a defence industry company, incorporated in your jurisdiction?

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When a foreign company seconds an Under the KCC, directors have two duties
employee to a Korean subsidiary, the to the company: (i) the duty of care and
employee can enter into Korea by obtaining (ii) the duty of loyalty. Though the term
at the Korean embassy a corporate investor “fiduciary duty” does not appear in the KCC,
visa (D-8), if the employee is going to it is generally accepted in Korea that the
work at a Korean company that qualifies two duties under the KCC form a general
fiduciary duty of directors to the company.
as a foreign investment company under
the FIPA as an indispensable professional If a director has intentionally or
specialist; and an intra-company transferee negligently violated a law or the articles
visa (D-7) if the employee has worked at the of incorporation or has neglected his/her
main office overseas for at least one year duties, he/she shall be jointly and severally
and is going to work at a Korean subsidiary liable for damages to the company. If
that is not a foreign investment company, any act in violation of any statute or the
articles of incorporation or neglect of duties
a branch office, or supervising office as an
occurred in accordance with a resolution
indispensable professional specialist.
of the board of directors, the directors
C. Corporate Governance who consented to such resolution shall be
jointly and severally liable, and directors
6. What are the standard management who participated in such resolution and
structures (e.g., general assembly, whose dissenting opinion was not entered
board of directors, etc.) in a corporate into the minutes shall be presumed to
entity governed in your jurisdiction have consented to such resolution. It is
and the key liability issues relating also possible for a director to incur civil
to these (e.g., liability of the board liability to third parties (such as creditors)
members and managers)? arising out of the performance of his or her
duties if the director was engaged in gross
In the case of a chusik hoesa, the most negligence or intentional misconduct.
common form of legal entity in Korea,
a board is required (except where the In addition to civil liability, directors can be
company’s paid-in capital is less than KRW held criminally liable if they have breached
their fiduciary duty and caused damages to
1 billion and only one or two directors are
the company.
appointed). Other than certain matters
stipulated by law or in the articles of Generally, Korean courts will apply what is
incorporation that must be determined at essentially the “business judgment rule”. In
the general meeting of shareholders, the other words, courts will not hold a director
board may determine the most important liable for a decision so long as the decision
corporate policies and management was: (i) made in good faith, after reasonable
and sufficient investigation; (ii) not notably
matters except for regular day-to-day
unreasonable; and (iii) made within the
business matters which are decided by the
scope of the director’s authority.
representative director (which is akin to
a CEO). Unless otherwise provided in the 7. What are the audit requirements in
articles of incorporation, all actions and corporate entities?
resolutions of the board may be adopted According to the Act on External Audit of
by the affirmative vote of a majority of the Stock Companies, (i) a listed company, (ii)
directors attending a properly convened a company that is intending to become a
board meeting. listed company in the relevant or following

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business year, and (iii) a company whose 0.05% held for more than 6 months), (ii) the
assets, liabilities, the total number of right to start derivative suits against the
employees, and revenue in the immediately directors (for listed companies, 0.01% held
preceding business year meet certain for more than 6 months), and (iii) the right
thresholds are subject to an accounting to start multiple derivate actions against
audit by an independent, external auditor directors (for listed companies, 0.5% for
after preparing the financial statements. more than 6 months).
D. Shareholder Rights Further, minority shareholders who own
at least 3% of issued shares have (i) the
8. What are the privileges that can
right to request the convocation of a
be granted to shareholders? In
general meeting of shareholders (for listed
particular, is it possible to grant
companies, 1.5% for more than 6 months),
voting privileges to shareholders for
(ii) the right to make shareholders’ meeting
appointment of board members?
proposals (for listed companies, generally
Some of the key rights of shareholders of a 1% held for more than 6 months), (iii)
chusik hoesa include the following: the right to request removal of directors,
auditors, a liquidator (for listed companies,
Voting rights at the shareholders’
generally 0.5% held for more than 6
meeting: A shareholder is entitled to
months), and (iv) right to inspect books of
one vote per share at the shareholders’
account (for listed companies, generally
meeting. Dismissal of a director or
0.1% held for more than 6 months)
auditor, amendments to the articles of
incorporation, business transfer, capital 10. Is it possible to impose restrictions
reduction, and dissolution of the company on share transfers under the
requires a special resolution at the corporate documents (e.g., articles
shareholders’ meeting. The conditions for of association or its equivalent in
passing the resolution are (i) for an ordinary your jurisdiction) of a company
resolution, a simple majority of votes by incorporated in your jurisdiction?
shareholders present and at least a quarter
In principle, the KCC protects the freedom
of issued shares, and (ii) for a special
to transfer shares, but for unlisted
resolution, at least two-thirds of votes by
companies, the articles of incorporation
shareholders present and at least a third of
may restrict such freedom by providing that
the issued shares.
a share transfer requires the approval of the
Appraisal right of dissenting shareholders: If board of directors. For a company with such
a shareholder dissents to a comprehensive a provision in the articles of incorporation,
share exchange or transfer, business a share transfer without board approval
transfer, or merger resolution, a shareholder will be null and void against the company
may register dissent within a certain (but may still be valid between the parties).
period of time and oblige the company to A listed company cannot restrict share
repurchase shares at fair market value. transfers.
9. Are there any specific statutory rights 11. Are there any specific concerns or
available to minority shareholders other considerations regarding the
available in your jurisdiction? composition, technical bankruptcy
and other insolvency cases in your
Under the KCC, minority shareholders who
jurisdiction?
own at least 1% of issued shares have (i)
the right to enjoin illegal actions by the Under Korean insolvency law and practice,
directors (for listed companies, generally rehabilitation is generally favoured over

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liquidation. Further, the law and the court • Because its legal persona is maintained,
practice tend to be slightly debtor-friendly the likelihood that third-party consents
than other jurisdictions. or approvals related to licenses, permits,
The court may replace the existing and contracts will pose a problem is
management of an insolvent company low, unless the statute concerning the
under reorganization with one or more particular license or permit includes
receivers, but it usually appoints the a separate regulation or the contract
existing management of the insolvent contains a change-of-control provision.
company as the receiver unless creditors However, when compared to business
strongly object based on justifiable reasons transfers and asset transfers, share transfers
such as the existing management’s moral have the disadvantage that the target
hazard. companies’ liabilities (including off-balance-
E. Acquisition sheet liabilities and contingent liabilities)
are not carved-out, as may be the case
12. Which methods are commonly used
with a business transfer or an asset transfer
to acquire a company, e.g., share
transaction.
transfer, asset transfer, etc.?
14. What are the approvals and
Acquisitions and disposals of companies,
consents typically required (e.g.,
businesses, or assets are generally
structured as a share transfer, an asset corporate, regulatory, sector
transfer, or a business transfer. A vertical based and third-party approvals)
spin-off of a business division or assets to for private acquisitions in your
create a subsidiary and subsequent sale of jurisdiction?
such a subsidiary are also used from time Under the Monopoly Regulation and
to time. Mergers are available under Korean Fair-Trade Act (“MRFTA”), in principle, a
law but are less common. In particular, business combination report (i.e., a merger
triangular mergers and reverse triangular filing) must be filed if a party with total
mergers were introduced in 2012, but they
assets or sales of KRW 300 billion or more
are not yet widely used, likely because
enters into a “combination transaction”
major players in the Korean M&A industry
(including merger, share transfer or
are less familiar with such structures.
business transfer) with another party with
13. What are the advantages and total assets or sales of KRW 30 billion or
disadvantages of a share purchase more. As a general matter, the business
as opposed to other methods? combination report must be filed with,
When compared to business transfers and and cleared by the Korean Fair Trade
asset transfers, share transfers have the Commission (the “KFTC”) within 30 days of
following advantages: the closing, except that, if the transaction
involves a party with total assets or sales
• Because only shares are transferred of KRW 2 trillion or more (together with
while the company maintains its legal its affiliates), such business combination
persona, the separate process involving report must be filed and cleared before the
the transfer of assets and business closing.
relations relating to the target’s
business need not be undertaken. As In addition, the acquisition of controlling
a result, the process is simpler and less shares in certain financial companies
time is taken for share transfers than for (e.g., banks, securities companies, asset
business or asset transfers. management companies, and insurance

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companies) will require regulatory approval of the KRX. These KRX regulations include
from the FSC prior to the closing of the the Market Listing Regulations and the
transaction. Disclosure Regulations that have been
established by the KRX separately for each
15. What are the regulatory
of the KOSPI and KOSDAQ markets.
competition law requirements
applicable to private acquisitions in 17. Is there a requirement to disclose
your jurisdiction? a deal, for instance to regulatory
authorities? Is it possible to keep a
The MRFTA governs antitrust issues, with
deal confidential?
the KFTC as the governmental authority
enforcing the rules and regulations If the acquirer is a Korean-listed company
thereunder. To the extent that the relevant and the acquisition is considered material,
transaction poses any antitrust concerns the acquirer is required to publicly disclose
or threats within the Korean market, the the transaction and include the transaction
KFTC will have the discretion to impose agreements in the disclosure. Sensitive
conditions or restrictions in respect of such information may be redacted from such
transactions. agreements. Similar public disclosure
requirements apply to the target company
16. Are there any specific rules if such a target company is a Korean-listed
applicable for acquisition of public company.
companies in your jurisdiction?
For unlisted companies, it is easier to keep a
The main regulatory framework governing transaction confidential, but the transaction
listed companies consists of the KCC and will need to be disclosed at some point if
the Capital Markets Act. the target or one of the parties is a listed
The FSC has established a set of rules called company.
the Regulations on Securities Issuance and 18. Can sellers be restricted from
Disclosure which require, among others, shopping around during a
the disclosure of certain changes in the negotiation process? Is it possible
shareholding of a listed company and to include break fee or other
compliance with other specific regulations penalty clauses in acquisition
pertaining to listed companies in documents to procure deal
connection with the issuance of shares and exclusivity?
other corporate actions such as a merger,
spin-off or business transfer. It is possible to include break fees or
another contractual penalty clause to
The Korea Exchange (“KRX”) has also enforce deal exclusivity.
established various regulations that set
out detailed rules in connection with In the absence of a specific contractual
mandatory disclosure of important mechanism, there is a general duty to
corporate events and established listing negotiate in good faith. Korean courts
and delisting requirements that apply to have ruled that a party may be liable to
the KOSPI market and the KOSDAQ market. the other party even before the execution
KOSPI, which stands for Korea Composite of the contract (pre-contractual liability),
Stock Price Index, is the Dow Jones/S&P in case the injured party had reasonable
500 equivalent of Korea, and KOSDAQ, expectations during the course of
which stands for Korean Securities Dealers negotiation that a contract will be signed,
Automated Quotations, is a trading board acted in reliance on such expectations, and

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was harmed by the other party’s refusal to common in Korea, especially when the
sign without reasonable cause. seller is an individual or is a fund vehicle
expected to be liquidated after the
We note that this would be an exceptional
transaction.
situation, and parties will be generally
free to shop around in the absence of an 21. Is there a requirement to set a
exclusivity clause. minimum pricing for shares of a
target company in an acquisition?
19. What are the conditions precedent
in a typical acquisition document? There is no requirement to set a minimum
Is it common to have conditions to price for shares. That said, directors’
closing such as no material adverse fiduciary duties, the MRFTA, and tax issues
change? set a parameter on pricing, which would
force an arm’s length basis pricing.
Customary conditions precedents include
accuracy of representations and warranties, 22. What types of acquisition financing
fulfilment of covenants, absence of are available for potential buyers in
litigation or order against the transaction, your jurisdiction? Can a company
absence of material adverse change, and provide financial assistance to a
obtainment of the requisite regulatory potential buyer of shares in the
target company?
approvals.
Acquisitions are typically financed through
A buyer may also seek to include a number
the buyer’s own cash, issuance of bonds
of other closing conditions, such as the no-
by the buyer, and/or borrowing from a
contravention appointment of individuals
financial institution (acquisition financing).
nominated by the buyer as directors,
In acquisition financing, the buyer typically
execution of ancillary agreements, or cure
provides the shares or assets that it is
of any outstanding issues identified during
acquiring as collateral for such financing. It
due diligence.
is notable that, in Korea, the buyer may not
20. What are the typical warranties use the target company’s assets as collateral
and limitations in acquisition for acquisition financing (as a form of a
documents? Is it common to obtain leveraged buyout), as such practice may
warranty insurance? constitute a breach of fiduciary duty by
directors of the target company.
In Korea, typical representations and
warranties relating to seller/purchaser 23. What are the formalities and
include organization and corporate power, procedures for share transfers and
authorization of transaction/agreement, how is a share transfer perfected?
no-contravention, and no governmental Generally, the transaction is perfected with
approval. Typical representations and the transfer of physical share certificates
warranties relating to the company and the recording of the transfer on the
include organization and corporate power, shareholder registry. If the company in
capitalization, no-contravention, financial question is a listed company, the share
statements, compliance with laws, and transfer will occur through the electronic
material contracts. book keeping system.
Warranty insurance policy covering 24. Are there any incentives (such
representation, warranty, and indemnity as tax exemptions) available for
claims is becoming more and more acquisitions in your jurisdiction?

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While it is not an incentive for acquisitions G. Trends and Projections

in general, in the case of a merger that
satisfied certain conditions (including, 29. What are the main current trends in
among others, that the merged corporation M&A in your jurisdiction?
maintains most of its business and The Korean M&A market, in line with
employees), there are tax benefits, namely global trends, is experiencing a significant
that the taxation of capital gains will be downturn due to interest rate pressures
deferred until the parties sell the shares of and USD 49.6 billion, as compared to USD
the merged entity. 92.7 billion in 2021 (a 46.4% decrease
F. Enforceability overall increase in uncertainty, including
the war in Ukraine. According to Deal Logic,
25. Can acquisition documents be the total Korean domestic M&A volume for
executed in a foreign language? 2022 was estimated to be USD 49.6 billion,
Yes, acquisition documents can be as compared to USD 92.7 billion in 2021 (a
executed in a foreign language, and it is 46.4% decrease).
quite common to execute documents in Due to this downturn, there is a significant
English when one of the parties is foreign. over-supply in the Korean domestic M&A
26. Can acquisition documents be market. There are a number of significant
governed by a foreign law? unsold targets and unfinished IPOs from
2022, while domestic strategic and financial
Yes, acquisition documents can be investors are signaling that they will curtail
governed under a foreign law, while we their activities at least during the first half
note that it is more common to have of 2023, in view of the general economic
Korean law as the governing law in M&A uncertainty. This may present market
documentation concerning Korean targets. opportunities for overseas investors.
27. Are arbitration clauses legally 30. Are any significant development
permissible or generally included in or change expected in the near
acquisition documents? future in relation to M&A in your
Arbitration clauses are legally permitted jurisdiction?
and common in practice. Cross-border A notable development is the planned
deals often include arbitration clauses implementation of the mandatory tender
which may be in Korea or other forums offer (announced in December 2022 by
(often Hong Kong, Singapore, Paris, or other the FSC and slated for regulatory adoption
foreign venues). by 2024), which requires the acquirer of
28. Are there any specific formalities the shares of a listed company to acquire
for the execution of acquisition a certain proportion of shares through a
documents? Is it possible to tender offer when a certain shareholding
remotely/digitally sign documents? threshold in the target is crossed. There
was some criticism that retail investors
No specific formalities exist for executing in Korea are not adequately protected,
documents. Parties may use a signature or a especially when the acquirer cuts a deal
seal, and remote/digital signatures are valid only with the controlling shareholder to
and enforceable as well. acquire the minimum controlling shares,
and not purchase shares from the retail
shareholders, and the new proposal seeks
to remedy this issue.

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SWITZERLAND
MLL LEGAL

Kevin M. Hubacher Ülkü Cibik

Partner Counsel
[email protected] [email protected]

A. General well as share and asset deals are generally

governed by the federal Swiss Code of
1. What is the main legal framework Obligations. Mergers, splits and asset
applicable to companies in your transfers (with exceptions) are subject to
jurisdiction? the Swiss Federal Merger Act. Transactions
Switzerland is a civil law system and concerning shares in listed Swiss companies
organized as a federal state with the state are typically subject to the Swiss Code of
powers being shared between the federal Obligations (if no other governing law was
state (Confederation), the cantons and the chosen by the parties) and, regarding the
communes. The primary source of law is act of disposal, to the Swiss Federal Act on
the legislation of the Confederation, the Intermediated Securities. Transactions in
cantons and the communes. Case law is shares of listed Swiss companies may also
not binding but is of great significance be subject to the Swiss Federal Financial
for the interpretation and application Market Infrastructure Act, the Swiss
of the statutory law. The federal laws Financial Market Infrastructure Ordinance,
govern most of the civil, commercial and the FINMA Financial Market Infrastructure
criminal matters, whereby the laws of the Ordinance and the Takeover Ordinance of
cantons and communes may determine the Swiss Takeover Board (e.g., regarding
the implementation of these federal disclosure of significant shareholdings,
laws. Public matters (including taxes) are public offers, insider trading). The Swiss
governed by both federal laws as well as Code of Obligations is quite flexible
cantonal and communal laws. allowing innovative deal structures and
The establishment and organization of tailored agreements between the parties to
non-listed and listed Swiss companies as a transaction.

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2. What are the most common types in French: la société anonyme) and the
of corporate entities (e.g., joint limited liability company (in German:
stock companies, limited liability Gesellschaft mit beschränkter Haftung; in
companies, etc.) used in your French: la société à responsabilité limitée).
jurisdiction? What are the main There are further types of corporate entities
differences between them (including which are, however, rarely used due to
but not limited to with regard to the their peculiarities (e.g., regarding liability,
shareholders’ liability)? membership rights, distribution of retained
The most common types of corporate earnings). The main differences between
entities used in Switzerland are the the Swiss corporation and the Swiss limited
corporation (in German: Aktiengesellschaft; liability company are as follows:

Aspect Corporation Limited Liability Company

Capital  Minimum amount: CHF 100,000 (or  Minimum amount: CHF 20,000 (or
equivalent in foreign currency) equivalent in foreign currency)
 Minimum paid-in amount:  Minimum paid-in amount:
CHF 50,000 (or equivalent in foreign CHF 20,000 (or equivalent in foreign
currency) currency)
 Maximum amount: not applicable  Maximum amount: not applicable
 Nominal amount: greater than zero  Nominal amount: greater than zero
Types and  Types: registered shares and, subject  Types: registered quota
Forms of Shares to certain requirements, bearer  Forms: registered securities,
/ Quotas shares certificate of proof
 Forms: uncertificated securities,
instrument to order, ledger-based
securities, intermediated securities
Transfer of  Form: based on type and form of  Form: written (wet-ink) assignment
Shares / Quotas share agreement (obligation to transfer is
 Approval: no unless the articles of not bound to form requirement but
association require an approval from act of transfer)
the board of directors  Approval: approval of quotaholders’
meeting required unless the articles
of association waive such approval
requirement
Liability of  Liability of shareholder limited  Liability of quotaholder limited
Shareholders / to the full payment (in cash or as to the full payment (in cash or as
Quotaholders contribution in kind) of the issue contribution in kind) of the issue
price of the shares price of the quotas
 However, articles of association may
provide for obligations to make
additional financial or material
contributions
Publicness of  Identity of shareholders not known  Identity of quotaholders together
Shareholders / to the public with their quotaholding is published
Quotaholders  In principle, shareholders have no in the relevant commercial register
right to access the share register  Transfers of quotas must also
and be informed about the identity be registered with the relevant
of other shareholders and their commercial register
shareholdings
Flexibility of  Higher than limited liability  Lower than corporation
Company Form company
Eligibility for  Yes  No
Listing on a
Stock Exchange

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B. Foreign Investment Investments into Swiss real estate by

foreign investors, whether individuals or
3. Are there any restrictions on foreign legal entities, is subject to a governmental
investors incorporating or acquiring authorization (so-called Lex Koller regime).
the shares of a company in your The Lex Koller regime is applicable
jurisdiction?
regardless of whether the real estate is
To date, Switzerland is a foreign- directly or indirectly (through a legal entity
investment-friendly jurisdiction with holding the real estate) acquired. However,
no specific foreign investment regime the Lex Koller regime does not apply, and
stipulating limitations and/or prohibiting no governmental authorization must
certain investments, subject to limitations be obtained if the real estate serves as a
with regard to investments into real permanent establishment of a commercial,
estate. However, certain companies active manufacturing or other business carried
in regulated industries (e.g., aviation, out in a commercial manner, the conduct
banking, insurance, nuclear energy, of a crafts business or liberal professions.
telecommunication, and radio as well as Thus, a foreign investor intending to
TV) require federal and, in certain cases, acquire a company owning Swiss real
cantonal governmental permits. The estate must assess whether the Lex Koller
issuance of such permits may depend on
regime is applicable or the aforementioned
the nationality or domicile of a foreign
exemption applies.
investor though foreign nationality or
domicile is not per se considered a limiting 4. Are there any foreign exchange
factor. restrictions or conditions applicable
Furthermore, the Swiss parliament to companies such as restrictions to
instructed the Swiss Federal Council in foreign currency shareholder loans?
March 2020 to prepare a draft foreign There are no foreign exchange restrictions
investment regulation, which has been or conditions applicable to Swiss
published on 15 December 2023. The companies, including restrictions on foreign
proposed Swiss Federal Act on the currency shareholder loans. In addition,
Examination of Foreign Investments shall the share capital of Swiss corporations and
prevent takeovers of domestic companies Swiss limited liability companies may be
by foreign investors if these takeovers
denominated in EUR, GBP, USD or JPY.
endanger or threaten public order or
security in Switzerland. Based on the 5. Are there any specific considerations
draft regulations, the foreign investment for employment of foreign
regime is likely to be applied to companies employees in companies
being active in the following sectors: incorporated in your jurisdiction?
goods or intangible assets relevant to
the military, security authorities or space A Swiss company may employ foreign
programs, electricity (power grids, power employees based in foreign jurisdictions.
plants), gas pipelines, water supply, IT Special considerations must be given to the
systems and services (if security-relevant), respective foreign laws and regulations. If
healthcare, transportation, communication a Swiss company decides to hire foreign
infrastructure, financial market employees (other than employees being
infrastructures and banking. We expect nationals of the European Union (EU),
that the proposed Swiss Federal Act on the whereby special rules apply to Croatians,
Examination of Foreign Investments will not or of member countries of the European
come into force prior to 1 January 2026. Free Trade Association (EFTA)) and have

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them come to work (whether for a short caused by their intentional or negligent
or long period) in Switzerland, the Swiss breach of their duties. Any person who has
company must apply for a work permit for the authority to delegate the performance
its employee. The Swiss company must of a task to another person is liable for
prove that the hiring serves the economic any damage caused by the latter, unless
interests of Switzerland and that it was the delegating person can prove that it
not able to find the required personnel exercised due care regarding the selection,
on either the Swiss hiring market or the instruction, and supervision of the
hiring market of the European Union or the delegate. Furthermore, Swiss courts apply
European Free Trade Association. the business judgment rule and restrain
C. Corporate Governance themselves from assessing decisions if (i)
the decision qualifies as a business decision
6. What are the standard management
(as opposed to legal decisions), (ii) the
structures (e.g., general assembly,
deciding body or person was not subject to
board of directors, etc.) in a corporate
a conflict of interest, (iii) the decision was
entity governed in your jurisdiction
made based on appropriate information,
and the key liability issues relating
to these (e.g., liability of the board and (iv) the deciding body or person acted
members and managers)? in good faith and in the honest belief that
the decision is in the best interest of the
The standard corporate bodies of a Swiss company. In case the business judgment
corporation or Swiss limited liability rule applies, Swiss courts will only assess
company are as follows: whether the decision is justifiable in
The members of the board of directors and substance. If the requirements for the
all persons involved in the management application of the business judgment rule
or liquidation of a Swiss corporation are are not met, Swiss courts will review the
liable both to the Swiss corporation and to decision in detail. The same liability regime
the individual shareholders and creditors applies to the management of a Swiss
of the Swiss corporation for any damage limited liability company.

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Aspect Corporation Limited Liability Company

Highest  General meeting of shareholders  General meeting of quotaholders
corporate (sometimes also referred (sometimes also referred
body to as general assembly of to as general assembly of
shareholders) quotaholders)
 General meeting of shareholders  General meeting of quotaholders
has certain non-transferable has certain non-transferable
duties, including, amongst duties (that are more extensive
others, the election of the than those of the general
members of the board of meeting of shareholders
directors and the auditors (if of a Swiss corporation),
required), approval of changes including, amongst others,
in the share capital, and the the election of the auditors
approval of the financial (if required), approval of
statements, and the approval of changes in the quota capital,
dividend distributions the approval of the financial
statements, and the approval
of dividend distributions,
and the determination of
the compensation of the
management
Highest  Board of directors, which consists  Management, which by default
operative of individuals elected by the consists of all the quotaholders
body general meeting of shareholders (no election required)
 Board of directors has certain  Management has certain non-
non-transferable and inalienable transferable and inalienable
duties and is tasked with the duties and is tasked with the
day-to-day management if not day-to-day management, if not
transferred to a management transferred to third parties
body based on organizational
regulations
 In medium and large Swiss
corporations, it is customary
for the board of directors
to delegate the day-to-day
management to a management
body
Audit body  Independent auditors, which are  Independent auditors, which are
elected by the general meeting elected by the general meeting
of shareholders if required by of quotaholders if required
law, chosen by the general by law, chosen by the general
meeting of shareholders or, in meeting of quotaholders or, in
certain instances, required by certain instances, required by
certain shareholders certain quotaholders

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7. What are the audit requirements in If and to which extent an audit is required
corporate entities? regarding a Swiss corporation or a Swiss
limited liability depends on certain
thresholds as follows:

Type of Thresholds Content of Audit

Audit

 Public companies: The auditor assesses whether:

̵ with listed equity securities;  the annual accounts and, if applicable,
̵ having bonds outstanding; consolidated accounts comply with
̵ contributing at least 20% of the the statutory provisions, the articles
assets or turnover to the consolidated of association and the chosen set of
accounts of a company having listed financial reporting standards;
equity securities or bonds outstanding.  the motion made by the board of
 Companies that exceed two of the directors to the general meeting of
following thresholds in two successive shareholders / quotaholders on the
financial years: allocation of the balance sheet profit
̵ balance sheet of total CHF 20 Mio.; complies with the statutory provisions
̵ turnover of CHF 40 Mio.; and the articles of association;
̵ 250 full-time positions on annual  there is an internal system of control;
average.  in case of listed companies: the
 Companies that are required to prepare remuneration report complies with
consolidated financial statements. the statutory rules and the articles of
 If one or more shareholders holding at association.
least 10% of the share capital request an
ordinary audit.
 If the articles of association stipulate
Ordinary audit

the obligation to carry out an ordinary

audit.
 If the general meeting of shareholders
/ quotaholders decides to carry out an
ordinary audit.
 If no ordinary audit is required, except The auditor assesses whether
all shareholders have approved the circumstances exist which indicate that:
waiver of the limited audit, provided,  the annual accounts do not comply
that the company has no more than 10 with the statutory provisions or the
full-time positions on annual average. articles of association; and
 the motion made by the board of
directors to the general meeting
of shareholders / quotaholders on
the allocation of the balance sheet
profit does not comply with the
Limited audit

statutory provisions and the articles of

association.
The audit is limited to conducting
interviews, analytical audit activities and
appropriate detailed inspections.
 If no ordinary audit is required and all  n/a
shareholders have approved the waiver
of the limited audit (requiring that the
No audit

company has no more than 10 full-time

positions on annual average).

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D. Shareholder Rights more members of the board of directors,

which the other shareholders agree to
8. What are the privileges that can elect. However, these privileges cannot be
be granted to shareholders? In incorporated into the corporate documents
particular, is it possible to grant of a Swiss corporation (e.g., articles of
voting privileges to shareholders for association, organizational regulations).
appointment of board members?
The same rules are applicable to a Swiss
As concerns the Swiss corporation, the limited liability company.
principle of equal treatment is applicable.
Thus, the room for privileges for individual 9. Are there any specific statutory rights
shareholders is limited. However, it is available to minority shareholders
possible to grant privileges to one or more available in your jurisdiction?
share classes. These privileges are limited
Shareholders who alone or together hold
to (i) voting rights (there is no possibility
at least (i) 5% of the share capital or the
to stipulate individual veto rights), (ii)
votes of a listed corporation, or (ii) hold at
dividend preferences and (iii) liquidation
least 10% of the share capital or the votes
preferences. Shares granting these
of a non-listed corporation are entitled to
privileges are called voting shares (re voting
require the calling of a general meeting of
rights) and preference shares (re dividend
and liquidation preferences). shareholders. The articles of association
may lower these thresholds. If the board
As regards the voting rights, the articles of of directors does not call a general
association may determine voting rights meeting of shareholders within 60 days,
according to the number of shares held the shareholder(s) may request a court to
by each shareholder, irrespective of the order the calling of a general meeting of
nominal value, so that each share is entitled shareholders.
to one vote (which is customary). Voting
shares have a lower nominal value than Shareholders who alone or together hold
ordinary shares. However, the nominal at least (i) 0.5% of the share capital or the
value cannot be ten times lower than the votes of a listed corporation, or (ii) hold at
value of ordinary shares. Further, in certain least 5% of the share capital or the votes
cases the voting shares are treated equally of a non-listed corporation are entitled to
as the ordinary shares (i.e., re-election of request that items be placed on the agenda
auditors, appointment of experts to audit of a general meeting of shareholders and
the company’s business management, be included in the invitation to a general
instigation of a special investigation, meeting of shareholders. If the board of
launching a liability action). Example: A directors refuses to accept such requests,
shareholder acquires voting shares with a the shareholders may request a court
nominal value of CHF 1.00 for CHF 1,000. to order the board of directors to act
Thus, the shareholder has 1,000 votes. accordingly.
Another shareholder acquiring ordinary
Furthermore, in a non-listed corporation,
shares with a nominal value of CHF 10 for
shareholders who alone or together
CHF 1,000 has only 100 votes.
represent at least 10% of the share capital
The shareholders may agree on further or the votes may request the board of
privileges to be set out in a shareholders’ directors in writing to provide information
agreement. The shareholders’ agreement on company matters. The board of directors
may, for example, provide the right to one must provide the information within four
or more shareholders to nominate one or months.

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Finally, company ledgers and files may be requirement or state the reasons justifying
inspected by shareholders who alone or a denial. The abolition or restriction of the
together represent at least 5% of the share consent requirement requires a resolution
capital or the votes. The board of directors of the general meeting of quotaholders
must permit inspection within four months to be passed by a majority of at least two
of receiving the request. thirds of the votes represented and an
absolute majority of the entire nominal
10. Is it possible to impose restrictions
capital entitled to vote.
on share transfers under the
corporate documents (e.g., articles 11. Are there any specific concerns or
of association or its equivalent in other considerations regarding the
your jurisdiction) of a company composition, technical bankruptcy
incorporated in your jurisdiction? and other insolvency cases in your
jurisdiction?
As concerns a Swiss corporation, the
articles of association may stipulate that There are three stages of financial distress:
the transfer of registered shares is subject (i) insolvency, (ii) capital loss, and (iii) over-
to the approval of the board of directors. indebtedness.
However, denial of the approval is limited Insolvency: The board of directors of a
to the following cases: (i) good cause as corporation or the management of a
set out in the articles of association, (ii) the limited liability company must monitor the
company offers to acquire the shares for the solvency of the company. If the company
company’s own account, for the account of threatens to become insolvent, the board
the other shareholders or of third parties of directors or the management must
at their real value, or (iii) the acquirer fails take measures to ensure its solvency. If
to declare expressly that it has acquired necessary, it must submit an application for
the shares in its own name and for its own a debt-restructuring moratorium.
account. The Swiss Code of Obligations
stipulates that provisions governing the Capital loss: If the last annual financial
composition of the shareholder group statements show that the assets less
which are designed to safeguard the liabilities no longer cover half of the sum of
pursuit of the company’s objects or its (i) the share capital, (ii) the statutory capital
economic independence are deemed to reserve not repayable to the shareholders
constitute good cause. or quotaholders and (iii) the statutory
retained earnings, the board of directors
The resolution of the general meeting (corporation) or the management (limited
of shareholders limiting the transfer of liability company) shall take measures to
registered shares as outlined above requires eliminate the capital loss. If the company
at least two-third of the votes represented has no auditors, the most recent annual
and a majority of the nominal value of the financial statements must be subjected to
shares represented. a limited audit by a licensed auditor before
they are approved by the general meeting
As concerns a Swiss limited liability
of shareholders or quotaholders (except
company, the transfer of quotas requires by
if the board submits an application for a
default the consent of the general meeting
debt-restructuring moratorium).
of quotaholders, which may refuse consent
without stating its reasons. The articles of Over-indebtedness: If there are reasonable
association may deviate from this default grounds for a concern that the company’s
rule and, for example, waive the consent liabilities are no longer covered by its

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assets, the board of directors (corporation) target company, and/or (v) the purchase
or the management (limited liability price shall be paid in cash or shares.
company) shall immediately prepare
In principle, the following three methods to
interim financial statements at going
acquire a business exist: (i) share transfer, (ii)
concern value and at realizable value
asset transfer, or (iii) merger. In some cases,
(certain exceptions may apply). The interim
a carve-out of the targeted business is
financial statements must be audited
carried out by the sellers and the shares of
by a licensed auditor. If the company
the carved-out entity are transferred to the
is overindebted according to the two
buyer. The acquisition of listed companies
interim financial statements, the board of
is mainly done through a transfer. Seldomly,
directors or the management must notify
the acquisition of listed companies is
the court. The court will open bankruptcy
carried out through a merger (typically a
proceedings or suspend the decision on
merger by absorption).
bankruptcy if there are indications of an
immediate restructuring or the conclusion 13. What are the advantages and
of a debt restructuring agreement. disadvantages of a share purchase
as opposed to other methods?
No notification of the court is required if:
Share (quota) deals are typically more
 if company’s creditors subordinate
straightforward than asset deals given
their claims to all other creditors to the
that they are less complex than asset
extent of the over-indebtedness and
deals (see below). In addition, in case of a
defer their claims, provided that the
share deal, Swiss resident individuals not
subordination covers the amount owed
qualifying as professional securities traders
and the interest claims for the duration
may generate a tax-free capital gain (see
of the over-indebtedness; or
question 24). Furthermore, sellers of shares
 as long as there is a reasonable or quotas are no longer liable to third
prospect that the over-indebtedness parties regarding liabilities and obligations
can be remedied within a reasonable of the company.
period of time, but no later than 90
In contrast, asset deals are more complex.
days after the audited interim financial
They can either be carried out based on
statements are available, and that the
singular succession, which requires that
creditors’ claims are not additionally
each counterparty of an agreement with,
jeopardized.
or a claim against, the target agrees to
E. Acquisition the asset transfer, or based on universal
succession. In the latter case, however, the
12. Which methods are commonly used
target is jointly and severally liable with the
to acquire a company, e.g., share
buyer for the debts incurred prior to the
transfer, asset transfer, etc.?
transfer of assets for a period of three years.
The method chosen to acquire a company Furthermore, Swiss resident individuals
depends on various considerations, cannot generate a tax-free capital gain
including, without limitation, whether (i) given that the target typically distributes
the sellers can generate a tax-free capital the purchase price as dividend, which is
gain, (ii) the sellers shall continue to be subject to withholding and income tax.
invested in the buying entity, (iii) the whole Finally, asset deals may be interesting if the
or only a part of the business shall be buyer does not want to take over certain
acquired, (iv) the risks associated with the risks existing within the target company.

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A merger is another possible acquisition institutes and insurance companies or

method. However, this typically requires the Swiss Federal Office of Public Health
a Swiss acquisition company as cross- for the acquisition of health insurance
border mergers may be difficult to companies, (iv) approval of the Swiss
implement. Further, shareholders of the Takeover Board in takeover situations.
transferring company (target) have a
- Third-party consents: (i) in case of a
right to share or membership rights in
share transfer third-party consents are
the acquiring company (buyer). However,
only required if third-parties and the
the merger agreement may stipulate that
target agreed to a change of control
the shareholders of the target are only
clause, and (ii) in case of asset transfers,
paid a compensation, which requires, the consent of third-parties with which
however, the approval of at least 90% of the the target has an ongoing contractual
shareholders of the target entitled to vote. relationship is required unless the asset
14. What are the approvals and transfer is carried out on the basis of the
consents typically required (e.g., Swiss Merger Act by way of universal
corporate, regulatory, sector succession and not based on the Swiss
based and third-party approvals) Code of Obligations based on singular
for private acquisitions in your succession (i.e., individual transfer of
jurisdiction? each contract).

The approvals and consents required 15. What are the regulatory
are heavily dependent on the individual competition law requirements
transaction. However, the following applicable to private acquisitions in
approvals and consents are customary: your jurisdiction?

- Corporate approvals: (i) approval of In general, the thresholds triggering

the transfer of shares by the board the scrutiny of the Swiss Competition
of directors (if any) or the transfer of Commission with regard to M&A
quotas by the general meeting of transactions are rather high compared to
quotaholders (if not waived), and (ii) other jurisdictions:
approval of the general meeting of M&A transactions must be notified to the
shareholders or the general meeting of Swiss Competition Commission prior to
quotaholders in case of an asset transfer their implementation if in the financial
which results in the transfer of essential year preceding the M&A transaction, (i) the
operating resources required for the involved companies generated a turnover
continued operation of the company. of at least CHF 2 billion worldwide or a
- Regulatory: (i) approval of the Swiss turnover in Switzerland of at least CHF 500
Competition Commission (subject Mio. and (ii) if at least two of the involved
companies each generated a turnover in
to reaching certain thresholds), (ii)
Switzerland of at least CHF 100 Mio.
approval of the relevant cantonal
authority if the target owns a real estate However, and notwithstanding the above,
or the assets to be transferred include the notification of the Swiss Competition
a real estate which does not qualify Commission is mandatory if one of the
as permanent establishment (see involved companies has been qualified
question 3), (iii) approval of the Swiss by a final and non-appealable decision
Financial Market Supervisory Authority as holding a dominant position in a
FINMA for the acquisition of financial market in Switzerland and if the M&A

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transaction concerns such market or an not to disclose all the deal details (e.g.,
adjacent market, an upstream market or a purchase price, liability rules etc.).
downstream market thereof.
18. Can sellers be restricted from
16. Are there any specific rules shopping around during a
applicable for acquisition of public negotiation process? Is it possible
companies in your jurisdiction? to include break fee or other
penalty clauses in acquisition
The acquisition of shares in public
documents to procure deal
companies listed on a Swiss stock exchange
exclusivity?
is subject to the Swiss Federal Market
Infrastructure Act, the Swiss Financial In general, parties benefit from the
Market Infrastructure Ordinance and the principle of the freedom of contract. Hence,
FINMA Financial Market Infrastructure they are free to enter into or terminate
Ordinance (e.g. regarding disclosure negotiations at any time without any
obligations). Public (voluntary as well as liability and without having to give a
mandatory) takeovers of public companies reason for such termination. However,
domiciled in Switzerland or domiciled parties who do not act in good faith cannot
abroad but whose equity securities are benefit from the principle of the freedom
primarily listed on a Swiss stock exchange of contract. Parties to a negotiation are
are also subject to the aforementioned laws obliged to seriously negotiate and to
and regulations in addition to the Takeover disclose their intentions (e.g., continuing
Ordinance of the Swiss Takeover Board. the negotiation although a party already
Furthermore, the rules and directives of the knows that it is no longer interested in
relevant stock exchange have to be taken the transaction or giving the impression
into account as well (e.g., rules on ad-hoc that the relevant corporate body has
publicity or management transactions). approved the transaction although this is
not the case is a violation of the good faith
17. Is there a requirement to disclose principle). A party which violates the good
a deal, for instance to regulatory faith principle may be subject to fidelity
authorities? Is it possible to keep a liability (based on the principle of the culpa
deal confidential? in contrahendo). However, cases brought
Whether a deal has to be disclosed to against a party based on fidelity liability are
regulatory authorities depends on the extremely rare. If a respective claim would
individual case. In certain instances, the be successful, the party subject to fidelity
deal may have to be disclosed to (i) the liability would have to cover the damages
Swiss Competition Commission (see incurred by the other party and hold the
question 15), (ii) the Swiss Financial Market other party harmless as if the negotiations
had not been carried out.
Supervisory Authority (regarding banks and
insurance companies), as well as (iii) the Given that a claim based on fidelity
relevant cantonal authority if the transfer liability is rare and rather difficult to prove,
of real estate is subject to an approval parties may agree on break fees and other
requirement (see question 3). Finally, if penalty clauses to procure deal exclusivity.
quotas are being transferred, the deal must The amount of the break fees and other
be disclosed to the relevant commercial penalties could be decreased by a court.
register and the documents filed with Finally, in the context of the acquisition of
the commercial register will be publicly public companies, special rules have to be
accessible. However, there are methods considered regarding (reverse) break fees.

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19. What are the conditions precedent minimum pricing for shares of a
in a typical acquisition document? target company in an acquisition?
Is it common to have conditions to
In case of the acquisition of shares or
closing such as no material adverse
quotas of non-listed Swiss companies, there
change?
is no requirement to set a minimum price.
Conditions precedent are typically
highly dependent on the individual In case of mandatory offers and change of
case. It is, however, customary to control offers regarding listed companies,
include the condition that all necessary the minimum price rules apply. The
approvals (if any) by any governmental minimum price must be at least equal to
authorities or third parties with respect the higher of the following two amounts
to the transactions contemplated by the (i) the stock exchange price or (ii) the
acquisition document have been granted highest price paid by the offeror for equity
without any restrictions. The inclusion securities of the target company in the last
of material adverse change clauses is twelve months.
only customary with regard to larger 22. What types of acquisition financing
private transactions and public takeover are available for potential buyers in
transaction. your jurisdiction? Can a company
20. What are the typical warranties provide financial assistance to a
and limitations in acquisition potential buyer of shares in the
documents? Is it common to obtain target company?
warranty insurance?
The type of acquisition financing chosen
Typical warranties and limitations in the depends on the individual case. The
context of share and quota transaction buyer may choose (i) leveraged buyouts
cover the following matters: seller’s including the issuance of high-yield notes
authority, title to shares, corporate or the placement of term-loans, (ii) debt
existence, no breach due to transaction, arrangements including working capital
financial information, assets, real property, facilities, (iii) bridge financing or (iv)
tax matters, material contracts, IP rights, domestic bank financing.
social security matters, employment
matters, compliance, insurance, litigation Swiss law does not stipulate specific rules
and investigations, data protection, and on the provision of financial assistance.
broker fees. Additional representations However, there are certain corporate law
and warranties may be required based and tax law limitations which must be taken
on the individual case (e.g., regarding into consideration. In general, the Swiss
environmental matters, sanctions, cartels, target must provide financial assistance
ESG etc.). based on at arm’s lengths conditions
(i.e., with interest and collaterals) and the
In mid- and large-sized transactions it purpose as set out in the target’s articles of
is customary to obtain warranty and association must allow financial assistance.
indemnity insurances. Typically, the buyer If the financial assistance is not provided
would take out the insurance which at arm’s length terms, the Swiss target may
provides the buyer with the advantage to only grant a guarantee or provide financing
be able to directly raise a claim against the
upstream or cross-stream if (i) the target
insurer without having to approach the
has enough freely distributable equity, and
sellers.
(ii) the relevant corporate approvals, and if
21. Is there a requirement to set a required, an auditors’ report, were obtained.

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23. What are the formalities and There are no general incentives available
procedures for share transfers and for M&A transactions in Switzerland.
how is a share transfer perfected? However, Swiss resident individuals selling
shares or quotas and who do not qualify as
The procedure to transfer a share or quota professional securities traders may benefit
depends on the form of the issued shares from a tax-free capital gain, which makes
(uncertificated securities, instruments Switzerland very attractive for sellers.
to order, ledger-based securities,
intermediated securities) or the issued F. Enforceability
quota (registered securities, certificate of 25. Can acquisition documents be
proof ): executed in a foreign language?

Form of Share / Quota Transfer Procedure

Uncertificated securities  Assignment declaration executed by wet ink signature
(shares and quotas (also if
a certificate of proof was
issued))
Instruments to order (share) Transfer of the possession of the instrument and:
or registered securities  in case of instruments to order, an endorsement;
(quota)  in case of registered securities, a written declaration,
which must not be made on the instrument itself.
Ledger-based securities  The transfer is subject to the provisions set out in the
(share only) registration agreement.
Intermediated securities A disposition of intermediated securities may be effected
(share only) by:
 an instruction from the account holder to its custodian
to transfer the intermediated securities; and
 a credit of the intermediated securities to the
acquirer’s securities account.

The transfer may require the approval of Yes, acquisition documents can be
the board of directors (in case of shares) executed in a foreign language. Switzerland
or of the general meeting of quotaholders has four official languages: German, French,
(in case of quotas) (see question 10). Italian, Romansh. If a term cannot be
Furthermore, the transfer of quotas must properly translated into a foreign language
be registered with the relevant commercial (e.g., English), it is common to indicate the
register. However, the commercial register term in one of Switzerland’s four official
entry has no constitutive effect (i.e., the languages in brackets to help interpreting
transfer is effective regardless of the the contract.
registration in the commercial register). 26. Can acquisition documents be
governed by a foreign law?
24. Are there any incentives (such
as tax exemptions) available for In principle, acquisition documents can be
acquisitions in your jurisdiction? governed by foreign law. This applies to a

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share purchase agreement, quota purchase to effect the transfer of quotas must both
agreement, asset transfer agreement and be executed in wet ink or by qualified
the merger agreement. The possibility electronic signature. Furthermore, the
to choose the law governing the act of merger agreement must also be executed
disposal (i.e., the act effecting the transfer in wet ink or by qualified electronic
of the shares or assets) may be limited signature. In addition, further formalities
or, in case of mandatorily applicable may have to be adhered to depending on
corporate law processes, excluded (e.g., re the individual case (e.g., the resolutions
mergers, splits, asset transfers according of the general meeting of shareholders
to the Swiss Merger Act, public takeovers). regarding a merger must be notarized;
Regardless of the above, it is customary and real estate purchase agreement must be
recommended that acquisition documents notarized).
regarding M&A activities in Switzerland are
G. Trends and Projections
governed by statutory Swiss law, which is
quite flexible. 29. What are the main current trends in
M&A in your jurisdiction?
27. Are arbitration clauses legally
permissible or generally included in We are cautiously optimistic about the
acquisition documents? M&A activities in Switzerland in 2025.
Switzerland’s economy is still quite stable
Yes, arbitration clauses are legally with low inflation rates. However, deal
permissible. There are no official statistics as financing will be a challenge and will
to the frequency of arbitration clauses used impact the valuations and potentially the
in M&A transaction documents. In domestic deal structures (e.g., putting more weight
M&A transactions, it is not very common on deferred payments, earn-outs and
to include arbitration clauses. However, seller’s loans). Furthermore, actions by the
in international M&A transactions, it is Trump administration may adversely affect
rather customary to agree on an arbitration foreign investment into Switzerland. We
clause. expect that strategic players will dominate
28. Are there any specific formalities the M&A landscape and that 2025 will still
for the execution of acquisition be a buyer market. Furthermore, we expect
documents? Is it possible to that mid-market deals will be more strongly
remotely/digitally sign documents? represented than large cap deals and
that there will be again a strong need for
The specific formalities depend on the restructuring activities.
type of the acquisition. Share purchase
agreements, if governed by Swiss law, do Public M&A activities are expected to
not need to be executed in wet ink and can continue to be low. Foreign companies,
be executed remotely/digitally. However, particularly Chinese companies, showed
increased interest in listing global
the assignment declaration to effect the
depository receipts (GDRs). We expect
transfer of the shares must be executed
additional listing of global depository
in wet ink or by a qualified electronic
receipts, but do not anticipate large
signature (i.e., an electronic signature using
volumes.
an officially recognized provider; Adobe
or DocuSign are not officially recognized Finally, we expect extended due diligence
providers). In contrast, the quota purchase procedures, addressing in particular
agreement and the assignment declaration compliance with the tightened Swiss data

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protection regulations and ESG standards. M&A transactions, subject to the potential
If and to what extent AI will shape M&A due introduction of a foreign investment
diligence remains to be seen. regime as noted under chapter B above. In
addition, we expect that environmental,
30. Are any significant development
social and governance (ESG) aspects may
or change expected in the near
gain importance in the context of M&A
future in relation to M&A in your
transactions, including, without limitation,
jurisdiction?
with respect to the due diligence, reporting
As of the date of this publication, we do obligations and/or further obligations to
not expect any significant changes or be set out in shareholders’ agreements and
developments of the legal and regulatory investment agreements.
environment in Switzerland with regard to

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TAJIKISTAN
GRATA

Bahodur Nurov
Senior Associate
[email protected]

A. General 2. What are the most common types

of corporate entities (e.g., joint
1. What is the main legal framework stock companies, limited liability
applicable to companies in your companies, etc.) used in your
jurisdiction? jurisdiction? What are the main
The most relevant legal acts for companies differences between them (including
but not limited to with regard to the
in Tajikistan include: (i) the Civil Code, (ii)
shareholders’ liability)?
the Tax Code, (iii) the Registration of Legal
Entities and Individual Entrepreneurs Act, A branch office or limited liability company
(iv) the Competition Protection Act, (v) the is the most popular and widely used type
Limited Liability Companies Act, and (vi) of corporate entity form. Mostly, foreign
the Joint Stock Companies Act. parties choose to register a branch or a
limited liability company if it aligns with
Besides the aforementioned laws, there their intended activity. The only distinction
are several other regulations that may relates to the taxation of profits.
apply, depending on the specific business
activities a company undertakes within B. Foreign Investment
Tajikistan.” 3. Are there any restrictions on foreign
Additionally, after reviewing the investors incorporating or acquiring
information in our guide section and the shares of a company in your
jurisdiction?
the current legal framework, we have
not identified any significant updates or There are no legal limitations on foreign
developments that need to be added to the investors forming a company or purchasing
guide. shares of a company. Although that hasn’t

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happened in our practice, it is possible that D. Shareholder Rights

there are some unwritten restrictions that
weren’t made known to the public, and 8. What are the privileges that can
only made known when relevant party be granted to shareholders? In
approaches the authorities. particular, is it possible to grant
voting privileges to shareholders for
4. Are there any foreign exchange appointment of board members?
restrictions or conditions applicable
to companies such as restrictions to A limited liability company’s highest
foreign currency shareholder loans? governing body is the general meeting
of participants. The general meeting of
Restrictions only apply to domestic loans;
participants has sole authority over the
such loans must be in national currency.
appointment of the board of directors.
There are no restrictions on foreign loans.
In addition to their statutory rights,
5. Are there any specific considerations the general meeting of participants’
for employment of foreign competence may also be expanded in
employees in companies accordance with internal documents in
incorporated in your jurisdiction? other areas (charter, by-laws, foundation
agreement, etc.).
Yes. The companies are required to obtain
a license (which entails having in-house 9. Are there any specific statutory rights
lawyer), and comply with specified quota, available to minority shareholders
which is determined annually at the start available in your jurisdiction?
of second quarter while the employees are
required to obtain work permits. There are currently no special statutory
rights available to minorities in Tajikistan,
C. Corporate Governance in contrast to the majority of international
6. What are the standard management states that have given minority
structures (e.g., general assembly, shareholders special legal protections.
board of directors, etc.) in a corporate 10. Is it possible to impose restrictions
entity governed in your jurisdiction on share transfers under the
and the key liability issues relating corporate documents (e.g., articles
to these (e.g., liability of the board of association or its equivalent in
members and managers)? your jurisdiction) of a company
While joint stock firms with more than incorporated in your jurisdiction?
fifty shareholders must have a board of In general, a participant of a limited liability
directors, limited liability companies and company has the legal right to withdraw
joint stock companies with less than fifty at any moment, without the approval of
owners are free to pick their management other participants. The withdrawal term
structures. Therefore, a CEO-only declaration may be determined by the
organization is the most common type of constituent documents since it is not
management structure.
explicitly stated by law.
7. What are the audit requirements in
If a participant decides to withdraw, the
corporate entities?
share will be transferred to the company
The audit is not mandatory. An audit can as soon as a withdrawal application is
be carried out at the request of participants submitted. In addition, the company is
for the limited liability company or required to pay the participant the actual
shareholders for the joint stock companies. value of the share, as determined by

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accounting data for the year in which the A share purchase has some limits and/or
application was submitted, or, with the conditions that must be met as a drawback.
participant’s consent, to provide property A change in the shareholding structure,
in kind of the same value. In the event for instance, necessitates the company to
that the contribution to the company’s go through the so-called “re-registration”
authorized capital is not fully paid, the process, which could take several months
actual value of the part of the participant’s and necessitates communicating with the
share, proportionate to the paid part of the state authorities. If thresholds are met,
authorized capital, is also due. obtaining an approval from governmental
agencies is necessary for a share purchase.
11. Are there any specific concerns or
other considerations regarding the 14. What are the approvals and
composition, technical bankruptcy consents typically required (e.g.,
and other insolvency cases in your corporate, regulatory, sector
jurisdiction? based and third-party approvals)
Technical bankruptcy is not defined under for private acquisitions in your
the current laws. The debtor’s formal jurisdiction?
bankruptcy (insolvency) is announced For general sector, corporate (approval of
at the general meeting of creditors, or appropriate body (if required by company
it is resolved in court. Apart from this, bylaws)) and competitive (if triggered), and
there are no other significant issues or for finance in addition to competitive (if
matters to be thought about in relation triggered) approval of the National Bank of
to the aforementioned; nonetheless, each Tajikistan is required.
situation should be considered separately
due to the various factors and elements 15. What are the regulatory
involved. competition law requirements
applicable to private acquisitions in
E. Acquisition your jurisdiction?
12. Which methods are commonly used There are two triggers:
to acquire a company, e.g., share
transfer, asset transfer, etc.? 1. If the total book value of the acquirer
is USD 685,640 in 2025, The amounts
The most commonly used method to have changed due to the fact that
acquire a company is through share in 2025 the settlement figure has
purchase. increased from 72 to 75 TJS (this is
13. What are the advantages and approximately from USD 6.58 to USD
disadvantages of a share purchase 6.86). The acquirer is required to notify
as opposed to other methods? the Antitrust Service within 15 days
following the transaction; and
Gaining ownership of the business and
reaping the rewards of participation, 2. If the total book value of the acquirer
including the possibility of dividends, is USD 1,371,279 in 2025. The amounts
simplicity of share transfer, and statutory have changed due to the fact that
ownership rights, is the main benefit of in 2025 the settlement figure has
buying shares. Other strategies entail increased from 72 to 75 TJS (this is
buying assets that don’t give you direct approximately from USD 6.58 to USD
control over the business, which restricts 6.86). The acquirer is required to apply
your options and the advantages of being a for preliminary consent from the
shareholder. Antitrust Service.

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While reviewing the documents if the 19. What are the conditions precedent
notification requirement is triggered, there in a typical acquisition document?
is a possibility that the Antitrust Service Is it common to have conditions to
may deem that the transaction requires closing such as no material adverse
its preliminary consent rather than just change?
notification. Likewise, in some cases,
A full list of the conditions precedent (“CP”)
Antitrust Service may require the provision
used in a typical acquisition document
of additional documents and information.
cannot be created due to a number of
16. Are there any specific rules elements and circumstances. Typically, it
applicable for acquisition of public relies on the industry, the target company’s
companies in your jurisdiction? activity range, its assets, and other factors.
CPs regarding the following are most likely
There are certain regulations that apply to
to be included by a firm ready to move
public firms (if they are open joint stock
forward with the purchase of a target
companies that are listed) regarding the
company:
listing of shares and the subsequent sale
and/or purchase of those shares via the (i) Regulatory approvals (if required); (ii)
stock market. The stock exchange market, Third-party consents (such as those of
however, is still in its infancy, therefore the target company’s current creditors);
there is still considerable room for (iii) Target company due diligence
development and problems that need to be (including legal, financial, and/or tax); (iv)
resolved. The Central Asian Stock Exchange Representations, warranties, and covenants
(local stock exchange), where public firms (common negative covenants might not
are normally listed, has its own set of rules be enforceable in Tajikistan due to conflict
and regulations governing how it runs and with the statutory provisions of the law);
how listed companies handle share trading. and (v) Other CPs as determined by a
17. Is there a requirement to disclose prospective buyer.
a deal, for instance to regulatory Conditions for closing, including the
authorities? Is it possible to keep a absence of any major adverse change, are
deal confidential? frequently included. The majority of the
If competition law requirements are CPs listed above are not usually included
triggered, the deal must be disclosed to in local transactions because not all of
the antitrust services, other than that, there them can be enforced under Tajik law.
are no requirements to disclose the deal to Nonetheless, such CPs are frequently
third parties. utilized in transactions involving local
parties that are controlled by foreign law.
18. Can sellers be restricted from
shopping around during a 20. What are the typical warranties
negotiation process? Is it possible and limitations in acquisition
to include break fee or other documents? Is it common to obtain
penalty clauses in acquisition warranty insurance?
documents to procure deal
It is typical to contain warranties and
exclusivity?
restrictions relating to the change in
The parties are free to choose the terms control, the lack of any liens or other claims
of the agreement if it complies with the secured by the assets, and the absence of
provisions of the country whose law was any current or pending litigation. Other
the law was chosen as the governing law. guarantees and limits may exist, but not

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all of them may be used or enforced in 24. Are there any incentives (such
accordance with Tajik laws. Due to the fact as tax exemptions) available for
that some of the shareholders’ rights are acquisitions in your jurisdiction?
statutory in nature and cannot be negated
No. There are no incentives.
by any contractual restrictions, common
negative covenants that would prevent F. Enforceability
shareholders from choosing whether to
25. Can acquisition documents be
alienate shares to other parties cannot be
executed in a foreign language?
implemented.
Yes. But recommended practice is to have
We have not encountered the use of
documents bilingual (foreign language and
insurance; the more common alternative is
Tajik language), as the documents have
to have a guarantor.
to be translated into Tajik language and
21. Is there a requirement to set a translation notary certified for them to be
minimum pricing for shares of a considered by the state authorities.
target company in an acquisition?
26. Can acquisition documents be
By law, no. However, if the price is too low, governed by a foreign law?
this may draw unwanted attention from Yes. Acquisition documents can be
the tax authorities, therefore, the price governed by a foreign law.
must not be lower than the market price for
similar companies. 27. Are arbitration clauses legally
permissible or generally included in
22. What types of acquisition financing acquisition documents?
are available for potential buyers in
your jurisdiction? Can a company Arbitration clauses are legally permissible,
provide financial assistance to a binding and generally included in
potential buyer of shares in the agreements with foreign parties.
target company? 28. Are there any specific formalities
These types of financing are not practiced for the execution of acquisition
in Tajikistan. Acquisition transpires through documents? Is it possible to
direct purchase of the shares via share remotely/digitally sign documents?
purchase agreement. There are no specific formalities other than
23. What are the formalities and those mentioned above. The documents
procedures for share transfers and can be signed remotely, but it has to be
how is a share transfer perfected? signed in wet ink and not e-signature (e.g.,
docusign), since currently, e-signature is not
A share purchase agreement must be as widely recognized by the state bodies.
finalized in writing and signed with wet ink.
A power of attorney (from the alienated G. Trends and Projections
and/or receiving party) may be used to 29. What are the main current trends in
appoint representatives. M&A in your jurisdiction?
The new shareholder is required to submit The government has made significant
a filing with the regulatory body following strides in the privatization of state-owned
the completion of the transaction in assets and inviting foreign investors to
order to introduce the necessary changes become joint owners with the government
to the register to reflect the change in ever since the dissolution of the Soviet
shareholder. Union.

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Due to the richness of various natural

resources in Tajikistan, there has been
substantial advancement in the mining
industry, with several mining businesses
being invested into by foreign investors and
co-owned with the government.
30. Are any significant development
or change expected in the near
future in relation to M&A in your
jurisdiction?
Unfortunately, the lawmaking processes
are not transparent, therefore, we cannot
tell whether there are any changes are
expected in the near future.

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TÜRKİYE
ERGÜN AVUKATLIK BÜROSU

Lara Sezerler Irmak Yensel Nergiz Melis Kaim Begüm Şen

Partner Senior Associate Associate Associate
[email protected] [email protected] [email protected] [email protected]

A. General authorities include the Trade Registries,

the Competition Authority of Türkiye
1. What is the main legal framework (“Competition Authority”), and, for public
applicable to companies in your companies, the Capital Markets Board of
jurisdiction? Türkiye (“Capital Markets Board”).
The main law applicable to companies in 2. What are the most common types
Türkiye is the Turkish Commercial Code No. of corporate entities (e.g., joint
6102, which governs corporate governance stock companies, limited liability
and transactions such as mergers, share companies, etc.) used in your
purchases, spin-offs, and carve-outs. In jurisdiction? What are the main
addition, the Turkish Code of Obligations differences between them (including
No. 6098 (regarding contractual relations but not limited to with regard to the
between companies), the Capital Markets shareholders’ liability)?
Law No. 6362 (applicable to public
companies), and the Law on the Protection The most common corporate entity types
of Competition No. 4054 (addressing anti- used in Türkiye are (i) joint stock companies
(“JSCs”) and (ii) limited liability companies
competitive conduct) are also key laws.
(“LLCs”).
Companies operating in certain regulated
Main differences between such corporate
sectors in Türkiye may be subject
entity types are as follows;
to additional restrictions or permit
requirements under legislation specific - Initial share capital: Initial capital of
to those sectors, such as banking or TRY 250,000 (for non-public registered
the energy market (electricity, natural capital JSCs the minimum capital
gas, petroleum, etc.). Key regulatory amount is TRY 500,000) is required for

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the incorporation of JSCs, while initial transfer document must be notarized.

capital of TRY 50,000 is required for the On the other hand, the shares of a JSC
incorporation of LLCs. can be represented by share certificates
(or temporary share certificates)which
- Shareholders’ Liability: In JSCs and
may be issued in registered bearer form,
LLCs, shareholders’ liability is limited
which facilitates the process of share
to their capital contribution to the
transfer. Nevertheless, to effectuate the
company, save for (only for LLCs)
transfer of registered shares for which
any additional payment obligations
the subscription amount has not been
under certain circumstances (e.g., in
fully paid, the approval of the JSC is
the event of financial difficulty) and
mandatory. Unless otherwise provided
other ancillary obligations which
in the articles of association, no further
the shareholders may set forth in
restrictions imposed on share transfers
the articles of association of LLCs.
in JSCs.
Furthermore, concerning the tax and
social security debts, a distinction arises B. Foreign Investment
in the liability borne by shareholders
3. Are there any restrictions on foreign
of LLCs and JSCs. In LLCs, shareholders
investors incorporating or acquiring
have secondary liability for outstanding
the shares of a company in your
taxes (i.e., public claims) with their
jurisdiction?
personal wealth but limited to their
shareholding percentage. Broadly speaking, Turkish legislation
generally allows foreign investment
- Managers/Boards of Directors
in Türkiye. There are some restrictions
Liability: LLCs and JSCs are regulated
in certain sectors such as aviation,
in the same manner. In LLCs and JSCs,
broadcasting and maritime activities.
the managers/board members and
Furthermore, it is worth noting that both
representatives have secondary liability
foreign and Turkish companies are subject
for outstanding taxes and they may
to certain restrictions on the acquisition
also, together with the company and
of real estate in Türkiye. Accordingly, a
authorized representatives of the
purchaser may need to obtain specific
company, be held jointly and severally
regulatory approvals depending on the
liable to the Social Security Institution
location of real property owned by a target
for social security debts.
company, for instance, in military zones
- Transfer of Shares and Share Transfer and prohibited zones. Apart from these,
Restriction: The shares of an LLC there is a requirement to notify the Ministry
can be represented by registered of Industry and Technology of any foreign
share certificates (or alternatively, by direct investment in a Turkish company,
certificates which can only be used for through an online system E-TUYS, for
evidentiary purposes). Unless otherwise informational purposes.
provided in the articles of association,
4. Are there any foreign exchange
any transfer of shares in an LLC shall be
restrictions or conditions applicable
approved by affirmative votes of the
to companies such as restrictions to
majority of those attending the general
foreign currency shareholder loans?
assembly of shareholders meeting –
such approval is a prerequisite for the In recent years, the Turkish Government
intended share transfer to become took several measures, including
effective. It should also be noted that enforcement of foreign currency borrowing

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restrictions, to procure Turkish Lira to C. Corporate Governance

gain its strength. The Decree No. 32 on
the Protection of the Value of Turkish 6. What are the standard management
Currency and Capital Movements Circular structures (e.g., general assembly,
regulate and set forth the principles for board of directors, etc.) in a corporate
the determination of the value of Turkish entity governed in your jurisdiction
currency against foreign currencies. This and the key liability issues relating
legislation sets forth specific restrictions to these (e.g., liability of the board
on obtaining foreign currency loans from members and managers)?
abroad or locally, if they are not generating
The executive body of a corporate entity
any foreign currency income and if the
is the board of directors for JSCs and the
entities or if their operations do not benefit
managers for LLCs, consisting of one or
from an exemption under the legislation.
more members, who may be real persons or
But this legislation should be checked
legal entities. In LLCs, at least one manager
consistently as it is constantly being
amended. must be a shareholder of the company.

Additionally, pursuant to the Communiqué There is no requirement for board members

numbered 2008-32/34 on Decree or managers to be Turkish residents or
numbered 32, banks are obliged to notify nationals. They owe a duty of care to
Turkish Central Bank within 30 days as of the company and must act as prudent
any wire transfers abroad in relation to managers, protecting the company’s
import and/or export activities and invisible interests. Without the approval of the
transactions, with a balance equal to USD general assembly, they are prohibited
50,000. from entering into transactions with
the company on their own behalf or on
5. Are there any specific considerations
behalf of third parties. If board members
for employment of foreign
or managers breach their obligations
employees in companies
with fault, they may be held liable for
incorporated in your jurisdiction?
any damages caused to the company, its
Foreign persons shall obtain a work permit shareholders, or its creditors. Directors and
to legally stay and work in Türkiye. For officers’ liability insurance may be obtained
the foreign persons to work in a company to mitigate such risks. However, this
in Türkiye, such company shall make an insurance only protects the insured party,
application to the Ministry of Labor and which may in some cases be the company
Social Services and follow all procedures itself.
with the Ministry, on behalf of these
employees. As of October 2024, work General assembly or shareholders have
permit evaluation criteria were updated the ultimate control over matters, such
to revise the employment, financial as amending the articles of association,
adequacy, and salary requirements, and increasing and decreasing share capital,
new provisions were introduced based on appointment of the board of directors
the sector, profession, or job type of foreign in JSCs/managers in LLCs, resolving on
employees. dividend distribution.

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7. What are the audit requirements in the board of directors or by shareholders

corporate entities? holding 10% of the company’s share capital
(and 5% for publicly held companies), if
Companies which meet at least two of the
there are just grounds for replacement.
following conditions for two consecutive
fiscal years are also subject to independent D. Shareholder Rights
audit:
8. What are the privileges that can
• active assets valued at TRY 150 million be granted to shareholders? In
(TRY 30 million for companies whose particular, is it possible to grant
capital market instruments are not voting privileges to shareholders for
traded on a stock exchange or other appointment of board members?
organized markets, but are considered
Under the Turkish Commercial Code,
public within the scope of the Capital
shareholders are entitled to both personal
Markets Board) or more;
(participation in general assembly meetings,
• annual net sales revenue of at least TRY voting rights, right to information, right
300 million (TRY 40 million for compa- to request special audit) and financial
nies whose capital market instruments rights (pre-emption rights, right to receive
are not traded on a stock exchange or dividends). The Turkish Commercial Code
other organized markets, but are con- permits shareholders to grant certain
sidered public within the scope of the privileges to shares or share groups,
Capital Markets Board) or more; and regarding dividends, liquidation shares,
pre-emptive rights and voting rights.
• at least 150 (50 for companies whose These rights are conferred on the shares
capital market instruments are not themselves and not directly on the
traded on a stock exchange or other shareholders. In this regard, privileges may
organized markets, but are considered be assigned by creating a specific class
public within the scope of the Capital of shares, with such privileges expressly
Markets Board) employees. stipulated in the articles of association. As
a rule, one share carries one voting right
Additionally, regardless of these conditions,
in general assembly meetings. However, it
companies that actively operate in certain
is possible to create privileged shares and
sectors as listed under a relevant decree
grant up to fifteen voting rights per share
– such companies which are subject to to a specific share group.
regulation and supervision of the Turkish
Capital Markets Board, banks, other The articles of association may set forth
financial institutions etc. are subject to an that certain or all general assembly
independent audit. resolutions be adopted by affirmative votes
representing a specific percentage of the
The general assembly of a company share capital, provided that such thresholds
appoints an auditor each year. The identity are not lower than those prescribed by
of the auditor is registered before the the Turkish Commercial Code. In a similar
trade registry and announced in the manner, the articles of association may
Trade Registry Gazette. The auditor may include provisions requiring that certain
be replaced during their term of office board of directors’ resolutions be adopted
(within three weeks’ time following the by a supermajority of board members.
announcement of the appointment of the Another voting privilege that can be
auditor in the Trade Registry Gazette) only granted to shares is in relation to the
by a court decision upon the request of composition of the board, where a right to

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nominate a certain number of directors can As per the Turkish Commercial Code,
be granted to a specific class of shares. minority shareholders may be granted
the right to be represented on the board
Besides the above-mentioned privileges,
of directors, provided that such right
it is possible to grant other rights related is expressly stipulated in the articles of
to the governance and decision-making, association. If a candidate nominated
receiving extra dividends or options to by the relevant group or minority is
the shareholders, with the execution of submitted to the general assembly, the
a shareholders’ agreement, which will be general assembly is required to elect the
binding on the parties and not on the candidate as a board member, unless there
company. It is also possible to define and is just cause to reject the nomination. In
establish information rights, right of first publicly held joint stock companies, the
refusal, drag-along rights, tag-along rights representation right granted in this manner
and anti-dilution rights that are granted to may not exceed half of the total number of
a group of shareholders in the shareholders’ board members.
agreement.
Shareholders may also agree to include
9. Are there any specific statutory rights other contractual protections for minority
available to minority shareholders shareholders in shareholders’ agreements,
available in your jurisdiction? such as veto rights in specific decisions
during general assembly or board meetings
Shareholders holding at least 10% of the
or special approval mechanisms for critical
total capital (this ratio is 5% in publicly
corporate actions, to safeguard the interests
traded companies) are defined as “minority” of minority shareholders and ensure their
in accordance with the Turkish Commercial participation in critical company decisions.
Code. Following rights are granted to the
minorities by the law; 10. Is it possible to impose restrictions
on share transfers under the
- right to call the general assembly corporate documents (e.g., articles
meeting and add articles to the agenda; of association or its equivalent in
- right to request the appointment of a your jurisdiction) of a company
special auditor from court; incorporated in your jurisdiction?
In LLCs, the share transfers shall be
- right to request the court to dissolve
approved by the general assembly of
the company on the grounds of a valid
shareholders with majority of the votes
reason;
present at the meeting.
- right to prevent the release of founders,
In JSCs, there are no legal restrictions on
board members and auditors from their
share transfers, provided that the capital
liabilities relating to incorporation and corresponding to the registered shares has
share capital increase; been duly paid and no contrary provision
- right to request information and exists in the articles of association.
inspection; Therefore, the fundamental principle
governing share transfers in JSCs is freedom
- right to request print of the registered of transfer. However, if the articles of
shares; association of a JSC include a provision
requiring the approval of the company (its
- right to request removal of auditor;
board of directors) for a share transfer, the
- right to squeeze-out in case of company may reject a share transfer based
acquisition of public companies. on an important cause.

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11. Are there any specific concerns or E. Acquisition

other considerations regarding the
composition, technical bankruptcy 12. Which methods are commonly used
and other insolvency cases in your to acquire a company, e.g., share
jurisdiction? transfer, asset transfer, etc.?

The Turkish Commercial Code stipulates The method mostly used in acquisitions in
different measures for JSCs and LLCs so as Türkiye is share transfer.
to protect the capital depending on the 13. What are the advantages and
extent to which the capital of the company disadvantages of a share purchase
is affected. as opposed to other methods?
- Pursuant to Article 376/1 of the In a share transfer transaction, an
Turkish Commercial Code, the board investor acquires the ownership of all
of directors/managers shall convene or a portion of the shares of a company
the general assembly for a meeting in and indirectly assumes control over the
the event that 1/2 of the total of capital company, including its assets, employees,
and legal reserve funds of the company contracts, rights and liabilities. This
is lost. At such meeting, the board structure has various advantages and
members / managers shall propose disadvantages when compared to other
remedial measures to the general acquisition methods such as commercial
assembly. enterprise transfers. Share transfers are
procedurally simple and generally tax
- Article 376/2 governs the circumstances
efficient. By contrast, asset transfers usually
where 2/3 of the total of capital and
involve more procedural requirements
legal reserve funds of the company
such as notifying the creditors and
are lost. In such a case, the general
fulfilling registration and announcement
assembly must be convened without
requirements. That said, in a share transfer,
delay to decide either (i) to continue its
the purchaser acquires the company with
operations with 1/3 of the capital or (ii) all its existing and potentially undisclosed
to take measures to recover the capital liabilities and risks including for tax,
deficit. If the general assembly does not litigation, contractual etc. and therefore
adopt any such decision, the company legal, tax and financial due diligence
will automatically dissolve. becomes more critical.
- Under the Article 376/3 of the Turkish 14. What are the approvals and
Commercial Code, if there is a suspicion consents typically required (e.g.,
that the company is insolvent, the
corporate, regulatory, sector
board of directors/managers shall
based and third-party approvals)
prepare an interim balance sheet
for private acquisitions in your
based on both the going concern and
probable sale (liquidation) values of the jurisdiction?
assets and if the balance sheet confirms For private acquisitions, the seller typically
that the assets of the company are undertakes the necessary steps to obtain
insufficient to cover the receivables of the corporate authorizations, such as
the creditors, the board of directors/ approval of the other shareholders where
managers shall request the bankruptcy required under shareholders’ agreements
of the company from the commercial
or the company’s articles of association
court of first instance.
and adopting a board resolution to record
the share transfer in the share ledger of

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the company. Additionally, third party Second, the turnovers of the parties must
consents are often required so that the meet the thresholds set forth in the Merger
buyer can continue to benefit from the key Communiqué, as follows:
contracts, which contain change of control
i. the combined turnover of the
clauses. Failure to obtain such consent
transaction parties exceeds TRY
may result in termination or renegotiation
750,000,000 and the Turkish turnover
of such contracts in less favorable terms.
of at least two of the transaction
Depending on the nature and sector of the
individually exceeds TRY 250,000,000, or
transaction, certain regulatory approvals
or notifications may also be required. ii. in takeover transactions, the turnover
For instance, approval from the Turkish of the asset or activity subject to the
Competition Board may be required if transfer, and in merger transactions,
certain thresholds are met and specific the Turkish turnover of at least one of
approval requirements may be triggered for the transaction parties exceeds TRY
companies operating in regulated sectors, 250,000,000 and the global turnover
such as energy or banking. In addition of at least one of the other transaction
to the above, if a share transfer results in parties exceeds TRY 3,000,000,000.
a target company being held by a single
shareholder or if the shareholding changes Failing to notify an acquisition which
in the target company exceed certain meets the above criteria, may result in
thresholds set forth under the Turkish administrative monetary fines and the
Commercial Code, then the target company transaction would be deemed as legally
is also required to notify the Trade Registry. invalid with all its legal consequences.

15. What are the regulatory 16. Are there any specific rules
competition law requirements applicable for acquisition of public
applicable to private acquisitions in companies in your jurisdiction?
your jurisdiction? The acquisition of shares in publicly held
The Turkish competition law requirements companies is primarily governed by the
for mergers and acquisitions are Capital Markets Law numbered 6362 and
governed under the Law on Protection Communiqué on Tender Offers numbered
of Competition numbered 4054 and the II-26.1, which set forth the procedures and
Communiqué Regarding the Mergers and principles relating to both voluntary and
Acquisitions Requiring Approval from the mandatory tender offers.
Competition Board numbered 2010/4 Mandatory Offer: Any person or
(“Mergers Communiqué”). persons acting in concert, who acquire
Pursuant to the Mergers Communiqué, management control of a publicly held
mergers and acquisitions that meet two target company, either through partial or
specific criteria fall within the scope of the full acquisition of shares or voting rights,
Competition Board’s approval requirement. shall apply to the Turkish Capital Markets
First, there must be a change of control Board to launch a mandatory tender
over the target company. Control is defined offer for the remaining shares. Acquiring
as the ability to exercise decisive influence management control in a company refers
over an undertaking’s strategic business to directly or indirectly holding more than
decisions such as its business plan, budget, fifty percent of the company’s voting rights,
material investment decisions and the either individually or jointly with persons
appointment of senior management. acting in concert, or holding privileged

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shares that grant the right to appoint or public disclosure via the Public Disclosure
to nominate the absolute majority of the Platform (Kamuyu Aydınlatma Platformu)
board of directors at the general assembly. when their shareholding or voting rights
If the real or legal persons who are required cross specified thresholds. Furthermore,
launch a tender offer, along with those any change in control, management, or
acting in concert with them, fail to fulfill this financial condition of a company, which
obligation within the period determined results in a significant impact on the
by the Turkish Capital Markets Board, then company’s operations, financial structure
their voting rights shall be automatically or management / shareholding structure
suspended. Accordingly, these shares shall may also trigger the obligation to make a
not be taken into account when calculating material event disclosure.
the quorum for general assembly meetings. 17. Is there a requirement to disclose
Voluntary Share Purchase Offers: Any a deal, for instance to regulatory
person may initiate a voluntary tender offer authorities? Is it possible to keep a
for all or part of the shares of a publicly held deal confidential?
target company. In a voluntary tender offer, If an acquisition exceeds or has a possibility
there is no mandatory minimum price and of exceeding the thresholds under the Law
the buyer is free in determining the price on Protection of Competition numbered
and form of consideration. 4054 (please see Question 15), a notification
In addition to the above, pursuant to the shall be made to the Turkish Competition
Communiqué on Squeeze-Out and Sell- Authority for the approval of the relevant
Out Rights numbered II-27.3, if a bidder transaction. Once notified, the details of the
acting alone or in concert, acquires at least acquisition, including the parties involved
98% of the voting rights of a publicly held and their fields of activity, are published
company, such controlling shareholder(s) on the Competition Authority’s website.
have the right to squeeze out other The Competition Authority also publishes
shareholders from the company and the its decisions after redacting commercial
minority shareholders have the right to information.
sell-out their shares to the controlling In public M&A transactions, share purchase
shareholder(s). offers are subject to certain notification
Other Approvals: If the transaction meets and public disclosure requirements under
the relevant criteria, Turkish Competition capital markets regulations, as provided
Board approval may be required prior under our answer to Question 16.
to completion, as in the case of private In private M&A transactions, there is no
company acquisitions. In addition, if a public disclosure requirement, and the
company operates in a regulated sector, acquisition documents typically contain
further regulatory approvals may be confidentiality clauses. However, the
necessary under sector-specific laws. Turkish Commercial Code imposes a post-
Publicly held companies are also subject closing disclosure obligation where the
to public disclosure obligations, primarily board of directors shall notify the Trade
regulated under the Communiqué on Registry if the share transfer results in the
Material Events Disclosures numbered target company being held by a single
II-15.1. Under this legislation, shareholders shareholder, or if the shareholding changes
who acquire or dispose of shares in exceed certain thresholds specified under
publicly held companies shall make a the Turkish Commercial Code.

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18. Can sellers be restricted from environmental matters, taxes, insurance

shopping around during a coverage, employment matters, litigation
negotiation process? Is it possible and intellectual property rights. To manage
to include break fee or other risk exposure, sellers negotiate limitations
penalty clauses in acquisition on their liability, including monetary
documents to procure deal thresholds (e.g., caps, de minimis, baskets)
exclusivity? and time limitations for bringing claims.
Warranty and indemnity insurance is
There is no statutory restriction under
not that common in Türkiye due to the
Turkish law, however during negotiations
high premiums determined by insurance
the parties may contractually agree to limit
companies in relation to the scope of the
shopping around by including restrictions
warranties.
in a term sheet / letter of intent /
memorandum of understanding. Although 21. Is there a requirement to set a
not very common, in practice, it is possible minimum pricing for shares of a
to include break fees or other penalty target company in an acquisition?
clauses in the share transfer documentation
There is no requirement to set a minimum
to deter withdrawal or non-performance by
price for shares in the acquisition of
either party.
a private company; the parties to the
19. What are the conditions precedent transaction are free to determine the
in a typical acquisition document? purchase price.
Is it common to have conditions to
In public companies, the capital markets
closing such as no material adverse
legislation imposes certain restrictions on
change?
the pricing of the shares. When there is a
In a typical acquisition document, direct change in the management control
conditions precedent can generally be of a target company, the mandatory tender
categorized into two groups: legally offer price for:
required and voluntary conditions. Legally
(i) the listed shares cannot be less than
required conditions include, for example,
(x) the arithmetic average of the daily
approval from the Turkish Competition
weighted average prices of the listed
Board for the transactions that result
shares over the six months preceding
in a change of control and are over
the public disclosure of the execution
the monetary thresholds set out in the
of the acquisition documents, or in the
applicable legislation. The parties may also
absence of such an agreement then
agree on voluntary conditions in line with
prior to the acquisition of management
the principle of freedom of contract, such
control, (y) the highest price paid by
as obtaining certain third-party consents or
the offeror or persons acting in concert
approvals.
with the offeror, for the same class of
20. What are the typical warranties shares in the target company in the
and limitations in acquisition last six months before the mandatory
documents? Is it common to obtain tender offer requirement arose;
warranty insurance?
(ii) the non-listed shares cannot be
Warranties commonly included in less than (x) the price determined
acquisition documents relate to the in a valuation report prepared in
title and ownership of shares, corporate accordance with the capital markets
authority, books and records, material regulations, considering any differences
contracts, regulatory compliance, in privileges among share classes, if

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any, and (y) the highest price paid by In general, banks, private institutions,
the offeror or persons acting in concert financing companies and funds play
with the offeror, for the same class of an active role in acquisition financing
shares in the target company in the in Türkiye. It is also possible to obtain
last six months before the mandatory financing from the institutions abroad.
tender offer requirement arose. Furthermore, as per article 380 of the
When there is an indirect change in Turkish Commercial Code, a target
the management control of the target company cannot provide financial
company, the mandatory tender offer price assistance such as advances, loans, or
shall be determined so that it cannot be security for the acquisition of its own
less than: shares. This means that the target company
(i) for non-listed shares or class of shares, cannot fund the purchase of its shares or
the price determined in the valuation establish a pledge or encumbrance over its
report prepared in accordance with the assets (including any subsidiary shares) for
capital markets regulations considering the acquisition of its shares.
any differences in privileges among 23. What are the formalities and
share classes; procedures for share transfers and
(ii) the highest price paid by the offeror how is a share transfer perfected?
or persons acting in concert with the
In LLCs after the execution of acquisition
offeror for the relevant class of shares
documents as required (please see
in the last six months before the
Question 28), such share transfer shall be
mandatory tender offer requirement
approved by the general assembly of the
arose;
shareholders. The relevant resolution shall
(iii) for listed shares or class of shares, the then be registered with the Trade Registry,
arithmetic average of the daily adjusted announced in the Trade Registry Gazette
weighed average stock exchange and annotated in the share ledger.
prices of the shares over the six months
preceding the public disclosure of the There are some formal requirements for
execution of the documents relating share transfers in JSCs as well. Transfer of
to share transfer or acquisition of bearer shares certificates is completed
management control, which result in by physical delivery to the buyer and
the indirect change of the management notification of such transfer to the
control, or in the absence of such an Central Securities Depository of Türkiye
agreement then the date on which the by the buyer. Transfer of registered share
management control was acquired. certificates requires both endorsement
There is no statutory minimum price and physical delivery to the buyer. For
requirement for voluntary tender offers in dematerialized shares the transfer is
publicly held companies. effected through a written share transfer
agreement. In each option, share transfers
22. What types of acquisition financing shall be annotated in the company’s share
are available for potential buyers in ledgers.
your jurisdiction? Can a company
provide financial assistance to a 24. Are there any incentives (such
potential buyer of shares in the as tax exemptions) available for
target company? acquisitions in your jurisdiction?

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In acquisition transactions, there are 27. Are arbitration clauses legally

different types of applicable taxes permissible or generally included in
depending on the details of a transaction acquisition documents?
such as existence of physical share
Arbitration clauses or agreements are
certificates, holding period and legal status
legally permissible to be included in
of sellers. Transaction documents relating
acquisition documents. The parties usually
to share sales are exempt from stamp tax,
prefer to include arbitration clauses, to
however tax authorities may deem that
avoid delays associated with state court
stamp tax is applicable on the provisions
proceedings and to mitigate concerns over
which do not relate to the purchase and on
the validity of certain provisions specific to
the shareholders’ agreements.
M&A documents. Parties are free to choose
F. Enforceability the governing law and seat of arbitration.
The main arbitration institution in Türkiye
25. Can acquisition documents be is Istanbul Arbitration Center (ISTAC), but
executed in a foreign language? the parties may opt for other arbitration
Although one of the main principles of the institutions around the world such as ICC
Turkish Code of Obligations is the freedom International Court of Arbitration and the
of contract, the Law numbered 805 on London Court of International Arbitration
the Compulsory Use of Turkish Language (LCIA).
requires the use of Turkish language in 28. Are there any specific formalities
contracts and notifications between Turkish for the execution of acquisition
parties. documents? Is it possible to
26. Can acquisition documents be remotely/digitally sign documents?
governed by a foreign law? Pursuant to the Turkish law, in LLCs, a share
As per the Turkish International Private and transfer agreement shall be written and
Procedural Law, parties may choose foreign notarized in order to be valid. On the other
law to govern contracts that contain a hand, in JSCs, there is no form or procedure
foreign element (in terms of parties or a required for the validity of share transfer
place), to the extent that the application agreements, except for the statutory
of the selected foreign law is not explicitly requirements for the transfer of shares.
contrary to the public order of Türkiye. In acquisitions realized by the foreigners,
Accordingly, parties may agree that all or the signatories of the parties often provide
some of the acquisition documents shall a power of attorney to their legal counsels
be governed by foreign law. A foreign enabling them to execute/sign the
element is deemed to exist if at least one agreements on their behalf. For a power of
of the parties to the transaction is a foreign attorney to be valid, the person providing
person or entity, or the subject matter of a power of attorney shall be present at the
the contract involves a foreign asset. notary public for the issuance of the power
More recently, there has been an increase of attorney and if a power of attorney is
in the preference for Turkish law as the issued abroad, such document shall be
governing law in acquisition agreements. notarized and apostilled for the recognition
In such cases, the parties usually select before official authorities in Türkiye.
arbitration as the dispute resolution Standard electronic signatures on
mechanism, rather than Turkish courts, in contracts are not considered as conclusive
order to ensure neutrality and impartiality. evidence and will only be admissible as

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commencement of evidence to prove (particularly renewables), infrastructure,

the existence, authenticity and validity of healthcare, and financial services are
a contractual relationship between the expected to remain key areas of interest.
parties to a court. Pursuant to Turkish Code
30. Are any significant development
of Obligations, secure electronic signature
or change expected in the near
has the same legal effect as a handwritten
future in relation to M&A in your
signature under Turkish law. Secured
jurisdiction?
electronic signatures (which may only
be provided by an electronic certificate Recent legal developments include
service provider established or recognized amendments to the Turkish Commercial
in Türkiye) and e-signature shall not be Code concerning the minimum share
used for certain types of contracts which capital requirements for joint stock
need to be executed in an official form or companies (JSCs) and limited liability
through certain procedures, e.g., before companies (LLCs), as well as changes
a notary public. In practice, e-signature is related to board elections, authority, and
mostly used in documents provided by meetings. Pursuant to Provisional Article
public institutions and is not yet a common 15 of the Turkish Commercial Code,
method in the agreements. companies whose share capital falls below
the newly established minimum thresholds
G. Trends and Projections are obliged to increase their capital to the
29. What are the main current trends in required levels by December 31, 2026.
M&A in your jurisdiction? Any failure to increase their share capital
to the required amounts by the specified
Türkiye’s M&A market maintained a
deadlines shall result in dissolution of
notable level of activity despite a range of
the breaching companies, except for
challenging factors, including geopolitical
companies in the registered capital system,
tensions, monetary policies, inflation,
which shall only exit the registered capital
and elections. According to KPMG
system rather than being dissolved.
Türkiye, the disclosed value of mergers
and acquisitions in Turkey reached There is no major legislative reform specific
approximately $5.3 billion in 2024, with to M&A that has been announced so far in
the total estimated value, including 2025. While the legal framework governing
undisclosed transactions, reaching around M&A in Türkiye largely remains the same,
$10.1 billion. In 2024, activity was primarily economic conditions and sectoral trends
concentrated in the technology, media, and and investor behavior will be key drivers in
telecommunications sector. Looking ahead the near future.
to 2025, sectors such as technology, energy

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UKRAINE
INTEGRITES

Illya Tkachuk Inna Kostrytska Vasyl Yurmanovych

Senior Partner Counsel Counsel
Illya.Tkachuk@ Inna.Kostrytska@ Vasyl.Yurmanovych@
integrites.com integrites.com integrites.com

A. General The main business vehicles used in Ukraine

are a) limited liability companies (“LLC”)
1. What is the main legal framework and b) joint stock companies (“JSC”).
applicable to companies in your
jurisdiction? A Limited Liability Company, where holders
of participatory interests are not liable for
The Civil Code of Ukraine provides general the company’s debts beyond the capital/
regulations of legal entities. Limited liability assets they contributed or committed to
companies and joint stock companies are contributing to the LLC capital. It is the
also governed by the special laws (i.e., Law most popular, widespread and flexible legal
of Ukraine “On additional and limited liability form that both local and foreign founders
companies” and Law of Ukraine “On joint commonly use to operate in Ukraine.
stock companies”). Business entities of other A Joint Stock Company that issues shares
legal forms are governed by the Economic registered with the National Commission
Code of Ukraine and the Law of Ukraine “On for Securities and Stock Market (the “SEC”).
business companies”. The shareholders are liable for the
company’s debts only to the extent of the
2. What are the most common types
capital/assets they contributed as payment
of corporate entities (e.g., joint for the shares. JSCs are either private or
stock companies, limited liability public, with the main difference being that
companies, etc.) used in your the shares of a public JSC can be placed
jurisdiction? What are the main and sold publicly, while shares of a private
differences between them (including JSC are placed exclusively among its
but not limited to with regard to the shareholders or a restricted list of persons
shareholders’ liability)? specifically approved by the shareholders.

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The main differences between the LLCs and JSCs are as follows:

LLC JSC
no minimum equity capital requirement 200 minimum monthly salaries as of the
date of state registration (appr. EUR 36,000
in November 2024)
easier and quicker to establish complex establishment process
(1 – 2 weeks in practice) and operate (4 – 6 months in practice)
participatory interests are not deemed to shares are securities registered by the SEC,
be registered securities (shares) no bearer shares are allowed
transfer of participatory interests to third transfer of shares of private JSCs to third
parties is normally subject to pre-emptive parties may also be subject to the pre-
rights of other shareholders emptive rights of other shareholders
participants are liable within their disclosure obligations and reporting to the
contributions SEC shareholders are liable within their
contributions

Other forms of business vehicles (for available to foreign investors. This includes
example, additional liability companies and the gas transmission system, electricity
private enterprises) are available but are grids, various plants and factories.
rarely used.
In view of Russia’s annexation of Crimea
B. Foreign Investment and its military aggression against Ukraine,
certain restrictions have been recently
3. Are there any restrictions on foreign introduced on investment by the nationals
investors incorporating or acquiring and companies of a foreign state that is
the shares of a company in your engaged in military aggression against
jurisdiction? Ukraine. For example, they are prohibited
Foreign investors in Ukraine generally have from owning shares (participatory interests)
the same rights as Ukrainian investors. in the Ukrainian media companies and are
There are very few restrictions on foreign disqualified from the privatization of the
investment. Ukrainian state-owned enterprises. Some
licensed activities may not be carried out
Foreign investors are not entitled to by businesses affiliated with the nationals
purchase and own agricultural land. There and companies of a foreign state that is
is also statutory prohibition on foreign engaged in military aggression against
investors who are not allowed to acquire Ukraine.
shares in companies that own agricultural
land. There are some industry-specific 4. Are there any foreign exchange
restrictions, such as the 35% cap on foreign restrictions or conditions applicable
ownership of information agencies, and the to companies such as restrictions to
foreign currency shareholder loans?
prohibition on ownership of broadcasting
companies by residents of jurisdictions that Due to the war, the National Bank of
qualify as offshore under the Ukrainian law. Ukraine (“NBU”) has imposed a temporary
Certain critical infrastructure, especially moratorium on all cross-border payments
in the energy sector, is precluded by law from Ukraine or to correspondent accounts
from private ownership and therefore not of foreign banks opened in Ukrainian

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banks, effectively blocking all transfers employment centres. The work permits
from Ukraine abroad subject to certain for citizens of the Russian Federation,
exemptions. The purchase of foreign the Republic of Belarus, as well as other
currency by Ukrainian residents has been states recognized as such that threaten
prohibited unless the foreign currency the state sovereignty, territorial integrity
is purchased to make exempt payments. and democratic constitutional order and
These measures were necessary to preserve other national interests of Ukraine, can be
Ukraine’s international reserves. issued or extended upon approval of the
Security Service of Ukraine. A work permit
The temporary rules do not allow
is necessary both for direct employment of
transferring foreign currency abroad
a foreign national by a Ukrainian employer,
for repayment and servicing of loan
for secondment of a foreign employee and
obligations to non-residents by Ukrainian
internal corporate assignees to a Ukrainian
companies (subject to certain exceptions,
employer.
like loans guaranteed by the state or
executed with international financial Work permits are generally issued for up to
institutions, etc.). three-year period and can be extended. In
Cross-border payments for any recently case of a direct employment, the validity
imported goods are possible. At the same term shall not exceed 2 years.
time, only service works, intellectual Under the general rule, a work permit is
property rights, and other intangible rights issued within seven business days upon
from the list approved by the Government filing the application. Three business days
can be paid by the local businesses to are needed, to extend the validity of the
foreign providers. The NBU has also permit or to amend it.
reduced the maximum term for settlements
under the export and import of goods The employer shall apply for an extension
applying to transactions (currently, 180 of the work permit not later than 20 and
calendar days). not earlier than 50 calendar days before the
expiration of such permit. This term does
The NBU has determined that in order
not apply during martial law.
to make payments in foreign currency, a
company must first use its foreign currency C. Corporate Governance
reserve and then, if necessary, purchase
6. What are the standard management
more on the Ukrainian foreign currency
exchange market. structures (e.g., general assembly,
board of directors, etc.) in a corporate
Termination of the mutual cross-border entity governed in your jurisdiction
obligations by way of offsetting is currently and the key liability issues relating
not accepted by the local banks under the to these (e.g., liability of the board
export or import transactions. members and managers)?
5. Are there any specific considerations The management structure of the LLC
for employment of foreign includes a general shareholders’ meeting
employees in companies and an individual or collective executive
incorporated in your jurisdiction?
body (director or executive board). Under
Generally, foreign nationals must Ukrainian legislation, it is also possible to
obtain a work permit to be employed in establish a supervisory board in the LLC to
Ukraine. The permit is issued by the local control the activities of the executive body.

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A JSC in Ukraine has a management value below the threshold established

structure similar to that of an LLC. Given by the law, provided that such failure led
the recently adopted new Law of Ukraine to the declaring the company bankrupt
“On Joint Stock Companies”, JSCs can during three years from the date of such
choose to have either a one-tier or two-tier decrease.
governance structure.
Other liability also may be established in
In a one-tier structure, the governing the contract concluded with the officials of
bodies are the general shareholders’ the company.
meeting and the board of directors – a 7. What are the audit requirements in
collegial body exercising management corporate entities?
and control functions. It may consist of
executive and non-executive directors. As Financial statements of public or regulated
an exception, for private JSCs with a one- companies are subject to mandatory audit
tier management structure that have up to by certified independent auditors. Such
10 shareholders, a single person executive companies include, in particular:
body can be chosen instead of the board of • enterprises of public interest, including
directors. issuers of securities admitted to trading
on the regulated capital market or
The two-tier management structure publicly offered, banks, insurers, non-
of a JSC splits management and state pension funds, other financial
control functions between the general institutions and large enterprises;
shareholder’s meeting, the supervisory
• public JSCs;
board, and the executive body – the
executive board or a sole director. Also, the • subjects of natural monopolies on the
involvement of the corporate secretary is national market;
mandatory in public JSCs, JSCs of public • business entities that operate in the
interest, and JSCs with 100 or more extractive industries;
shareholders/owners of ordinary shares. • medium-sized enterprises;
According to the Ukrainian law, officials • other financial institutions that relate to
of JSCs or LLCs (e.g., members of the micro and small enterprises.
executive board or supervisory board) Financial statements and auditor reports
must act reasonably, in good faith, and the of the mentioned companies must be
company’s best interest. Under a general disclosed within the time frame and in the
rule, the officials are personally liable manner prescribed by the Law of Ukraine
to the company for damages caused by “On Accounting and Financial Reporting in
their actions or failure to act. In addition, Ukraine”.
shareholders in JSCs and members of the
supervisory board representing them are D. Shareholder Rights
jointly and severally liable for damages 8. What are the privileges that can
caused to the company by such board be granted to shareholders? In
member(s). particular, is it possible to grant
voting privileges to shareholders for
Members of the company’s governing
appointment of board members?
bodies may also jointly bear subsidiary
liability for the company’s obligations if Generally, in Ukraine, shareholders receive
they fail to convene a general shareholders’ certain rights in connection with their
meeting or notify controlling bodies about ownership over the shares. In particular,
the decrease of the company’s net assets shareholders have the right to:

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• participate in the management of the shareholder to demand from the company

company; to repurchase their shares in cases
• receive dividends; envisaged by the law) and a sell-out
procedure (right of a minority shareholder
• receive a part of the company’s assets to demand from the acquirer of a dominant
or their value in case of the company’s controlling stake of shares to buy out their
liquidation; shares).
• to have access to certain records/ In LLCs and JSCs, shareholders jointly
information etc. owning 10% or more shares may also
Shareholders of LLCs and JSCs have pre- demand the company to convene an
emptive rights during the share capital extraordinary general shareholders’
increase. In LLCs, the shareholders also meeting. In addition, every owner of
enjoy pre-emptive rights in case of the stock may submit proposals to the
sale of the stock to third parties unless general meeting agenda. Proposals of
otherwise provided by the articles of the owner(s) with more than 5% of shares
association and/or shareholders agreement. are mandatorily included in the agenda.
Proposals of the minority shareholders with
Shareholders of JSCs or LLCs may enter fewer percentage of votes may be turned
into a shareholders’ agreement to fix their down by the body convening the general
undertakings to exercise their rights and meeting on grounds stipulated in the
powers in a certain way or refrain from their articles of association (if any).
exercise.
The minority shareholders also enjoy
Such agreement can establish terms the same statutory rights as the majority
and conditions (or the procedure for the shareholders, in particular rights related to
determination of terms and conditions) access to information, receiving dividends
under which a shareholder has the right etc.
or obligation to buy or sell its stock, the
procedure for nomination of candidates for 10. Is it possible to impose restrictions
the posts in the governing bodies of the on share transfers under the
company, as well as the obligation of the corporate documents (e.g., articles
parties to vote at the general shareholders’ of association or its equivalent in
meeting in the manner provided for by your jurisdiction) of a company
such agreement. incorporated in your jurisdiction?

To ensure the fulfilment of their obligations In addition to the pre-emptive right in case
by the parties of the shareholders’ of the sale of the stock to third parties,
the articles of association of the LLC may
agreement, the agreement can envisage
establish restrictions on the alienation or
the issuance by the obliged party of an
encumbrance of the stock in the company’s
irrevocable power of attorney to the
share capital. It is also possible to include
empowered party.
the requirement to obtain a consent of
9. Are there any specific statutory rights other shareholders for the alienation of the
available to minority shareholders stock and its pledge.
available in your jurisdiction?
The corresponding provisions can be
The Law of Ukraine “On Joint Stock included in the articles of association
Companies” provides for such mechanisms or excluded therefrom by a unanimous
as a buyback of shares (right of a minority decision of the general shareholders’

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meeting, at which all shareholders of the Ukrainian law also allows the acquisition of
company are present. a company through the purchase of assets
which is quite common as well. This option
In the JSCs, generally, no restrictions on
allows the buyer to acquire only identified
share transfer can be established in the
corporate documents of the company. assets and liabilities of a company and not
Nevertheless, the desired restrictions can the company itself. However, the purchase
be implemented by the shareholders on of assets usually requires payment of the
a contractual basis in the shareholders value-added tax (currently amounting to
agreement both in a JSC and a LLC. 20%), which increases the transaction value.

11. Are there any specific concerns or 13. What are the advantages and
other considerations regarding the disadvantages of a share purchase
composition, technical bankruptcy as opposed to other methods?
and other insolvency cases in your
Generally, the purchase of shares provides
jurisdiction?
for the following advantages for sellers or
Historically, the bankruptcy procedure purchasers as opposed to other methods:
was often misused to restrict the creditors
• structural simplicity and business
in their rights to claim the debt. However,
continuity;
recent changes to the Ukrainian bankruptcy
regulations substantially improved the legal • direct receipt of sale proceeds by the
framework which now protects both the shareholders;
creditors and the participants\shareholders
of the company. • not subject to the Ukrainian value-
added tax;
E. Acquisition
• no need to inform or consult employees
12. Which methods are commonly used or their representative(s).
to acquire a company, e.g., share
transfer, asset transfer, etc.? At the same time, share purchases have
the following disadvantages for sellers or
In Ukraine, methods to acquire a company
purchasers:
are quite similar to those available in other
jurisdictions, with some limitations and • purchaser may acquire hidden
peculiarities. Ukrainian law provides the liabilities;
following methods to acquire a company:
• sale must be approved by shareholders;
• purchase of shares or participatory
interests; • withholding taxation (15% or less) for
cross-border transactions may apply to
• purchase of an asset (including the certain transactions;
purchase of an integrated property
complex); • strict Ukrainian currency control and
financial monitoring regulations with
• mergers; respect to cross-border payments.
• debt-to-equity swaps. 14. What are the approvals and
The most common method used in Ukraine consents typically required (e.g.,
is the purchase of shares or participatory corporate, regulatory, sector
interests in a particular company. That is, based and third-party approvals)
the purchaser buys the outstanding stock for private acquisitions in your
directly from the company’s shareholders. jurisdiction?

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In Ukraine, a number of approvals should • direct or indirect acquisition of

be obtained for private acquisitions. The shares, that ensures obtaining control
type of approval to be obtained depends including (1) 25% or more (2) 50% or
on the type of business and the transaction more votes in the highest governing
value. body of an entity.
Generally, the parties to the transaction The acquisition of less than 50% of shares
shall ensure compliance with their in a company is subject to AMCU approval
corporate procedures and obtain approvals if such minority interest ensures the control
as required by the law and the company’s to the acquirer (including the negative
statutory documents. control via veto rights under a shareholders’
The approval of the Antimonopoly agreement or other similar instruments).
Committee of Ukraine (the “AMCU”) is Under Ukrainian competition law, control
also required if the transaction qualifies
is a decisive influence over the business
as a concentration, and the respective
activity of an entity, irrespective of the
financial thresholds established by the
form that such influence takes (including
Law of Ukraine “On Protection of Economic
informal de facto control). The control test
Competition” dated 11 January 2001 (as
is based on the ability to veto important
amended) are exceeded.
decisions relating to the business activity of
There may be other mandatory filings an entity (approval of the budget, business,
depending on a specific industry as well strategic and development plans, the
as the peculiarities of business operations. appointment of senior management and
For example, acquisition of shares or key employees, the ability to enter certain
participatory interest in an insurer over types of agreements, etc.).
certain thresholds (10, 25 or 50%) will
require prior approval of the regulator. The merger control clearance is required, if:
As a matter of practice, obtaining such • the aggregate worldwide value of
approvals may take time due to the
assets or turnover of the parties to
bureaucratic procedures.
concentration exceeds EUR 30 mln,
15. What are the regulatory and the value of Ukrainian assets or
competition law requirements turnover of at least two parties to the
applicable to private acquisitions in concentration exceeds EUR 4 mln each;
your jurisdiction? or
The merger control notification is • the aggregate value of Ukrainian assets
mandatory if the financial thresholds or turnover of at least one of the parties
established by the law are met. to concentration exceeds EUR 8 mln,
The following types of transactions are and the worldwide turnover of at least
subject to merger control: one other party to the concentration
exceeds EUR 150 mln.
• merger of entities or takeover of one
entity by another; All thresholds are calculated on a group-
level basis (taking into account the relations
• direct or indirect acquisition of control of control). All entities which are directly
over an entity or a part of it;
or indirectly controlled by the parent
• creation of a joint venture by two or company, form a group of entities and
more entities; constitute a single undertaking from a

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merger control standpoint. The thresholds UAH 250 million – these are large-scale
test is applied for the acquirer group and privatization objects, to which only state-
the target group including the seller group. owned enterprises and share packages can
apply. Usually, such objects require more
The thresholds refer to the whole turnover
time for pre-privatization preparation,
and assets of the parties (not only those
attraction of potential buyers and their
related to the relevant product/service
familiarization with information about the
market). The thresholds are the same for all
enterprise.
industries and sectors involved.
17. Is there a requirement to disclose
Concentrations exceeding the thresholds
a deal, for instance to regulatory
stipulated by the competition law must
be cleared with the AMCU before their authorities? Is it possible to keep a
implementation. deal confidential?

16. Are there any specific rules Under the general rule, it is possible to keep
applicable for acquisition of public a deal confidential unless the legislation
companies in your jurisdiction? provides for notification, prior approval or
reporting obligations. Some of them are
There is a specific regulation for acquisition mentioned below.
of public joint stock companies. More
specifically, if a buyer bought more than Concentrations exceeding the thresholds
50% of the common shares, it is obliged stipulated by the competition law must
(1) to notify the SEC and (2) to make an be cleared with the AMCU before their
irrevocable offer on the acquisition of the implementation.
shares of the remaining shareholders. Transaction on the acquisition of shares in
Furthermore, reaching the threshold of JSCs shall be reported to the SEC, if it results
more than 95% triggers the sell-out and in increase by a person of the existing
squeeze-out mechanisms. interest in the target company to 10%, 25%,
50%, or 75% of the company’s authorized
It is worth mentioning that the acquisition (share) capital or votes in the company.
of public (state-owned) companies
is subject to special procedure of 18. Can sellers be restricted from
privatization. shopping around during a
negotiation process? Is it possible
Privatization is the sale of state-owned to include break fee or other
property to private individuals or legal penalty clauses in acquisition
entities. All targets are sold exclusively documents to procure deal
through Government’s electronic trading exclusivity?
system Prozorro.
Exclusivity clauses are quite common in
All targets form two groups: small-scale and
the Ukrainian M&A market. Ukrainian law
large-scale privatization objects. Objects of
does not provide for specific regulations
small-scale privatization include not only
regarding break fees. Thus, general
state-owned enterprises and stakes but
principles of Ukrainian contract law are
also objects of unfinished construction and
applicable in this case. As Ukrainian law
socio-cultural purposes, separate movable
does not provide for any restrictions in this
and immovable property, the value of
regard, the break fee penalty is enforceable
which does not exceed UAH 250 million.
in Ukraine. However, it is advisable for the
If the cost of the object is higher than parties to have a genuine intention to

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conclude a fair deal and act reasonably and several warranties that are often included
in good faith, otherwise, such deal can be in M&A agreements in Ukraine, in particular
declared null and void by a court. warranties with respect to:
19. What are the conditions precedent • corporate organization and authority;
in a typical acquisition document?
• title to assets;
Is it common to have conditions to
closing such as no material adverse • compliance with laws;
change?
• financial condition of company;
The standard list of conditions precedent to
the acquisition documents includes: • litigation and claims.

• obtaining preliminary regulatory It is not common in Ukraine to obtain

permits/approvals; warranty insurance.
• obtaining corporate approvals; 21. Is there a requirement to set a
• delivery to the purchaser of written minimum pricing for shares of a
consents from certain key clients or target company in an acquisition?
suppliers of the target to confirm There is no statutory requirement in
they consent to the contemplated Ukraine to set minimum pricing for shares
transaction and agree not to exercise of a target company in an acquisition.
any termination right arising from the
contemplated transaction (e.g., change 22. What types of acquisition financing
of control provisions); are available for potential buyers in
your jurisdiction? Can a company
• pre-transaction restructuring;
provide financial assistance to a
• pre-transactional cleaning up, etc. potential buyer of shares in the
target company?
It is also quite common to have such
condition precedent as no material adverse The most common form of acquisition
change. However, in reality, MAC clauses are financing is a loan which can be taken in
rarely used and even more rarely upheld by Ukraine or abroad.
courts. This practice is now being changed
as such clauses have gained importance The law on JSC prohibits the target
during the war. company from financing any acquisition
of its shares, as well as to guaranteeing the
20. What are the typical warranties loan granted for this purpose by a third
and limitations in acquisition party.
documents? Is it common to obtain
warranty insurance? The law on LLC prohibits the target
company from financing only the
Under the Ukrainian law, the parties to the obligation of a participant to contribute to
agreement may agree on a list of warranties the share capital, but not the acquisition of
regarding the circumstances relevant to the existing shares from participants.
conclusion, performance, or termination of
such agreement. 23. What are the formalities and
procedures for share transfers and
The specific warranties included in the
how is a share transfer perfected?
acquisition documents vary depending
on the nature of the transaction and the The document that confirms transfer of the
assets being acquired. However, there are participatory interest of a limited liability

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company is the share transfer certificate, executed in two languages – Ukrainian

which shall be executed by the parties in and the language of the counterparty (or
front of a Ukrainian notary. This certificate English).
should be provided to the state registrar to
26. Can acquisition documents be
formalize the transfer of the shareholder’s
governed by a foreign law?
rights.
Once the certificate is submitted, the If a foreign person is a party to the
state registrar registers respective agreement, the parties are free to choose
amendments with the Ukrainian corporate a governing law. However, some other
register (Unified State Register of Legal transactional documents will have to
Entities, Private Entrepreneurs and Public comply with the local legal requirement
Organizations). applicable to share transfers, including
notification obligations to the SEC (for a
As for the JSC, the instruction on transfer
JSC), share transfer certificate which has to
of shares in a JSC shall be filed with the
be filed with the state registrar to reflect the
depositary in person by the authorized
change in ownership (for an LLC).
representative of the seller. The registration
of the title transfer is done by a depositary 27. Are arbitration clauses legally
institution upon deposition of the shares at permissible or generally included in
the securities account of the buyer. acquisition documents?
24. Are there any incentives (such The arbitration clauses are legally
as tax exemptions) available for permissible and generally included in
acquisitions in your jurisdiction? acquisition documents.
Normally, foreign investors in Ukraine are The arbitration clauses must be put down
taxed the same way as domestic companies in writing. It may be concluded in the
unless there is preferential treatment. form of a separate agreement, a clause in
This kind of treatment can be awarded a contract, or by exchange of letters. An
to projects under state programs for arbitration agreement is also deemed to
development of priority industries.
have been validly concluded if the parties
In addition, tax incentives may be available exchange a written claim and a written
under intra-governmental double taxation defense in which one of the parties asserts
treaties. and the other party does not deny the
existence of an arbitration agreement.
Finally, there are also special tax incentives
for participants of industrial parks and large An arbitration clause (agreement) may also
investments. be incorporated into the parties’ contract
F. Enforceability by reference. According to the Ukrainian
Arbitration Act, a reference in a contract
25. Can acquisition documents be to a document containing an arbitration
executed in a foreign language? clause constitutes an arbitration agreement
Agreements involving domestic legal provided that the contract is executed in
entities must be concluded in Ukrainian. If a writing and the reference is such as to make
foreign person is a party to the agreement, the clause a part of the contract. The parties
the parties may choose another language. should include a clear and expressed
In this case, documents are usually reference to ensure that the respective

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provisions of, for example, the general which we see on the market have certain
terms and conditions constitute an integral peculiarities which are shortly described
part of the contract. above.
28. Are there any specific formalities International structuring: Considering
for the execution of acquisition the overall situation in Ukraine, the sellers
documents? Is it possible to prefer to structure the deals on the “outside
remotely/digitally sign documents? Ukraine” level (where possible). This
includes the pre-deal structuring, involving
The agreements on transfer of shares or
the creation of a holding company mostly
participatory interest can be in writing. The
in a European jurisdiction, with further
law does not require notarization of such
centralization of all shares and assets.
agreements.
Changes in focus: Indeed, the situation
E-signatures are legally valid and
in Ukraine is rather dynamic and special
enforceable in Ukraine. Thus, the Ukrainian
attention is given to the material adverse
law allows to sign such agreements
change (“MAC”) clauses, as well as the
remotely/digitally.
force majeure (“FM”) clauses. As a result,
The simple e-signature is not sufficiently MAC and FM clauses became much more
defined and regulated by the specific complex and compound. Such clauses now
Ukrainian law. As this type of e-signature is cover not only local regulations but also
not capable of identifying the person that martial law, conscription and relocation
signed it, it is not widely used in transaction of employees, as well as functions of
on companies’ acquisition. governmental authorities, banks, state
The qualified e-signature shall have the registers, etc.
equivalent legal effect of a handwritten Deferral conditions: In view of the global
signature and is based on a qualified uncertainty, the parties to an M&A deal
open key certificate. This type of signature often negotiate various deferral conditions,
enables electronic identification of the for example, the payment conditions linked
signatory. to certain events and the transfer of title
It should be noted that certain transaction after certain dates.
documents (e.g., share transfer certificate 30. Are any significant development
which is the basis for registration of the title or change expected in the near
transfer) require notarization in Ukraine. future in relation to M&A in your
The instruction on transfer of shares in a jurisdiction?
JSC shall be filed with the depositary in
person by the authorized representative of From the legal point of view, Ukrainian
the seller. corporate legislation has been substantially
improved and many “English law
G. Trends and Projections instruments” have been introduced.
29. What are the main current trends in Considering this, we may expect that more
M&A in your jurisdiction? M&A deals will be structured under the
Ukrainian law.
The war dropped down the market in 2022
in most of the areas. In 2023 the situation From the business point of view, we expect
slightly improved by the companies which a number of distressed asset M&A deals in
generated profits with no possibility to the coming months as the war has had a
distribute the dividends. Those M&A deals negative impact on numerous businesses.

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Along with that, Technology and

Agriculture are likely to remain the most
active sectors in terms of M&A.

Also, a number of M&A deals in Ukraine will

be driven by the ongoing privatization.

Finally, we expect that after the war, we will

see the number of M&A deals increasingly
growing in various sectors.

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UNITED ARAB EMIRATES

GREENBERG TRAURIG, LLP

Shibeer Ahmed Luke Robinson

Shareholder Senior Associate
[email protected] [email protected]

A. General in the Dubai International Financial Centre

(the “DIFC”) and the Abu Dhabi Global
1. What is the main legal framework Market (the “ADGM”) is the DIFC Companies
applicable to companies in your Law and the ADGM Companies Regulations
jurisdiction?
2015 respectively. Both frameworks
The main legal framework applicable to are based on English common law and
companies in the United Arab Emirates (the govern the formation and operation of
“UAE”) is the Federal Law No. 32 of 2021 on companies within the DIFC and the ADGM
Commercial Companies, which came into respectively, as well as their relationships
force on 2 January 2022. This law sets out with shareholders, directors and other
the rules and regulations for the formation stakeholders. The DIFC and the ADGM
and operation of companies in the UAE, each have their own court system, which
including limited liability companies, are separate from the UAE’s federal court
joint ventures, and public shareholding system and are responsible for resolving
companies. The UAE also has a number of disputes that arise within the DIFC and the
free zones that have their own specific laws ADGM.
and regulations governing the formation
and operation of companies within those 2. What are the most common types
zones. of corporate entities (e.g., joint
stock companies, limited liability
The main legal frameworks for companies companies, etc.) used in your
in the Dubai International Financial Centre
jurisdiction? What are the main
(the “DIFC”) and the Abu Dhabi Global
differences between them (including
Market (the “ADGM”) are the zones.
but not limited to with regard to the
The main legal frameworks for companies shareholders’ liability)?

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The most common types of corporate we expect the SCA to issue further
entities in the UAE are: resolutions and guidance but anticipate
that such vehicles could be utilized in
• Limited Liability Company (“LLC”):
bond issuances, debt capital market
this type of company is the most
transactions and credit transactions.
common corporate structure used in
the UAE. It is a separate legal entity • Sole Proprietorship: this type of
from its shareholders, meaning that the company is owned and run by a single
shareholders’ liability is limited to the individual, and the owner is personally
amount of capital they have invested in liable for all the debts and liabilities of
the company. the company.
• Free Zone Company: these types of • Foreign Branch Office: this type of
companies are established in one of the entity is not a separate legal entity but
UAE’s free trade zones and are subject an extension of the foreign company.
to the regulations of the respective free Such a company is not permitted to
zone authority. Free zone companies undertake commercial activities, and
typically have more flexibility in the parent company is liable for all its
terms of ownership and operations in debts and liabilities.
comparison to LLCs.
B. Foreign Investment
• Public Joint Stock Company (“PJSC”):
these types of companies are typically 3. Are there any restrictions on foreign
larger and have a higher level of investors incorporating or acquiring
regulation compared to LLCs and free the shares of a company in your
zone companies. They are required jurisdiction?
to have at least five shareholders and Up until recently, most mainland (non-free
their shares can be traded on a stock zone) companies were required to have a
exchange. Shareholders’ liability is UAE shareholder owning at least 51% of
limited to the amount of capital they the shares in the capital of the company.
have invested. However, pursuant to Federal Law No. 32
• Private Joint Stock Company of 2021 on Commercial Companies, the
(“Private JSC”): similar to a PJSC, UAE now allows 100% foreign ownership
except that the shares of the company of certain onshore companies, provided
cannot be traded on a stock exchange, such companies carry out certain types of
and the company must have at least activities that are considered non-strategic.
two shareholders, however as an Each Emirate can determine which activities
exception, a legal entity can incorporate are allowed to be conducted by companies
a Private JSC and hold its entire shares. with 100% foreign ownership, subject to
Shareholders’ liability is limited to the
certain restrictions. Such activities typically
amount of capital they have invested.
focus on commercial and industrial
• Special Purpose Vehicle (SPV): activities, however, certain sectors and
this type of company is established activities are specifically excluded from
for the purpose of separating the such allowance of 100% foreign ownership,
obligations and assets associated with including (i) commercial agencies; and (ii)
a specific financing operation from strategic activities (including the military,
the obligations and assets of its parent banking, insurance and re-insurance, and
entity. As above, at the time of writing, telecoms sectors).

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Neither the DIFC nor the ADGM place is the Dubai real estate sector regulatory
restrictions on foreign investors agency.
incorporating or acquiring the shares of
5. Are there any specific considerations
a company. All companies incorporated
for employment of foreign
in the DIFC and the ADGM can be 100% employees in companies
foreign-owned, and it is possible for such incorporated in your jurisdiction?
a company to own assets and conduct
business outside of that free zone, subject There are several considerations for the
to certain rules and regulations. employment of foreign employees in
companies incorporate in the UAE. Some of
It is worth noting that there are restrictions these include:
on certain sectors such as oil, gas and other
• Sponsorship & Residency Visa: In
strategic sectors of the economy. It is also
order to lawfully reside and work in
worth noting that the UAE has a number
the UAE (even if that work is on a
of bilateral investment treaties with other temporary work visa, please see below),
countries that may provide additional all expatriate employees must be
protections and benefits to foreign sponsored by a locally licensed entity
investors in specific circumstances. for UAE work permit and residence visa
4. Are there any foreign exchange purposes (note, this would not apply
to visits for ad hoc business meetings
restrictions or conditions applicable
which are not revenue-generating).
to companies such as restrictions to
Sponsorship is both employer-specific
foreign currency shareholder loans?
and location-specific, permitting the
Companies in the UAE are generally individual to work only for the employer
free to conduct transactions in foreign through whom they have obtained
currency, including accepting foreign their visa and at the location specified
currency shareholder loans, however, the in the visa.
Central Bank of the UAE (the “CBUAE”) • Contract Requirements: Depending
has the authority to impose foreign on where a company’s UAE entity
exchange controls or restrictions in certain is licensed and registered, the
circumstances (i.e. during periods of sponsorship application process
economic instability). requires the registration of a standard
prescribed labour contract (“UAE
The CBUAE has not imposed any significant Labour Contract”), in a form prescribed
foreign exchange restrictions in recent by either the UAE Ministry of Human
years, however companies must keep up to Resources and Emiratisation, or the
date with any changes to such regulations applicable free zone authority. The
to ensure they are compliant. It is important UAE Labour Contract is issued by the
to note that companies must comply with Labour Department and is mandatory
the regulations of the CBUAE as well as in order to obtain the labour card
other relevant authorities, such as the and residence visa. If the company is
UAE Ministry of Economy. Additionally, based in one of the UAE’s free zones, it
foreign currency loans may be subject to may (depending on the free zone) be
restrictions or conditions in some sectors required to complete the relevant free
or industries, such as the real estate sector, zone’s employment contract.
which may be subject to the rules issued by • Visa Process: There are a number of
the Real Estate Regulatory Authority, which steps that will need to be followed

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to obtain a UAE Residency Visa, but The standard management structures in a

essentially the process involves three corporate entity in the UAE are:
steps: (i) application for an entry permit,
• General Assembly: this is the highest
(ii) medical visit and (iii) stamping of the
governing body of the company,
UAE Residency Visa on the applicant’s
composed of all the shareholders of
original passport. In most cases,
the company. The General Assembly is
employees are required to provide the
responsible for making major decisions
authorities with legalised copies of their
such as appointing the board of
degree certificates.
directors, amending the company’s
• Taxation: The personal income tax and articles of association, and approving
corporate income tax level is currently the company’s financial statements.
0% in the UAE. Please note however,
an individual’s overall tax situation • Board of Directors: the board is
will depend on how many days they responsible for managing the day-to-
physically reside in the UAE and in other day operations of the company and
countries (i.e., the UK), the tax regime making strategic decisions on behalf of
differs considerably and specific tax the shareholders. The Board of Directors
advice would need to be sought in is typically composed of between 3
respect of this. In summary however, (three) and 11 members, depending
from a UAE perspective, there is no on the articles of association of the
obligation for an individual to pay taxes company.
in the UAE. • Executive Management: responsible
• Visa Quota: In respect of free zones, for implementing the decisions of the
companies are generally subject to a Board of Directors and running the
visa quota based on a number of factors operations of the company.
such as office leasing space (which The liability of the board members and
in turn limits the number of foreign the managers are generally limited to their
employees that can be employed by actions within the scope of their authority;
the company at any given time). however, they may be held liable for any
It is important for companies to comply damages caused by their negligence
with these rules and regulations to avoid or breach of their duties. The Board of
any legal or financial penalties. It is also Directors may also be held liable for the
important for foreign employees to be financial losses of the company if they are
aware of these considerations to ensure found to have acted in bad faith or with
compliance with the laws and regulations gross negligence.
of the UAE.
7. What are the audit requirements in
C. Corporate Governance corporate entities?

6. What are the standard management Corporate entities incorporated in the UAE
structures (e.g., general assembly, are subject to audit requirements as part
board of directors, etc.) in a corporate of their financial reporting obligations.
entity governed in your jurisdiction The specific audit requirements can vary
and the key liability issues relating depending on the emirate and industry
to these (e.g., liability of the board sector and the size of the business, but
members and managers)? some common requirements include:

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• Auditing Standards: companies D. Shareholder Rights

are required to comply with the
International Financial Reporting 8. What are the privileges that can
Standards (IFRS) and the International be granted to shareholders? In
Standards on Auditing (ISA) when particular, is it possible to grant
preparing their financial statements and voting privileges to shareholders for
conducting their audits. appointment of board members?

In the UAE, shareholders are generally

• Auditing Firm: companies are required
granted certain privileges, which include
to appoint an independent auditing
the following:
firm to conduct their annual audits.
The auditor should be a member of • Right to vote: shareholders have
one of the recognised professional the right to vote on important
accountancy bodies, such as the matters related to the company (i.e.,
Institute of Chartered Accounts in appointment of board members,
England and Wales (ICAEW). changes to the articles of association
and the distribution of dividends).
• Financial Statements: companies are
required to prepare and submit their • Right to receive dividends:
financial statements to the relevant shareholders are entitled to receive
authorities annually. These financial dividends from the company’s profits,
statements should be audited by subject to the company’s articles of
an independent auditor and should association.
include a balance sheet, an income
• Right to attend and participate in
statement, a cash flow statement, and a
general meetings: shareholders have
statement of changes in equity.
the right to attend and participate
• Audit Report: the independent in general meetings of the company,
auditor will issue an audit report which where important matters related to the
includes an opinion on the financial company are discussed and voted on.
statements. The auditor will also issue
• Right to inspect the company’s books
a management letter which includes
and records: shareholders have the
observations and recommendations
right to inspect the company’s books
for improving the company’s financial
and records, subject to the company’s
controls, internal controls and
articles of association.
reporting.
• Right to appoint board members:
• Compliance: companies are required
shareholders have the right to vote for
to comply with the regulations and
the appointment of board members,
laws regarding financial reporting and
subject to the company’s articles of
auditing in the UAE and the auditors
association.
are required to confirm that companies
have not violated any financial The rights and privileges of shareholders
reporting and anti-money laundering may vary depending on the type of
laws and regulations. company and place of incorporation.

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9. Are there any specific statutory rights in the UAE. The company’s articles of
available to minority shareholders association can include provisions that
available in your jurisdiction? restrict the transfer of shares without the
consent of the company of the board of
There are specific statutory rights available directors.
to minority shareholders (in addition to the
right to attend and participate in general 11. Are there any specific concerns or
meetings, the right to vote and the right to other considerations regarding the
composition, technical bankruptcy
inspect the company’s books and records,
and other insolvency cases in your
as mentioned above), including:
jurisdiction?
• Right to request a meeting of
Some of the concerns and considerations
shareholders: minority shareholders
regarding the composition, technical
have the right to request a meeting of
bankruptcy and other insolvency cases
shareholders if they believe their rights
include:
are being violated or if they have a valid
reason for requesting such a meeting, • Limited legal framework: the UAE’s
subject to the company’s articles of legal framework for insolvency and
association. bankruptcy is relatively limited
compared to other jurisdictions.
• Right to seek legal remedies: minority
shareholders have the right to seek • Lack of specialized courts/tribunals:
legal remedies in case of any violation the UAE does not have specialized
of their rights or if they believe that the courts or tribunals to handle insolvency
company’s actions are prejudicial to and bankruptcy cases. Instead, such
their interests, subject to the company’s cases are heard by general courts,
articles of association. which may not have the expertise or
resources to deal with such complex
Minority rights can be protected through
matters.
shareholder agreements and/or through
providing protection in the memorandum • Limited creditor support: the UAE’s
of association and articles of association of legal framework for insolvency and
a company. While shareholders’ agreements bankruptcy does not provide much
are generally enforced in the UAE courts, support for creditors. Creditors may not
these agreements are essentially private have the same legal rights as in other
contracts among the shareholders. To be jurisdictions, which can make it difficult
effective against all parties, the relevant for them to recover their debts.
provisions should be incorporated into the
• No specific regulations for
memorandum of association and articles of
crossborder insolvency: the UAE
association.
does not have specific regulations for
10. Is it possible to impose restrictions crossborder insolvency, which can
on share transfers under the make it difficult for foreign creditors
corporate documents (e.g., articles to recover their debts if a company
of association or its equivalent in becomes insolvent.
your jurisdiction) of a company
• Reputation risk: insolvency and
incorporated in your jurisdiction?
bankruptcy can have a negative impact
Yes, it is possible to impose restrictions on a company’s reputation, which can
on share transfers under the corporate make it difficult for the company to
documents of a company incorporated attract new customers/partners.

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E. Acquisition of the shares and not the assets or the

liabilities of the company.
12. Which methods are commonly used
to acquire a company, e.g., share • Retention of existing management:
transfer, asset transfer, etc.? share purchases allow the buyer to
acquire control of the company while
The method of acquisition will depend retaining the existing management
on the circumstances of the transaction team, which can help to ensure a
and the goals of the buyer and seller. In smooth transition and continuity of
the UAE, the most common method of operations.
acquiring a company is by way of a share
Disadvantages
transfer, whereby the buyer purchases the
shares of the company from the existing • Lack of control over assets: share
shareholder(s), allowing the buyer to purchases only provide the buyer with
acquire control of the company without control over the company, but not its
having to assume responsibility for its assets, which may limit the buyer’s
liabilities. ability to affect change of access to
Asset transfer is another method of assets in a way that would be beneficial
acquiring a company, already less common, for the buyer.
whereby the buyer purchases the assets • Limited due diligence: share purchases
of the company, rather than its shares. may involve less due diligence than
This method can be useful in certain
other methods of acquisition, which
circumstances, such as when the buyer only
can make it difficult for the buyer to
wants to acquire certain assets and not the
fully understand the financial and
entire business.
operational condition of the company
A merger and acquisition can also be done before the purpose.
in the UAE, in which case the assets and
liabilities of both companies are combined, • Dependency on other shareholders:
and the shareholders of the absorbed share purchases may depend on the
company receive shares in the acquiring agreement and the willingness of other
company. Another method is through shareholders to sell their shares, and
the purchase of a controlling interest in the buyer may not be able to acquire
a company, whereby the buyer acquires enough shares to gain control of the
a large enough number of shares to gain company if other shareholders are
control of the company’s board of directors unwilling to sell.
and make strategic decisions on the
• Price volatility: share prices may be
company’s behalf.
subject to market fluctuations, which
13. What are the advantages and can make it difficult for the buyer to
disadvantages of a share purchase predict the final purchase price if not
as opposed to other methods? fixed in advance.
Advantages 14. What are the approvals and
• Ease of transaction: share purchases consents typically required (e.g.,
are generally simpler and less complex corporate, regulatory, sector
than other methods of acquisition, such based and third-party approvals)
as asset purchases or mergers, as they for private acquisitions in your
only involve the transfer of ownership jurisdiction?

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The approvals and consents required for approvals and approval may be
private acquisitions in the UAE will vary required from the municipality in the
depending on the specific circumstances relevant Emirate where constructions
of the transaction (i.e., the nature of the and/or engineering companies are
business, the industry sector, and the involved. A transfer of shares typically
structure of the acquiring and target requires the approval of the relevant
companies). However, some of the typical DED or free zone authority.
approvals and consents that may be • Sector-based approvals: certain
required include: sectors, such as the real estate sector,
• Corporate approvals: the acquiring may be subject to specific regulations
and target companies will typically be and approvals. For example, the Real
required to obtain the approval of their Estate Regulatory Authority (RERA)
respective shareholders (see below) and may require certain approvals for the
boards of directors for the transaction. transfer of ownership of properties.
Individuals signing the local transfer • Third-party approvals: certain third-
documentation must be empowered party approvals may be required for
by a notarized (and attested, if signed the transaction, such as approvals
abroad) power of attorney. from banks, landlords, suppliers,
• Shareholder approvals: shareholders or customers, depending on the
of limited liability companies enjoy contractual arrangements between
statutory pre-emption rights on the seller and the relevant parties. For
a transfer of shares, which cannot example, if assets are secured against
be waived unless agreed by all bank financing, it is very likely that the
shareholders at the time of transfer. bank’s consent will be needed.
There are no statutory pre-emption • Competition Approval: approval of
rights for shareholders of private joint the UAE Competition Authority may
stock companies, nor for free zone be required in case of any merger or
entities, however, shareholders of acquisition that meets the threshold set
free zone entities can agree on such by the Competition Law (see below).
restrictions between themselves (in
the company’s articles of association, • Central Bank Approval: the CBUAE
memorandum of association or may require approvals for the
shareholders’ agreement). Where there transactions that are related to the
are two or more shareholders of the banking and financial services sector.
target company, the parties should also
It is important to note that the process of
be mindful of existing drag-along and/
obtaining approvals and consents can be
or tag-along rights (if any) that may
complex and time-consuming in the UAE.
impact on the proposed transaction.
15. What are the regulatory
• Regulatory approvals: depending
competition law requirements
on the nature of the business and the
applicable to private acquisitions in
industry sector, various regulatory
your jurisdiction?
approvals may be required for the
transaction. For example, companies The UAE has implemented Federal Law
operating in the financial services No.36 of 2023 on Competition (the
or telecommunications sectors may “Competition Law”) to regulate private
be subject to additional regulatory acquisitions and ensure fair competition

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among businesses. The Competition Law violation of the Competition Law for a
applies to all economic activities within the period of up to 6 months.
UAE and applies to any merger, acquisition
The thresholds are based on the combined
or joint venture that meets certain
turnover of the parties and their market
thresholds.
shares in the relevant markets. The parties
The following are the main regulatory must notify the UCA if:
competition law requirements that are
applicable to private acquisitions in the • Turnover Threshold
UAE:  the parties have a combined annual
• Notification: any acquisition that meets turnover in the UAE exceeding AED 300
the thresholds (see below) set out by million during the last fiscal year
the Competition Law must be notified • Market Share Thresholds
to the UAE Competition Authority (the
“UCA”) for review and clearance before  the total market share of the parties
it can be completed. Filings must be exceeds 40% of the total sales in the
submitted at least 90 days prior to relevant market during the last fiscal
completion of the transaction. year
• Review process: the UCA will review 16. Are there any specific rules
the notified transaction to determine if applicable for acquisition of public
it would result in a significant lessening companies in your jurisdiction?
of competition in the relevant market.
Yes, there are specific rules applicable to
The Minister of Economy must issue
the acquisition of public companies in the
a decision within 90 days from when
UAE. Such rules are intended to ensure fair
a filing is deemed complete, subject
and transparent treatment of shareholders,
to a 45-day extension (or when the
as well as to protect the rights of minority
Competition Committee issues requests
for additional information, which stops shareholders. For example:
the clock until parties comply. • Disclosure: acquiring parties in a
public company acquisition is required
• Remedies: the UCA may impose
to make full and accurate disclosures
remedies on the parties to the
transaction to address any competition to shareholders and the relevant
concerns, which can include regulatory authorised, including the
divestitures, licensing of intellectual Securities and Commodities Authority
property rights, or other commitments (the “SCA”) in the UAE. This includes
to maintain competition in the relevant information about the terms of the
market. acquisition, the financial condition
of the acquiring party, and any other
• Penalties: the Competition Law information that may be material to the
imposes significant fines and penalties shareholders’ decision.
for non-compliance, including fines of
up to 10% (and no less than 2%) of the • Tender offer: acquiring parties are
parties’ total annual revenue. If it is not typically required to make a tender
possible to determine the amount of offer to all shareholders of the public
relevant revenues, the fine will be set as company, offering to purchase their
a fixed amount between AED 500,000 shares at a fair price. The tender offer
and AED 5,000,000. The Competition must be open for a minimum period of
Authority can also order the closure 21 days, and the terms of the offer must
of an establishment found to be in be the same for all shareholders.

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• Fair treatment: acquiring parties are must be notified to the UCA for
required to treat all shareholders of the review and clearance before they can
public company fairly and equitably. be completed, and the parties must
This includes not taking any action provide information to the UCA as
that would discriminate against required.
minority shareholders, or that would
Although there are disclosure requirements
be detrimental to the interests of the
company or its shareholders. for certain types of transactions, it is
possible to keep certain aspects of a
• Shareholders’ approval: the deal confidential, such as commercially
acquisition of a public company in sensitive information or proprietary
the UAE requires the approval of information. The parties to the transaction
shareholders, and the shareholders of can include confidentiality agreements and
the target company must approve the nondisclosure provisions in the transaction
acquisition by a simple majority vote. documents, and the regulatory authorities
• Regulatory authorities’ approval: have the discretion to respect the parties’
the acquisition of a public company in request for confidentiality.
the UAE must also be approved by the If the target is listed on the ADX or DFM,
relevant regulatory authorities, such as the SCA Disclosure and Transparency
the SCA and the CBUAE. Regulations require publication of certain
17. Is there a requirement to disclose information, which includes the target’s
a deal, for instance to regulatory annual audited financial statements and
authorities? Is it possible to keep a half yearly financial statements, information
deal confidential? on material developments affecting the
target’s share price, details on acquisitions
In the UAE, there may be a requirement to or disposals of the target’s major assets,
disclose a deal to regulatory authorities, dealings in shares by the target’s board or
depending on the type of transaction and executive management and changes to the
the nature of the business. target’s board or executive management.
• Public companies: acquisition of public For companies listed on the NASDAQ
companies in the UAE are subject to Dubai, obligations regarding disclosure and
disclosure requirements, as detailed reporting are set out in the DFSA Market
above. Rules, as well as generally in the DFSA
Rulebook. These disclosure obligations are
• Private companies: the disclosure
very similar to those of the SCA Disclosure
requirements for private companies
and Transparency Regulations above.
are less stringent than for public
companies, however, if the acquisition 18. Can sellers be restricted from
involves a change of control or the shopping around during a
transfer of a significant asset, it may be negotiation process? Is it possible
subject to regulatory approvals and to include break fee or other
the parties may be required to provide penalty clauses in acquisition
certain information to the relevant documents to procure deal
authorities. exclusivity?
• Competition Law: mergers and In the UAE, sellers are generally free to shop
acquisitions that meet the threshold around during a negotiation process, unless
of the Competition Law (see above) there is a specific agreement between the

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parties that restricts their ability to do so. it investigation of the company or assets
is possible for buyers to include exclusivity being acquired.
provisions in the acquisition documents
• Regulatory Approvals: the buyer
(i.e., an “exclusivity” clause) which would
and the seller may need to obtain any
prohibit the seller from engaging in
necessary regulatory approvals for the
negotiations with other parties during a
acquisition, such as from the CBUAE or
certain period. However, it is important
the Ministry of Economy.
to note that the enforceability of such
exclusivity provisions may depend on the • Third-Party Consents: the seller may
specific terms of the agreement. Generally, be required to obtain any necessary
the UAE courts will not enforce agreements consents or approvals from third parties
that are deemed to be restrictive of in order to complete the acquisition
competition or that are detrimental to the (for example, in respect of a change of
interests of the public. control).
Break fees and/or other penalty clauses • Representations and Warranties:
can be included in acquisition documents, the seller will be required to make
however, the UAE courts may exercise representations and warranties
discretion in evaluating the enforceability regarding the company or assets
of such clauses, and they may be being acquired, including regarding
considered unenforceable if they are its ownership, financial condition, and
deemed to be excessively punitive or if legal compliance.
they are not in line with the UAE laws and
regulations. • Indemnification: the seller may be
required to indemnify the buyer for
Onshore in the UAE, the arrangement any losses or damages arising from
pertaining to break fees must be fully any breaches of representations or
disclosed in the offer documents, which warranties.
must include a clear definition of events
that would trigger such break fees). Break The above is not an exhaustive list, and
fees are capped at 2% of the offer value and the specific conditions precedent will vary
any arrangement on break fees requires depending on the details of the acquisition
SCA approval. In the DIFC, break fees and the parties involved.
are frequently employed and generally In the UAE, it is a common requirement for
deemed permissible under the DIFC the seller to warrant that there has been no
regime, unless the DFSA objects to them. material adverse change in the company or
19. What are the conditions precedent assets being acquired since the date of the
in a typical acquisition document? agreement (as a condition to closing).
Is it common to have conditions to 20. What are the typical warranties
closing such as no material adverse and limitations in acquisition
change?
documents? Is it common to obtain
The typical conditions precedent to warranty insurance?
an acquisition in the UAE include the
The seller will typically provide warranties
following:
regarding the company or assets being
• Due Diligence: the buyer may require acquired, such as warranties regarding
the seller to provide access to all ownership, financial condition, and
necessary information for the buyer compliance with laws and regulations
to conduct its own due diligence (but please note that these will depend

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on the details of the acquisition and the It is important to note, however, that there
parties involved). These warranties are are regulations in place that may impact
intended to provide the buyer with certain pricing. For example, the SCA has the
assurances about the company or assets power to regulate securities transactions
being acquired and are typically included and may set rules regarding the pricing of
to protect the buyer against any unknown shares in publicly traded companies, and
or undisclosed issues that may arise after the CBUAE may also regulate the pricing of
the acquisition. shares in companies that are subject to its
oversight.
The limitations and exclusions of these
warranties are also commonly included, 22. What types of acquisition financing
such as: are available for potential buyers in
your jurisdiction? Can a company
• the warranties will only be valid for a
provide financial assistance to a
specific period after the closing of the
potential buyer of shares in the
acquisition,
target company?
• the warranties will be subject to any
The types of acquisition financing available
materiality or material adverse change
for potential buyers in the UAE include:
qualifications,
• Debt: this involves borrowing funds
• the warranties will be limited to the
from a lender (i.e., a bank or a financial
knowledge of the seller at the time of
institution), and such lender typically
the agreement,
requires the buyer to provide collateral
• certain warranties may not apply to for such borrowing.
any known or disclosed issues that
• Equity: this involves the sale of shares
the buyer was aware of before the
in the acquiring company to raise funds
acquisition.
for the acquisition.
It is uncommon in the UAE for the buyer • Mezzanine: this is a hybrid of debt and
to obtain warranty insurance to protect equity financing, in which the lender
against breaches of the warranties provided provides funds in the form of a loan
by the seller. This type of insurance but also receives an equity stake in the
can provide the buyer with additional company.
protection if the seller breaches any of the
warranties and the buyer suffer a loss as a • Vendor: this involves the seller
result. providing financing to the buyer,
usually in the form of a loan or a
21. Is there a requirement to set a deferred purchase price.
minimum pricing for shares of a
target company in an acquisition? • Private Equity: private equity firms
provide capital to companies in
There is no specific requirement in the exchange for an ownership stake.
UAE to set a minimum pricing for shares
• Corporate banking: most of the UAE
of a target company in an acquisition. The
banks offer corporate banking services,
price of such shares is typically negotiated
which include tailored solutions
between the buyer and the seller and can
for M&A activities, such as project
be based on a number of factors such as
financings, syndicated loans, and
the financial performance of the company,
structured finance.
the value of the assets, and the market
conditions. It is possible for a company to provide

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financial assistance to a potential buyer In the DIFC the formalities and procedures
of shares in the target company; however, for share transfers are regulated by the DIFC
this is subject to certain regulations and Companies Law and the DIFC Companies
restrictions. The UAE Companies Law Regulations. In the ADGM, the formalities
prohibits a company from providing and procedures for share transfers are
financial assistance for the purchase of regulated by the ADGM Companies
its own shares unless certain conditions Regulations. The procedures for share
are met (such as the company obtaining transfers in the DIFC and the ADGM are as
an independent expert’s report that the follows:
assistance is fair and reasonable). 1) a share transfer agreement, which sets
23. What are the formalities and out the terms of the transfer (including
procedures for share transfers and the purchase price and any other
how is a share transfer perfected? relevant terms) must be executed
between the transferor and transferee,
In the UAE, the formalities and procedures
for share transfers vary depending on 2) the share transfer agreement must
whether the shares being transferred are in be accompanied by the original share
a public or private company. certificate(s) and a share transfer form,
which must be completed and signed
For shares in public companies: by the transferor and transferee,
• the shares must be registered in the 3) the share transfer form and share
name of the transferee with the SCA or transfer agreement, along with the
the relevant regulatory body original share certificate(s) must be
• the transferee must submit the delivered to the DIFC Companies
Registrar or the ADGM Companies
necessary documents and forms to the
Registrar (as applicable) for registration,
SCA or the relevant regulatory body,
such as the share transfer form, proof 4) the DIFC Companies Registrar or
of payment of the share purchase price, the ADGM Companies Registrar
and any other required documents (as applicable) will then review the
documents and, if they are in order, will
• the SCA or the relevant regulatory body
register the transfer and update the
will then review and approve the share
company’s register of shareholders,
transfer, and update the company’s
register of shareholders 5) after the registration of the share
transfer, the company will issue a new
For shares in private companies: share certificate in the name of the
• the company’s articles of association transferee.
or memorandum of association must The share transfer agreement is considered
provide for the transfer of shares binding and enforceable from the date
• the share transfer agreement must be of execution, and the transfer of shares is
signed by the transferor and transferee deemed to be completed upon registration
and then be delivered to the company of the transfer with the DIFC Companies
for registration Registrar or the ADGM Companies Registrar
(as applicable).
• the company will then update its
register of shareholders and issue a 24. Are there any incentives (such
new share certificate in the name of the as tax exemptions) available for
transferee acquisitions in your jurisdiction?

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There are various incentives available for Arabic and certified by a legal translator.
acquisitions in the UAE that are provided The original document and its translation
by the government to encourage foreign must both be presented to the relevant
investment and economic growth in the authorities for the acquisition to be legally
country. Some of the incentives available recognised and registered.
include:
26. Can acquisition documents be
• Tax Exemptions: foreign investors may governed by a foreign law?
be eligible for tax exemptions on their
Yes. In the UAE, acquisition documents can
income and profits, depending on the
be governed by a foreign law provided that
type and location of the investment.
the foreign law does not conflict with the
• 100% Foreign Ownership: foreign laws of the UAE. It is, however, important
investors are generally allowed to own to note that the UAE’s courts will apply UAE
100% of a company in the UAE, with law in the event of any disputes arising
certain exceptions in some sectors such from an acquisition, and that any foreign
as oil and gas. judgments or arbitral awards relating to
the acquisition must be recognized and
• Free Zones: the UAE has several free
enforced by the UAE courts.
zones, such as the DIFC and the ADGM,
which offer a range of benefits to 27. Are arbitration clauses legally
companies operating within them, permissible or generally included in
including 100% foreign ownership, tax acquisition documents?
exemptions, and relaxed regulations.
Arbitration clauses are legally permissible
• Economic Development Zones: the and generally included in acquisition
UAE government has established documents in the UAE. The UAE is a
various economic development zones signatory to the New York Convention
with the aim of attracting foreign on the Recognition and Enforcement of
investment. These zones include Foreign Arbitral Awards, which means that
Dubai South, Dubai Industrial City, arbitration awards made in other signatory
and Abu Dhabi Industrial City, and are countries will be recognized and enforced
designed to provide various benefits in the UAE. The UAE has also enacted its
to companies operating within them, own arbitration law, known as the UAE
such as tax exemptions and relaxed Federal Law No. 6 of 2018 on Arbitration
regulations. (the “Arbitration Law”), which governs
arbitration in the UAE and is based on
• Subsidies and Grants: the UAE
government provides subsidies and the UNCITRAL Model Law. The arbitration
grants to companies that meet certain clause should be drafted in compliance
criteria, such as technology-based with the Arbitration Law, and the
companies, companies that are focused arbitration clause should be clear, specific
on innovation, and companies that are and should indicate the rules of arbitration
that will be followed.
engaged in research and development.
Arbitration is a common means of resolving
F. Enforceability disputes in the UAE, particularly in the
25. Can acquisition documents be commercial and construction sectors.
executed in a foreign language?
28. Are there any specific formalities
Yes. Acquisition documents can be for the execution of acquisition
executed in a foreign language in the UAE, documents? Is it possible to
however, they must also be translated into remotely/digitally sign documents?

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Yes, there are specific formalities that must • Strategic partnership: companies in
be followed when executing acquisition the UAE are increasingly focusing on
documents in the UAE. In general, most strategic partnerships to expand their
legal documents, including acquisition market reach, enter new markets, and
documents, must be executed in writing gain access to new technologies.
and signed by the parties. Some legal
• Infrastructure and real estate:
documents, such as real estate and infrastructure and real estate sectors
commercial agency agreements, must also continue to be attractive to investors
be notarized and attested by the relevant in the UAE, with ongoing investment in
authorities. transportation, energy and real estate
In recent years, the UAE has been working projects.
to make it possible for remote/digital • Consolidation: recent economic
signing of legal documents (including uncertainty has led to increased
acquisition documents), and the UAE consolidation in the UAE’s business
government has introduced e-signatures landscape, with companies looking
and digital signature solutions to facilitate to merge or acquire other companies
this process. The use of electronic to diversify their revenue streams and
signatures is now legally recognised improve their financial positions.
and accepted in the UAE, provided it is
in compliance with the regulations set 30. Are any significant development
forth by the UAE’s Telecommunications or change expected in the near
Regulatory Authority, however, the future in relation to M&A in your
jurisdiction?
regulations and laws are still evolving and
so signing electronically is not currently Significant developments and changes
common in practice. expected in the near future in relation to
M&A in the UAE include:
G. Trends and Projections
• Economic diversification: with the
29. What are the main current trends in
ongoing efforts to diversify the UAE’s
M&A in your jurisdiction? economy, the government is expected
There are several current trends in M&A in to continue to provide incentives and
the UAE, being the following: support for M&A activities in sectors
such as technology, renewable energy,
• Technology: with the increasing and healthcare.
adoption of digital technologies, there
• Remote M&A: with the increased
is an increasing trend in M&A activities
adoption of digital technologies and
in the technology sector, particularly
the shift towards remote working, the
in areas such as e-commerce, digital
use of virtual and digital tools for M&A
health and fintech. transactions are expected to become
• Private Equity Investment: the more common.
UAE’s private equity market has seen • ESG (Environmental, Social and
significant growth in recent years, with Governance): with the growing
increased investment from both local awareness of the importance of ESG
and international investors in sectors factors, companies are expected to
such as education, healthcare and increasingly consider these factors
consumer goods. when making M&A decisions.

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• Laws and Regulations: the UAE

government is expected to continue
to refine and update its laws and
regulations to create a more favorable
environment for M&A activities.

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UNITED KINGDOM
ADDLESHAW GODDARD

Daniel Cousens Michal Szperzynski

Partner Managing Associate
daniel.cousens@ Michal.szperzynski@
aglaw.com aglaw.com

A. General The two main types of companies used in

the UK are:
1. What is the main legal framework
applicable to companies in your • Private company limited by shares
jurisdiction? (“Limited Company”) – this is the most
common form of corporate entity used
The primary source of English company in the UK.
law is the Companies Act 2006 (“CA
2006”) which provides a comprehensive • Public limited company (“Public
framework for company law in the UK. Company”) – this is a more regulated
Other legislation and rules important for form of a company used mainly in
the operation of companies in the UK connection with listed businesses.
include: Both types of companies have separate
• the Insolvency Act 1986; and legal personalities and the liability of their
members is limited to the nominal value of
• the City Code on Takeovers and Mergers their shares.
(“Takeover Code”).
The main differences are:
2. What are the most common types
• Limited companies are prohibited from
of corporate entities (e.g., joint
offering their shares to the public.
stock companies, limited liability
companies, etc.) used in your • In respect of corporate acquisitions,
jurisdiction? What are the main the Takeover Code applies to all Public
differences between them (including Companies which have their registered
but not limited to with regard to the office in the UK and any acquisition of a
shareholders’ liability)? Public Company must generally comply

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with the Takeover Code (however, in resolutions) in a target entity active within
certain circumstances, it can also apply a specified sector in the UK. The mandatory
to a Limited Company). regime is of suspensory nature which
• Public Companies cannot take means that a transaction cannot complete
advantage of various procedures under until it receives clearance.
the CA 2006 which are available to The voluntary regime applies to all
Limited Companies (e.g. being able to sectors of the economy, and parties are
pass shareholder resolutions as written encouraged to voluntarily notify any
resolutions). “trigger events” which they consider may
• Public Companies have a minimum be of interest from a national security
share capital of a nominal value of at perspective. The UK Government also
least GBP 50,000. In contrast, there is has extensive “call-in” powers to review
no minimum share capital requirement qualifying transactions that have not been
applying to Limited Companies (all that notified up to five years post-completion.
is required is that they have one share The call-in period is reduced to six months
in issue). if the Government has been notified of the
transaction.
Other types of entities can also be used
for conducting business (e.g. a limited There are criminal and civil sanctions
liability partnership) but these are much for non-compliance with a mandatory
less common in the context of M&A notification obligation, which can impact
transactions. both buyers and sellers. A fine of up to 5%
of worldwide turnover or GBP 10 million
B. Foreign Investment
(whichever is higher) can be imposed
3. Are there any restrictions on foreign and buyer-side directors can face up to
investors incorporating or acquiring five years imprisonment. A completed
the shares of a company in your transaction will also be void.
jurisdiction?
4. Are there any foreign exchange
While the UK was traditionally quite liberal restrictions or conditions applicable
with respect to foreign investors acquiring to companies such as restrictions to
shares in UK companies, this has changed foreign currency shareholder loans?
with the introduction of the National
Security and Investment Act 2021 (NSIA) Generally not.
which has introduced a new hybrid regime 5. Are there any specific considerations
for foreign investments in the UK. for employment of foreign
It consists of a mandatory regime for 17 employees in companies
most sensitive sectors of the economy incorporated in your jurisdiction?
(such as advanced robotics, artificial Following the UK leaving the European
intelligence, defense, energy) and a
Union, in general, all foreigners must hold
voluntary regime for all other sectors.
a visa to work in the UK (subject to some
Under the mandatory regime, parties must exceptions, e.g., in respect of citizens of
notify the UK Government if they acquire Ireland or citizens of other EU countries
more than 25%, 50% or 75% of votes who lived in the UK before December 31,
or shares (or the ability to block or pass 2020 (subject to certain conditions).

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C. Corporate Governance authorized insurance companies and

banking companies) must have their
6. What are the standard management annual accounts audited every year.
structures (e.g., general assembly,
board of directors, etc.) in a corporate In addition, generally speaking, Limited
entity governed in your jurisdiction Companies must have their annual
and the key liability issues relating accounts audited if they satisfy at least two
to these (e.g., liability of the board of the following:
members and managers)?
• an annual turnover of more than GBP
UK companies are managed by a single 10.2 million;
board of directors. Executive directors are in • balance sheet of more than GBP 5.1
charge of managing the business and may
million;
also be employed by the company. If there
are any non-executive directors, these are • more than 50 employees on average.
generally expected to fulfil a supervisory D. Shareholder Rights
role. The law does not, however, distinguish
between executive and non-executive 8. What are the privileges that can
directors and decisions must be taken by be granted to shareholders? In
the board acting collectively. particular, is it possible to grant
voting privileges to shareholders for
Persons who have not been formally
appointment of board members?
appointed as directors but act as such will
be treated as directors. The company’s articles of association set
the rights and limitations attached to the
Similarly, persons in accordance with whose
directions or instructions the directors of shares. Different rights can be enjoyed by
a company are accustomed to act will be different shareholders and special rights
treated as directors for certain purposes. can be granted such as rights to appoint
directors, weighted voting rights, special
If directors breach their duties to the dividend rights etc.
company, they may be personally liable to
compensate the company for losses caused. 9. Are there any specific statutory rights
They may also have to restore company available to minority shareholders
property and pass any profits they have available in your jurisdiction?
made to the company. It is generally a
Certain rights can be enjoyed by
criminal offence to fail to comply with
shareholders holding at least a certain
statutory administrative requirements for
percentage of shares in the company, such
accounts to be prepared and public filings
to be made. It is also a criminal offence for as:
directors to fail to declare their interest in • 5% of shares/voting rights in the
a transaction involving the company. See company can, for example, call a
also the response to question 11 below general meeting or, in respect of a
in respect of directors’ duties when the Limitied Company, require the company
company is in financial difficulty. to circulate a written resolution to
7. What are the audit requirements in shareholders;
corporate entities?
• 10% shares/voting rights in the
All Public Companies and other companies company can call for a poll vote on a
operating in certain sectors (such as resolution at a general meeting

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• more than 10% shares/voting rights 12. Acquisition Which methods are
in the company can prevent a general commonly used to acquire a
meeting from being held on short company, e.g., share transfer, asset
notice; transfer, etc.?

• more than 25% shares/voting rights The most commonly used method to
in the company can block a special acquire a Limited Company is through a
resolution. share transfer. Asset transfers are also used
but are less common in practice.
In addition, any minority shareholder can
bring an unfair prejudice claim against the The regime under the Takeover Code
company. applies to Public Companies which can be
acquired either through a contractual offer
10. Is it possible to impose restrictions or statutory, court-approved mechanism
on share transfers under the called a scheme of arrangement (which
corporate documents (e.g., articles involves a vote by shareholders and court
of association or its equivalent in approval and is often seen as a more
your jurisdiction) of a company straightforward path to acquiring full
incorporated in your jurisdiction? ownership of the target).

Yes, Limited Companies can impose 13. What are the advantages and
share transfer restrictions. These are often disadvantages of a share purchase
included in both the articles of association as opposed to other methods?
and shareholders’ agreements. As in other jurisdictions, share acquisitions
Public Companies’ shares must generally tend to be simpler as they do not
be freely transferable and share restrictions require individual assets to be listed in
can only be imposed in rare circumstances. the acquisition documents (all of the
company’s assets transfer automatically
11. Are there any specific concerns or with the company), there is no need for
other considerations regarding the consents to transfer individual agreements
composition, technical bankruptcy (though there may be change of control
and other insolvency cases in your provisions that are triggered) or consult
jurisdiction? with the target’s employees (as tends to
be the case in the context of business and
Where a company is in financial difficulties assets acquisitions). Share acquisitions may
or insolvent, its directors must protect the also be more advantageous from the tax
interests of the company’s creditors as a perspective.
whole (instead of the company’s members).
On the flipside, as in other jurisdictions,
In particular, when directors become
share purchases involve acquiring the
aware that there is no reasonable prospect
target company with all of its assets and
that the company will avoid becoming liabilities which may not work from the
insolvent, they must take every step to seller’s perspective.
minimize the creditors’ losses.
14. What are the approvals and
Appropriate legal advice should be taken consents typically required (e.g.,
in these circumstances. The directors may corporate, regulatory, sector
be required to repay creditors with whom based and third-party approvals)
the company traded while they were aware for private acquisitions in your
that insolvency was probable. jurisdiction?

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There are various regulated business 17. Is there a requirement to disclose

sectors in the UK where government a deal, for instance to regulatory
or regulator consent may be necessary, authorities? Is it possible to keep a
including financial services, broadcasting, deal confidential?
utilities, and railways (see, for example, the
The deal needs to be disclosed if any
response to question 3 above). On a share
mandatory consents or approvals
sale, there may be change of control clauses
(including any regulatory consents if the
that need to be waived in underlying joint
target is a regulated entity) are required. In
ventures or other key contracts. Also, the
addition, with respect to Public Company
transfer of shares may require shareholder
takeovers, those need to be initially notified
approval in accordance with the articles of
to the Takeover Panel, and, eventually, to
association.
the public.
On a business sale, contract counterparty
18. Can sellers be restricted from
consent is generally needed to transfer
shopping around during a
contracts formally, although workarounds
negotiation process? Is it possible
are often adopted for day-to-day contracts.
to include break fee or other
15. What are the regulatory penalty clauses in acquisition
competition law requirements documents to procure deal
applicable to private acquisitions in exclusivity?
your jurisdiction?
Exclusivity agreements are frequently
The UK merger control regime is voluntary entered into in respect of private M&A
(i.e. there is technically no legal obligation transactions in the UK. These may include
to notify a merger to the Competition and break fees which, while not very common,
Markets Authority (“CMA”) and transactions are allowed provided they comply with the
may complete without notification or legal requirements (such as not being so
clearance). However, regardless of whether high as to amount to a penalty).
a merger has been notified, the CMA is
In general, offer related arrangements
empowered to impose interim orders
(such as break fees) are not allowed in the
prohibiting the parties from integrating
context of Public Company acquisitions
and, in exceptional cases, may even
(subject to some limited exceptions). Some
prohibit completion of the transaction.
specific arrangements, such as irrevocable
In addition, following the UK’s exit from the commitments and letters of intent with the
EU, many large deals which previously fell target’s directors and/or major shareholders
within the jurisdiction of the EU may now are permitted under the Takeover Code.
be subject to parallel UK and EU review.
19. What are the conditions precedent
16. Are there any specific rules in a typical acquisition document?
applicable for acquisition of public Is it common to have conditions to
companies in your jurisdiction? closing such as no material adverse
change?
Yes, the Takeover Code applies to
acquisitions of Public Companies in the A typical acquisition document would,
UK and it contains a number of special if applicable, include conditions relating
rules (for example, relating to public to merger control approvals and third
announcements, mandatory offers, party consents having been obtained,
offer periods, squeeze out of minority completion of pre-closing reorganizations
shareholders etc.). etc.

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Traditionally it was not common to see 22. What types of acquisition financing
no material adverse change conditions are available for potential buyers in
unless the buyer was in a particularly your jurisdiction? Can a company
strong negotiating position, however, due provide financial assistance to a
to the economic and political uncertainty, potential buyer of shares in the
target company?
these are insisted on by the buyers in an
increasing number of deals. In general, Public Companies (and their
subsidiaries) are prohibited from giving
20. What are the typical warranties
financial assistance for the purpose of
and limitations in acquisition
buying shares in such companies.
documents? Is it common to obtain
warranty insurance? There is no such prohibition for Limited
Companies (subject to complying with
As in a number of jurisdictions, the scope certain rules, such as directors’ duties under
of warranties is quite wide – they are a the CA 2006).
very important part of any acquisition
document as, in addition to giving the 23. What are the formalities and
procedures for share transfers and
buyer the possibility to bring a claim in
how is a share transfer perfected?
the event of a breach, they also serve the
purpose of encouraging disclosure by the To transfer shares in a Limited Company,
sellers. The exact scope of the warranties the seller must sign a stock transfer from
would primarily depend on the bargaining and stamp duty arising on the stock
position of the seller and the buyer (e.g., transfer form (of 0.5%) must be paid and
private equity funds are unlikely to provide the stock transfer form must be submitted
warranties beyond title and capacity). to the UK Tax Authority (“HMRC”). Once
HMRC has confirmed due receipt of the
General tax indemnities are very common. stamp duty payment and submission of the
Typical limitations include maximum stock transfer form, the target company’s
liability cap, time limitations for bringing a register of members can be updated and
the legal title to the shares, transfers to the
claim, de minimis and basket.
buyer.
The warranties tend also to be qualified by
24. Are there any incentives (such
matters that have been disclosed to the
as tax exemptions) available for
buyer (including, typically, disclosure of the
acquisitions in your jurisdiction?
full data room).
If a share disposal by a corporate
It is pretty common to obtain warranty seller qualifies for the UK’s substantial
insurance, in particular in PE driven deals. shareholding exemption, a gain made by
21. Is there a requirement to set a the seller is exempt from UK corporation
minimum pricing for shares of a tax.
target company in an acquisition?
There is a requirement to set a minimum
pricing for shares of a target company in
an acquisition, only in respect of listed
companies.

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E. Enforceability F. Trends and Projections

25. Can acquisition documents be 29. What are the main current trends in
executed in a foreign language? M&A in your jurisdiction?

Yes (but given the prominence of the As the UK had a relatively turbulent couple
English language, it does not really happen of years which saw raising inflation and
in practice). interest rates, cost-of-living and political
crises and a number of other issues, M&A
26. Can acquisition documents be activity cooled down from the highs of
governed by a foreign law? 2021 (which was a record year in both value
Yes (subject to any mandatory provisions of and volume). Accordingly 2023 was still a
relatively slow year for M&A in the UK.
English law).
However, the latter part of the year saw
27. Are arbitration clauses legally
an increase in activity with expectations
permissible or generally included in
for this upward trend to carry forward into
acquisition documents?
2024. Private equity funds- in particular,
They are permissible and often seen in are still sitting on a lot of dry powder and
practice (in particular in transnational are ready to return to regular deal-making
transactions). activities. Similar to the patterns seen in
2023, ESG, TMT, energy and healthcare are
28. Are there any specific formalities
the likely areas to attract a lot of attention
for the execution of acquisition
from investors.
documents? Is it possible to
remotely/digitally sign documents? 30. Are any significant development
or change expected in the near
If the SPA contains a power of attorney, it
future in relation to M&A in your
will need to be executed as a deed which
jurisdiction?
requires specific formalities.
No.
It is possible to sign documents (including
deeds) electronically.

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UZBEKISTAN
CENTIL LAW

Maksud Karaketov Kamilla Muminova

Partner Associate
maksud.karaketov@ kamilla.muminova@
centil.law centil.law

A. General May 6, 2014 (“JSC Law”) and the Law of the

Republic of Uzbekistan No.77-II “On Foreign
1. What is the main legal framework Economic Activity” dated May 26, 2000, and
applicable to companies in your other legislative acts.
jurisdiction?
2. What are the most common types
Companies have the full legal capacity of corporate entities (e.g., joint
as separate legal personalities to be stock companies, limited liability
engaged in any business activity (including companies, etc.) used in your
licensable activities). Numerous factors jurisdiction? What are the main
(such as the purpose of a business, cost, differences between them (including
and complexity of registering a legal entity, but not limited to with regard to the
liability issues, management structures, and shareholders’ liability)?
capital requirements) affect the choice of
corporate structure. Among the variety of existing corporate
forms (full and limited partnerships, unitary
The legislation applicable to companies
enterprise, and production cooperative
consists of the Civil Code of the Republic
society), only two corporate forms appear
of Uzbekistan (as amended), effective
to be the most common and suitable for
from March 1, 1997, Law of the Republic of
foreign investors such as a limited liability
Uzbekistan No.310-II “On Companies with
company (“LLC”) and a joint stock company
Limited and Additional Liability” dated
(“JSC”).
December 6, 2001 (“LLC Law”), Law of the
Republic of Uzbekistan No. 223-I “Аbout LLC is a company established by one or
joint stock companies and protection of the more individuals or legal entities with a
shareholders’ rights” (as amended) dated charter capital divided into shares whose

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size is determined by the foundation Despite the consolidation of the investment

documents (bylaws). laws into a single legal document, the
equity restrictions, which are effective now,
JSC is a commercial organization, the are still dispersed in different legal acts.
charter capital of which is divided into a The law sets limits in certain sectors (mass
certain number of participatory interests, media, banking, defense, and national
certifying the rights of shareholders in security).
relation to the company. The JSC is a legal
For mass media, it is prohibited to
entity and owns the separate property,
incorporate mass media companies by
including property transferred to it in legal entities in the charter capital which
the charter capital, accounted for on its is composed of 30% or more of foreign
independent balance sheet, can acquire investment.
and exercise property and personal
For banks, the total share of non-residents
non-property rights on its own behalf,
– individuals and legal entities that are not
bear obligations, and be a plaintiff and
international financial institutions, foreign
defendant in court. banks, and other credit organizations,
In contrast to a JSC, shares in an LLC are should not exceed 50% of the charter
not securities. LLC participants are not capital of the bank.
liable for its obligations, and they bear Shareholding Restriction (aka ‘Matryoshka
the risk of losses connected with the LLC’s Rule’): There is a rule that a founding
activities within the limits of the value of company may not hold 100% participatory
their personal contributions (participatory interest in the charter capital of an
interest). It has minimal requirements in LLC, if the former, in turn, is owned by
terms of registration, and management a single person (either corporate or
individual). In other words, either an LLC
and no requirements for disclosure of
or a founding company should be in joint
information, except for shareholders
ownership (with two or more participants/
(named participants in LLCs). shareholders). This rule does not apply to
Most private businesses in Uzbekistan a company that is held by a JSC with one
are organized in a form of LLCs, while shareholder.
state-owned enterprises and all banks are 4. Are there any foreign exchange
mainly registered as JSC. JSCs are heavier restrictions or conditions applicable
regulated by capital markets authorities to companies such as restrictions to
while LLCs are simpler to manage. JSCs may foreign currency shareholder loans?
be characterized by the complex procedure There are no any specific restrictions
of their registration and administration. on foreign currency shareholder loans.
Contrary, LLC Law is rather simple and However, the loan agreement should be
straightforward and not over-regulated as compatible with Uzbek law and must be
in the case of JSC. registered with the Central Bank of the
Republic of Uzbekistan via the company’s
B. Foreign Investment service bank.
3. Are there any restrictions on foreign 5. Are there any specific considerations
investors incorporating or acquiring for employment of foreign
the shares of a company in your employees in companies
jurisdiction? incorporated in your jurisdiction?

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The foreign nationals are entitled to the 30,000 payable from the company’s
same rights as provided for locals as well bank account.
as owe the same duties to their employers
After successful consideration, when
as locals, additionally being subject to
issuing a work permit, a company must
holding the relevant work permit, issued
pay a state fee in the amount of 1 BCV,
individually for the foreign employee, and
which is 375,000 UZS, approximately
visa.
USD 29 for highly qualified specialists,
A work permit is a document giving the and a state fee of 2 BCV, which is 750,000
right a foreign citizen to carry out labor UZS, approximately USD 58 for qualified
activities in the territory of the Republic specialists. Work permit for qualified and
of Uzbekistan. A work permit is issued to highly qualified specialists is issued for
a foreign specialist personally for a 1-year a period of up to three years, with the
period and is subject to renewal in case possibility of extension.
of continuous employment of a foreign
specialist. For foreign employees of representative
offices physically presenting and residing
When submitting an application, the in Uzbekistan must procure an individual
company pays an application fee in the accreditation card.
amount of 1 basic calculated value (“BCV”),
which is 375,000 UZS, or approximately C. Corporate Governance
USD 29. The review period is 15 business 6. What are the standard management
days. Upon successful review and upon structures (e.g., general assembly,
granting the work permit, the company board of directors, etc.) in a corporate
needs to pay out the fee amounting entity governed in your jurisdiction
to 30 BCV, which is 11,250,000 UZS, and the key liability issues relating
approximately USD 8694. to these (e.g., liability of the board
Under the labor laws, there are additional members and managers)?
requirements are provided for highly The managing bodies of JSC are the
qualified and qualified foreign specialists: General Meeting of Shareholders, the
Highly qualified foreign specialists must: Supervisory Board and the Executive Body.

• be a graduate of one of the 1000 best LLC’s management consists of a supreme

universities in the world rank; body (the General Meeting of Participants
(founders) or a single founding member);
• have at least 5 years of professional and Executive Body (individual or
experience in the relevant field; collective). The company may also have
• have an annual salary of at least USD a Supervisory Board within its corporate
60,000 payable from the company’s structure, which is, however, not
bank account. mandatory.
The qualified foreign specialist must: The General Meeting of Shareholders/
• have a higher education; Participants (“GMSP/GMP”) is a supreme
management body of a company. GMSP
• have at least 5 years of professional has exclusive powers concerning the
experience in the relevant field; specific issues mainly covering business,
• have an annual salary of at least USD financial, management and structural

4 The average exchange rate of USD 1 equal to UZS 12,940 was used.

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matters of the company. The exclusive the decision of the company’s Supervisory
powers of GMP include of the LLC include: Board, except for cases, provided in the
Charter, as well as to the decision of the
• the definition of the main areas of
company’s Executive Body.
the company’s activities, as well
as the decision to participate in The Supervisory Board is an intermediate
other associations of commercial body. It does not carry out daily operations
organizations; and executive management of the
• change in the size of the charter capital company but performs certain managerial
of the company; functions of a higher level, such as
introduction of changes and additions determining certain programs, policies,
to the foundation documents; and categories of operations, appointing
the Executive Body, and the internal audit
• formation of Executive Bodies of the body, providing authorizations, approvals,
company and early termination of their etc. In fact, the Supervisory Board acts in
powers; accordance with the authority delegated to
• election and early termination of it by the GMP.
the powers of the audit commission
The day-to-day management of the
(auditor) of the company;
company is performed by the Executive
• election and early termination of Body (director/management board), which
the powers of the Supervisory Board is mandatory. The authority entrusted to
if its creation is provided for by the the Executive Body shall be specified in
company’s charter; the foundation documents (charter and/
• approval of annual reports and annual or foundation agreement (if there is more
balance sheets; than one participant in the company) of the
company.
• deciding on the distribution of the
company’s net profit among the 7. What are the audit requirements in
participants of the company; corporate entities?
• approval (adoption) of documents Audit requirements in LLC.
regulating the activities of the
An internal audit service is mandatory only
company’s bodies;
for LLCs with a state share of 50 percent or
• deciding on conducting an audit, more with a book value of assets of more
determining the audit organization and than 100,000 BCV (approximately USD
the maximum amount of payment for 2,897,990). The internal audit service is
its services; created and its employees are appointed
• making decisions on the establishment by the Supervisory Board of the company.
of other legal entities, representative The internal audit service reports to the
offices, and branches; Supervisory Board of the company.

• decision-making on the reorganization Companies with a book value of assets of

or liquidation of the company; more than 100,000 BCV (approximately
USD 2,897,990) or proceeds from the sale of
• appointment of a liquidator and
products (works, services) of more than 200
approval of liquidation balances.
000 BCV (approximately USD 5,851,600),
Issues referred to the exclusive powers of the average annual number of employees is
the GMP cannot be transferred to them for over 100 people are subject to a mandatory

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annual audit conducted by an independent of participants and is elected by a simple

external audit organization. majority of votes at the general meeting.
However, the company’s charter may
Audit requirements in JSC.
provide for another order of appointment
An internal audit service is mandatory for of the Supervisory Board and the Executive
the JSC with if a state share of 50 percent Body.
or if the book value of a company’s assets
In the JSC. In accordance with the JSC Law,
is more than 100,000 BCV (approximately
the members of the Supervisory Board of
USD 2,925,800). The internal audit service
the company are elected by the general
is created and its employees are appointed
meeting of shareholders in the manner
by the Supervisory Board of the company.
prescribed by JSC Law and the charter of
The internal audit service reports to the
the company for a period of three years.
Supervisory Board of the company.
Formation of the Executive Bodies of the
Note: The company, whose shares are
company and early termination of their
included in the exchange quotation list of
powers are carried out by the decision
the stock exchange, is obliged to establish
of the general meeting of shareholders
an audit committee consisting exclusively
if the charter of the company does not
of members of the Supervisory Board of
refer these issues to the competence of
this company. The internal audit service of
the Supervisory Board of the company.
the company in its activities is accountable
In accordance with the charter of the
to the audit committee if any.
company or by decision of the general
In addition, the JSC is subject to a meeting of shareholders or the Supervisory
mandatory annual audit conducted by an Board of the company, the appointment
independent external audit organization. of a director or members of the company’s
board is carried out, as a rule, on the basis
D. Shareholder Rights of a competitive selection, in which foreign
8. What are the privileges that can managers can take part.
be granted to shareholders? In
9. Are there any specific statutory rights
particular, is it possible to grant
available to minority shareholders
voting privileges to shareholders for
available in your jurisdiction?
appointment of board members?
In the LLC. The Uzbek LLC Law does not
In the LLC. The participant may participate
provide for the concept of a “minority
in person or through his representatives
shareholder”. The concept of a “minority
based on a power of attorney, discuss
shareholder” is contained in the regulations
issues, and vote at the GMP of the company.
on the procedure for the activities of
The order of decisions in the company shall
the committee of minority shareholders
be established in the company’s charter,
in a JSC, according to which minority
as well as regulated in the LLC Law. Each
shareholders are owners of participatory
participant of a company shall have, at the
interest whose participation and voting
GMP, the number of votes proportional
at the general meeting of shareholders
to his participatory interest in the charter
does not affect the results of voting on
capital of the company.
the agenda of the meeting. We believe
The election of members of the Supervisory that it is advisable to apply this definition
Board and the Executive body falls within to a minority participant in a limited and
the competence of the general meeting additional liability company. Thus, it is not

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the size of the participatory interest that 50 or more percent of the participatory
classifies minority participants as such, but interest in the charter capital of the
the ability to influence the results of voting company.
on issues decided by the GMP.
The requirement to expel a participant from
The rights of minority shareholders of the the company. A participant of the company
company are not expressly provided for by or participants of the company, whose
the LLC Law. However, based on the context participatory interest in the aggregate
of the LLC Law, the following corporate amount to at least 10 percent of the charter
rights of minority participants in the capital of the company, have the right to
company can be distinguished, in addition demand in court the exclusion from the
to the general rights established by the law company of a participant, including a
LLC for all participants in the company. majority participant who grossly violates
The right to veto certain issues: In his obligations or by his actions (inaction)
accordance with the LLC Law, the decision makes it impossible to operate the
to approve the charter of the company, company or significantly complicates it.
amend the charter of the company, LLC Law allows the establishment of other
increase the charter capital of the company, rights of the company’s participants,
reorganize and liquidate the company, including minority participants, in the
as well as the decision to approve the charter and foundation agreement. In
monetary value of the contributions order to protect the rights and legitimate
made by the company’s participants are interests of minority shareholders
decided by the participants unanimously. in a company, a committee of such
This means that a participant with a shareholders may be established.
participatory interest of even 1% of the
charter capital has the right of veto on In the JSC: In accordance with the Uzbek
all such issues, that require a unanimous law, minority shareholders are owners of
decision of the GMP. It should also be borne shares whose participation and voting
in mind that the LLC Law does not prohibit at the general meeting of shareholders
establishing such a decision-making may not affect the results of voting on
procedure for other issues decided at a the agenda of the meeting. The following
general meeting of company participants. mechanisms are available in order to
protect the rights of minority shareholders:
Mandatory buyout offers. In accordance
with the LLC Law, a person who has Committee of minority shareholders:
become the owner of 50 or more percent In accordance with the Uzbek JSC Law,
of a participatory interest in the charter in order to protect the legitimate rights
capital of a company (with the exception and interests of minority shareholders in
of the state) is obliged within 30 days the company, a committee of minority
to offer minority participants to sell him shareholders may be created from among
participatory interest at market value, minority shareholders. The competence of
if before that the person did not own the committee of minority shareholders
participatory interest or owned less than includes: participation in the preparation
50 percent of the participatory interest in of proposals on issues related to the
the charter capital of the company. Thus, conclusion of major transactions and
a minority participant is provided with the transactions with affiliates submitted for
right to withdraw from the company upon consideration by the general meeting of
the appearance of a participant owning shareholders or the supervisory board of

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the company; consideration of appeals to pay the selling participant the actual
from minority shareholders related to the value of his participatory interest, which is
protection of their rights and legitimate determined on the basis of the company’s
interests; submitting appeals to the financial statements for the last reporting
authorized state body for regulating the period preceding the day the company’s
securities market on the protection of the participant makes such a request, or, with
rights and legitimate interests of minority the consent of the company’s participant,
shareholders; consideration of other to give him a property of the same value in
issues in accordance with the law and kind.
the charter of the company. At the same
In the JSC: In accordance with the JSC Law,
time, interference in the activities of the
shareholders have the right to alienate
committee of minority shareholders by the
their shares without the consent of other
supervisory board or the executive body of
shareholders and the company. However,
the company is not allowed.
please note that in case if the number
Mandatory buyout offers: In accordance of shareholders does not exceed 50, the
with the Uzbek JSC Law, the person who company’s charter may provide for a
became the owner of 50% or more shares preemptive right:
of the company within 30 days is obliged
to announce a proposal to owners of • allowing other shareholders to
the remaining shares to sell their shares purchase shares sold by other
at market value, provided this person shareholders of this company, at a price
previously did not own any shares or and on the terms of an offer to a third
owned less than 50% of the shares of party in proportion to the number of
this company. If written consent of the shares owned by each of them;
shareholder for the sale of its shares is • allowing a company to purchase
received during this period, the owner of shares sold by its shareholders, if other
50% or more shares of the company shall shareholders of this company have not
be obliged to buy those shares. exercised their preemptive right.
10. Is it possible to impose restrictions 11. Are there any specific concerns or
on share transfers under the other considerations regarding the
corporate documents (e.g., articles composition, technical bankruptcy
of association or its equivalent in and other insolvency cases in your
your jurisdiction) of a company jurisdiction?
incorporated in your jurisdiction?
In case of insolvency, the director of
In the LLC: The restriction on the sale of the company is obliged to notify the
a participatory interest to a third party shareholders and creditors to start the pre-
may be imposed under the charter of the trial readjustment process. In particular, the
company. In case such a restriction on the company may be the subject of a deferral
transfer of a participatory interest to third or financial assistance may be requested for
parties is prescribed by the charter, and its recovery.
other participants in the company refuse
Both the debtor and creditors and in
to acquire it, the company is obliged to
the case of a company with state shares,
acquire such participatory interest, at the
the State Assets Management Agency,
request of the selling participant.
may apply to the court for insolvency
At the same time, the company is obliged proceedings.

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The interests of creditors in the insolvency contribution of a third party accepted into
proceedings are upheld by a committee the company as a participant and transfer
or a meeting of creditors. Once the court of a participatory interest of one company
accepts the application, the creditor cannot as a contribution to the charter capital of
address the debtor individually. the other company is listed below:
In case of non-submission or untimely Tax consequences. If the acquisition of a
submission by officials of materials on company occurs through the acquisition
financial and economic activities of of a participatory interest or transfer of a
the company to the state agency for participatory interest as a contribution to
bankruptcy cases — attracts imposing of the charter capital of the company at the
penalty from 3 to 5 BCV (from 87 up to 145 nominal value, there are no consequences
USD). that can occur.

The same offense committed repeatedly In case a share/participatory interest is

within a year after the application of transferred or sold at market or contract
an administrative penalty – entails the value, and if the market and contract value
imposition of a fine from 5 to 10 BCV (from of the sold share/ participatory interest
145 up to 290 USD). is higher than the nominal value, then
the seller has income from the sale of the
E. Acquisition share/ participatory interest, which will
be taxed. However, in the case when the
12. Which methods are commonly used
acquisition of the company occurs by
to acquire a company, e.g., share
increasing the charter capital, there are no
transfer, asset transfer, etc.?
tax consequences that might occur.
There are several mechanisms to acquire
Non-monetary contribution: Moreover,
shares/participatory interest in the
by the legislation of the Republic of
company in Uzbekistan:
Uzbekistan, a contribution to the charter
(1) acquisition of a shares/participatory capital can be made not only in money
interest in the company; but also in property or other rights having
a monetary value. The monetary value of
(2) an increase of the charter capital of non-monetary contributions to the charter
the company at the expense of the capital of the company, made by the
contribution of a third party accepted company’s participants and third parties
into the company as a participant; accepted into the company should be
(3) transfer of a participatory interest of approved by the decision of the general
one company as a contribution to the meeting of the company’s participants and
charter capital of the other company. adopted by all participants of the company
unanimously. However please note, that in
13. What are the advantages and case, of an increase of the charter capital
disadvantages of a share purchase of the company at the expense of the non-
as opposed to other methods? monetary contribution of a third party
The listed mechanisms of acquiring a accepted into the company as a participant,
VAT (12%) will apply.
company are approximately the same in
terms of processing transactions. The main Also please note that non-monetary
advantages and disadvantages of purchase contributions to the charter capital of
of share/participatory interest as opposed the LLC, valued in excess of 10,000 BCV
to an increase of the charter capital (3,750,000,000 UZS, approximately USD
of the company at the expense of the 292,580), shall be assessed by an appraisal

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organization and cannot exceed the • Pre-emptive right: The sale of a

estimated value. participatory interest to third parties
is allowed unless prohibited by the
Antimonopoly approval: The approval of
charter of the company. In this case,
Competition Promotion and Сonsumer
Protection Committee of the Republic of the participants of the company enjoy
Uzbekistan (“Antimonopoly Committee”) the pre-emptive right to purchase a
is required both when acquiring ashares participatory interest over third parties.
(participatory interest) in the charter capital If other participants of the company have
of the company by increasing the charter not exercised their pre-emptive right to
capital of the company and when acquiring purchase a participatory interest sold by its
a participatory interest in the company participant, then the company has a pre-
or transfer of a participatory interest as a emptive right to acquire this participatory
contribution to the charter capital of the interest.
company.
Accordingly, a participant who intends to
Pre-emptive right: In the case of an sell his participatory interest to a third party
acquisition of a participatory interest in the is obliged to notify the other participants
company, the participants in the company in the company and the company itself
and the company have a pre-emptive in writing, indicating the price and other
right to purchase selling participatory conditions for its sale.
interest, while in the case of an increase of
the charter capital of the company at the Participant of the company wishing
expense of the contribution of a third party to exercise the pre-emptive right to
accepted into the company as a participant purchase the participatory interest must,
or transfer of a participatory interest as a within seven days, notify the participant
contribution to the charter capital of the of the company who offered to sell his
company, this rule does not apply. participatory interest, indicating that he
intends to purchase the participatory
14. What are the approvals and interest offered for sale in full or a certain
consents typically required (e.g., part of it.
corporate, regulatory, sector
based and third-party approvals) If the total value of the received offers does
for private acquisitions in your not exceed the size of the sold participatory
jurisdiction? interest, each of the participants acquires
that part of it, which he indicated in his
Under Uzbek law there are some rules and notification.
requirements set for private acquisition
which are listed below. If the participants of the company or the
company itself do not use the pre-emptive
• General consent: Per Uzbek LLC law
right to purchase a participatory interest
participant of the company has the
offered for sale within a month from the
right to sell or otherwise assign his
date of such notification, unless another
participatory interest in the charter
period is provided for by the charter of the
capital of the company or part of it
company or agreement of the participants
to one or more participants of the
in the company, the participatory interest
company. The consent of the company
may be sold to a third party at a price and
or other participants of the company to
on conditions known to the public and its
make such a transaction is not required
participants.
unless otherwise provided by the
charter of the company.

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Obtainment of prior consent of the the last calendar year of the business
covenants under the agreements. (change entities participating in the transaction
of control clause): If the terms of the isexceeds 500,000 BCV (187,500,000,000
agreements (if any) contain a requirement UZS, approximately USD 14,489,954).
to obtain prior consent to the transfer of
Note, that the state control over the
participatory interest, it is necessary to
transactions will not occur in the following
obtain the consent of the covenants under
cases:
the agreements before such a transfer.
• transactions involving the merger
15. What are the regulatory
or acquisition of enterprises with
competition law requirements
the participation of the state or the
applicable to private acquisitions in
acquisition of shares in their charter
your jurisdiction?
capital are carried out by decision of the
Under Law of the Republic of Uzbekistan President of the Republic of Uzbekistan;
No.ZRU-850 “On Competition” dated
• establishing an economic entity;
October 4, 2023 (“Competition Law”)
obtaining the consent of the Antimonopoly • transactions for the acquisition by
Committee for transactions on acquisition an economic entity of its own shares
of participatory interest in the charter (participatory interest) in the charter
capital of companies might be required. capital;
To regulate economic concentration, the • transformation of a joint stock
authorized state body will exercise state company (limited liability company
control by granting prior consent in specific or additional liability company) into
situations, including: another organizational and legal form
• Reorganization of business entities while maintaining the size of its charter
through mergers and acquisitions; capital;

• Accrual of a right by a person or a • acquisition of shares (participatory

group of persons to dispose of shares interest) by investment intermediaries
of JSC or LLC registered in Uzbekistan. for the purpose of their further resale;
Preliminary consent is required when • transactions for the acquisition of
acquiring more than 25% of the voting
shares (participatory interest) by an
shares in the charter capital of the JSC,
individual in the charter capital of an
or more than 1/3 of the participatory
economic entity, if at the time of filing
interest in the charter capital of the LLC.
the application such an individual did
State control over such transactions will not dispose of more than 25 percent
occur only if: of shares (participatory interest) in the
charter capital of any commercial entity.
• the book value of assets or proceeds
from the sale of goods for the last Consent to transactions for the acquisition
calendar year of one of the business of the participatory interest by a company
entities participating in the transaction or group of companies in the charter
exceeds 250,000 BCV (93,750,000,000 capital of companies is issued by the
UZS, approximately USD 7,244,977); or Antimonopoly Committee.
• the total book value of assets or The state fee for consideration of the
revenue from the sale of goods for application and accompanying documents

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is 1 BCV (approximately USD 29) for Obtaining the consent of the Antimonopoly
consideration and for the issuance of the Committee. The preliminary consent of
preliminary consent of the Antimonopoly the Antimonopoly Committee for the
Committee - 0.05 percent of the proceeds transactions on the acquisition of the
of the parties to the transaction from the participatory interest by a company or
sale of goods for the last calendar year group of companies in the charter capital
(in the absence of proceeds - of the book of a JSC is necessary in cases such JSC or
value assets), but in the amount of not less group of companies acquires the right to
than 7 BCV (2,625,000 UZS, approximately dispose of more than 25 percent of the said
USD 203) and not more than 1,000 BCV participatory interest; and State control
(375,000,000, approximately USD 28,979). over such transactions will now occur only
if:
The Antimonopoly Committee considers
the application within 30 (thirty) calendar • the book value of assets or proceeds
days and informs the applicant of the from the sale of goods for the last
calendar year of one of the business
decision in writing.
entities participating in the transaction
In case there are reasons why the exceeds 250,000 BCV (93,750,000,000
transaction leads or may lead to restriction UZS, approximately USD 7,244,977), or
of competition, including by creating
• the total book value of assets or
or strengthening a dominant position
revenue from the sale of goods for
in the product or financial market, the
the last calendar year of the business
Antimonopoly Committee may extend the entities participating in the transaction
term of consideration of the application for exceeds 500 000 BCV (187,500,000,000
a maximum of 2 (two) months by sending UZS, approximately USD 14,489,954).
a written notice indicating the grounds for
the extension. The Antimonopoly Committee considers
the application within 30 calendar days
16. Are there any specific rules and informs the applicant of the decision in
applicable for acquisition of public writing.
companies in your jurisdiction?
In case there are reasons why the
A shareholder holding shares in JSC may transaction leads or may lead to restriction
sell his shares for more or less than nominal of competition, including by creating
value. However, if the shares: or strengthening a dominant position
in the product or financial market, the
(1) are included in the exchange quotation Antimonopoly Committee may extend the
list (“Listing”) of Republican Stock term of consideration of the application for
Exchange “Toshkent” JSC (“Exchange”) a maximum of 1 (one) month by sending
- the income of the seller (including a written notice indicating the grounds for
a non-resident of the Republic of the extension.
Uzbekistan) on the transaction is not
subject to corporate income tax and tax Note: The Competition Law also mandates
on the income of individuals; obtaining preliminary consent for the
establishment or reorganization of
(2) are not included in the listed - the enterprises with state participation and
seller pays a fee of 0.3 percent of the their affiliated entities, any changes in their
transaction amount in lieu of income types of activities, and the acquisition of
tax for legal entities (or income tax for shares or participatory interest by such
individuals). enterprises.

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Implementation of a transaction for registration with the purchaser’s investment

the purchase and sale of shares on the intermediary, which records and certifies
Exchange: If the shareholder sells his shares, rights to data securities (“Registrar”) who
the seller and the buyer must conduct may charge a fee to affect the registration
(through their investment intermediary) a of a change of ownership.
transaction on the Exchange (respectively
The parties represented by their
(a) on the Exchange trading floor- for listed
representatives in the presence of the
JSCs, or (b) over-the-counter transaction
Registrar shall sign in triplicate (one for
floor- for non-listed JSCs).
the parties and one for the registrar) the
The parties must use the following sections agreement submitted for registration
of the Stock Market module: of an over-the-counter transaction with
securities. It should be noted that in
(1) The main section of the Main Board
case of fulfillment of the shareholder’s
- when selling less than 1% of the
obligation to a third party, the parties
shares of charter capital of the JSC (the
themselves determine the price per share,
value for the shares is determined in
in accordance with which the principal and
accordance with the market price of the
interest (if applicable) are calculated, so it
share);
may be different from the market price.
(2) Negotiation auction Nego Board - when
When registering an agreement, the
selling shares from 1% of the charter
registrar may also request the relevant
capital of JSC, the seller, and the buyer
agreement (for example, a loan agreement)
can agree on the cost of the transaction
after signing the agreement by the parties,
independently (through the section)
registers an over-the-counter transaction
both lower and higher than the market
with securities by making an appropriate
price of the share.
entry in the accounting register for over-
Registration of an agreement on the the-counter transactions with securities
change of ownership without the actual and on the basis of the relevant agreement
payment of shares: In the event that the and instruction from the shareholder to
owner of shares is changed without actual write off shares to the depository account
payment for the shares (for example, the of the acquirer, the transfer of shares to the
transfer of shares by donation, or the acquirer is carried out.
transfer of shares due to the fulfillment of
17. Is there a requirement to disclose
an obligation by a shareholder to a third
a deal, for instance to regulatory
party, or another transaction leading to
authorities? Is it possible to keep a
a change of ownership), such a change
deal confidential?
requires registration, therefore this type of
transfer of rights refers to over-the-counter In the JSC: The owner of shares is obliged
transactions with securities papers leading to disclose information on the acquisition,
to a change of ownership. independently or jointly with affiliated
persons, as a result of one or several
According to the Regulations on the
transactions of a block of shares in a JSC,
accounting register of over-the-counter
which in the aggregate constitutes 20
transactions with securities (Registered
percent or more of the charter capital of
by the Ministry of Justice of the Republic
this JSC.
of Uzbekistan on March 9, 2009, reg. No.
1919), an over-the-counter transaction with Disclosure of information is carried out
securities made in writing, are subject to within two business days from the date of

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conclusion of the transaction (transactions) individuals who are ultimate beneficial

in the republican newspaper or on the owners and hold actual control over a
official website of the stock exchange. business entity through direct or indirect
ownership of 25% or more of its shares or
In addition, significant facts that must be
stocks.
provided in the annual report of a JSC
are changing in the list of legal entities in 18. Can sellers be restricted from
which the issuer owns 10 or more percent shopping around during a
of the shares (interests, shares) of each such negotiation process? Is it possible
legal entity. The annual report must also to include break fee or other
contain information on the ownership of 5 penalty clauses in acquisition
or more percent of shares (stakes, shares) of documents to procure deal
other legal entities if the issuer’s shares are exclusivity?
included in the exchange quotation list of
the stock exchange. This concept is not recognized under Uzbek
law.
Also, JSCs must disclose material
information about an affiliate on its official 19. What are the conditions precedent
website and on the Unified Corporate in a typical acquisition document?
Information Portal within two business days Is it common to have conditions to
from the date of the event (registration of closing such as no material adverse
the share transfer). change?

In the LLC: As for the disclosure of The conditions precedent may vary
transactions in an LLC when purchasing among transactions on acquisition of the
a participatory interest, there is a need to participatory interest. However, from many
disclose transactions to the Antimonopoly transactions on the acquisition, some of
Committee if, in accordance with the the common Conditions Precedent in such
legislation of the Republic of Uzbekistan, it transactions include:
is necessary to obtain the prior consent of • The conditions precedent for the
the Antimonopoly Committee. seller’s representations and warranties,
Also, when re-registering an LLC due namely, the seller’s representations and
to a change of participants, acquisition warranties must be true and accurate
documents are provided to the registering and the sellers must fully comply with
authority. However, please note that the such representations and warranties.
acquisition documents, as well as the • The conditions precedent for
details of the transaction on acquisition internal approval for transaction on
of the participatory interest (the purchase acquisition of the participatory interest.
price of the participatory interest, the Accordingly, the seller must provide
final beneficiaries of the parties to the evidence/ to obtain internal approvals,
transaction, the conditions specified in the
authorizing the execution and
acquisition documents and the document
performance of the sale and purchase
itself ), are not published in open sources.
agreement;
Note. The Competition Law in addition
• The conditions precedent for prior
to the previously required documents,
consent of the Antimonopoly
applicants seeking preliminary consent
Committee for the transaction on
from the Antimonopoly Authority must
acquisition of the participatory interest
now also provide information about
(if applicable);

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• The Conditions Precedent for Thus, the seller of the shares/participatory

completing all required legal interest has the right to set the price at
procedures to recognize the buyer as a his own request. In practice, the shares/
new participant of the company such as participatory interest may be sold at a
conduction of the re-registration of the nominal, market, actual or contract value.
company;
• Nominal value. The nominal value of
• The Conditions Precedent for the the participant’s share/participatory
obtainment of the certificate of interest in the charter capital of the
absence of tax debts or fulfilment of company is determined by the size of
obligations with the tax authorities. As the charter capital of the company,
such, the seller commits that the seller fixed in its foundation documents in the
hides no tax obligation besides what form of a specific amount of money;
are included in the sale and purchase
agreement. • Actual value5
• Market value; and
20. What are the typical warranties
and limitations in acquisition • Contract value.
documents? Is it common to obtain Profit on sale of shares/participatory
warranty insurance? interest is subject to taxation in Uzbekistan.
Usually, the following warranties and The rate and type of tax depends on the
limitations are included in the acquisition seller (individual or legal ettily) and its tax
documents: residency status.

• The warranty on the authority to enter 22. What types of acquisition financing
the agreement; are available for potential buyers in
• No contravention to enter the your jurisdiction? Can a company
agreement; provide financial assistance to a
potential buyer of shares in the
• Possession of the selling participatory
target company?
interest and no encumbrances.
The practice of providing acquisition
Please note, that implementation of
financing is not common in the Republic
warranties and limitations in acquisition
of Uzbekistan. There are two types of
documents is possible, however, this has
acquisition financing available for potential
not yet been tested in court.
buyers in our jurisdiction:
Warranty insurance is not recognized under
Uzbek law. • Bank loans;
• Loans, provided by legal entities.
21. Is there a requirement to set a
minimum pricing for shares of a However please note, that the bank loans
target company in an acquisition? for the acquisition financing in practice are
provided only by the major banks.
In the LLC, there is no legal requirement
in regards to the setting of the price of 23. What are the formalities and
the shares/participatory interest when procedures for share transfers and
selling such shares/participatory interest. how is a share transfer perfected?

5 The actual value of the participatory interest of a participant corresponds to part of the value of the company’s net assets,
proportional to the size of his participatory interest.

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The procedure of transfer of the (i) stock exchange;

participatory interest in the LLC is the
(ii) a foreign exchange that has established
following:
a securities department.
• notify other participants of the
24. Are there any incentives (such
Company and the Company itself about
as tax exemptions) available for
the sale of the participatory interest;
acquisitions in your jurisdiction?
• receive written waivers to exercise
There are no tax incentives available for
the pre-emptive right to purchase
acquisitions. However, please note, that in
a participatory interest from other
case there is a double tax treaty between
participants of the Company and from
the country – resident of the buyer and
the Company;
the Republic of Uzbekistan, it is possible
• conclude a contract for the sale of the to avoid taxation in the territory of the
participatory interest and deed transfer Republic of Uzbekistan.
of the participatory interest; F. Enforceability
• obtain a certificate of absence of tax 25. Can acquisition documents be
debts; executed in a foreign language?
• adopt a decision of the GMP on Acquisition documents can be executed
changing the composition of in a foreign language. In practice, such
participants and approving the Charter documents are usually executed bilingually.
and the Foundation Agreement of the Please note, that for registration purposes
Company in a new edition; acquisition documents must be executed
• carry out re-registration in connection in the Uzbek language and additionally can
with a change in the composition of be executed in other foreign languages as
participants in the Company. well.

In the JSC, according to the Law of the 26. Can acquisition documents be
Republic of Uzbekistan “On the Securities governed by a foreign law?
Market” the circulation of securities Acquisition documents can be governed by
(shares) is carried out through transactions foreign law, with the following exception.
by legal entities and individuals on the Shareholders/participants may enter into
securities market. The process of selling an agreement between shareholders/
shares after their placement among the participants (which will be governed by
Issuer’s shareholders is carried out on the contractual relations), according to which
secondary securities market. the parties prescribe additional conditions
In this case, transactions for the purchase for acquiring a share/participatory interest,
and sale of shares are carried out exclusively while such an agreement may be governed
by the law of another country with the
at organized trading in securities, with
exception of corporate issues included in
the exception of the repurchase of shares
the exclusive jurisdiction of the Republic of
by the joint-stock company itself at the
Uzbekistan.
request of shareholders.
Please note, that foreign law (law other
The organizers of securities (shares) trading
than Uzbek law) can be agreed to by the
are:
parties to a contract involving foreign
individuals or foreign legal entities (non-

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Uzbek residents) as counterparties or that is G. Trends and Projections

“fraught with foreign element”. The Uzbek
law fails to further elaborate what can be 29. What are the main current trends in
viewed as “fraught with foreign element” M&A in your jurisdiction?
for this purpose. However, traditionally, this At the moment, there are two main trends
concept encompassed factors of foreign in M&A in the Republic of Uzbekistan,
(non-Uzbek) nature. Domestic contracts, in namely:
their turn, are governed by Uzbek laws by
default. (1) acquisition of a state share by the way
of privatization;
27. Are arbitration clauses legally
(2) direct acquisition of shares /
permissible or generally included in
participatory interests in private
acquisition documents?
companies.
The choice of foreign arbitration is
recognized by the legislation of Uzbekistan Acquisition of a state share through
unless the disputed issue is in the privatization. On March 24, 2023,
exclusive jurisdiction of the national Presidential Decree No. PP-102 was
courts of Uzbekistan. In accordance with adopted, where a list of shares in the
the legislation of Uzbekistan, corporate charter capital of business entities that
disputes such as disputes related to the were subject to privatization was approved.
creation, reorganization, and liquidation According to the resolution, state shares in
of a legal entity, disputes related to the 1001 companies in such areas as industry,
ownership of shares/participatory interests, energy, automotive, and others should be
shares/participatory interests in the sold to the private sector.
charter capital, disputes on invalidating Direct acquisition of shares / participatory
transactions, disputes on appealing interests in private companies. As discussed
decisions of management bodies, etc. to in item 12 of this questionnaire, there are
the exclusive jurisdiction of the economic several mechanisms of acquiring shares/
courts of the Republic of Uzbekistan. participatory interest in the company in
28. Are there any specific formalities Uzbekistan, however, the most popular
for the execution of acquisition practice is the direct acquisition of shares
documents? Is it possible to / participatory interests. The practice of
remotely/digitally sign documents? direct acquisition of shares / participatory
interests in private companies by foreign
No, there are no specific formalities for the investors has become widespread in
execution of acquisition documents. The Uzbekistan over the past years.
acquisition documents are usually executed
in simple written form. The legalization/ 30. Are any significant development
apostille is required only in cases when or change expected in the near
such documents are executed outside of future in relation to M&A in your
the Republic of Uzbekistan. There is no jurisdiction?
such option of signing the acquisition
Due to the rapid growth of foreign
documents remotely or digitally.
investment In Uzbekistan for the past few
years, significant changes in the legislation
are expected. Thus, the adoption of the
Entrepreneurial Code is expected. The code
is expected to combine 9 (nine) existing

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laws, 2 (two) new drafts of legislation, and

more than 10 legal acts aimed at regulating
all processes from starting a business to its
termination.
Also, the concept of the “corporate
agreement” was introduced in the Civil
Code by the Law of the Republic of
Uzbekistan “On Amendments and Additions
to Certain Legislative Acts of the Republic of
Uzbekistan in Connection with the Further
Improvement of the Legal Framework for
Corporate Relations” dated February 7,
2025. The law takes effect on May 8, 2025.
At the moment, there is no concept of
“corporate agreement” and “shareholder
agreement” in Uzbek legislation, however,
in practice, the parties may conclude an
“Agreement of participants”. Along with the
above changes, and taking into account
that the legal framework governing the
activities of LLCs is considered (outdated),
a new law on LLCs is also expected to be
adopted. Thus, at the beginning of February
2024, discussions on the draft of new law
on LLCs started.

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Notes:

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