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International M&A and Joint Ventures Committee Newsletter
March 16, 2016
Editor’s Note:
As we look forward to convening in New York in less than a month, find
below the latest edition of our Committee Newsletter. The New York
Spring 2016 Meeting is April 12-16 at the Grand Hyatt Hotel and our
Committee will be sponsoring three programs:
1. "Spin to Win: the Increasing Use of Spin-Off Transactions By
Activist Stockholders Worldwide", Wednesday, April 13, 11:0012:30pm.
2. "Under Siege: Shareholder Activism, Governance Turmoil &
Pressured Boards", Thursday, April 14, 9 am- 10:30 am.
3. Are you Getting the Benefit of Your Bargain– The Role of Good
Faith in M&A Transactions", Thursday, April 14, 11 am- 12:30
Stay tuned for information on our Committee Dinner and Breakfast as
well. See you in New York!
Best Regards,
Gord Cameron
Country Updates
New Take-Over Bid Rules to Come
into Effect
By Gordon Cameron and Laura
Fraser (Stikeman Elliott (NY) LLP)
Data Privacy in M&A
Transactions: Currently More
Questions Than Answers
By Jörg Rehder (Schiedermair
M&A Trends in 2015: Focus on
“ease of doing business”
By Satyajit Gupta (Advaita Legal)
Legal Insight into M&A Regulation
in Kazakhstan
By Yerkebulan Rakhmenov and
Arlan Yerzhanov
Romanian M&A Market: Overview
of last year and perspectives for
By Sabin Volciuc (VolciucIonescu)
Farewell to the "Société
Anonyme": New Registration
Obligations for Shareholders
By Albert Garrofé and Idoya
Fernández (Cuatrecasas, Gonçalves
Implementation Act European
Directive on Annual Accounts
By Eva Das and Frederik de
Hosson (Stibbe)
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
New Take-Over Bid Rules to Come into Effect
By Gordon Cameron, Stikeman Elliott (NY) LLP, New York, NY, USA ([email protected]) and Laura Fraser,
Stikeman Elliott (NY) LLP, New York, NY, USA ([email protected])
The Canadian Securities Administrators (“CSA”) have published final amendments to the Canadian
take-over bid regime (the “Take-Over Bid Amendments”), which come into effect on May 9, 2016. The
rationale behind the Take-Over Bid Amendments is to provide target boards with increased time to respond to
take-over bids and to seek out value-maximizing alternatives, while facilitating shareholders’ ability to make
voluntary, informed and coordinated tender decisions without coercion. The following are three key features of
the Take-Over Bid Amendments: a 105-day minimum deposit period, a 50% minimum tender condition, and a
mandatory 10-day extension.
105-Day Minimum Deposit Period
Under the Take-Over Bid Amendments, take-over bids will generally be required to remain open for a
minimum deposit period of 105 days (as opposed to the current 35-day minimum deposit period). According to
the CSA, the 105-day requirement affords target boards sufficient time to respond to an unsolicited bid while
providing bidders with a reasonable opportunity to rely on such compulsory acquisition provisions. However, the
105-day requirement is subject to two exceptions:
the target issues a press release announcing an initial deposit period of not less than 35 days and not
more than 105 days, in which case all outstanding or subsequent contemporaneous take-over bids must
remain open for at least this announced shorter deposit period; or
the target issues a press release announcing that it has agreed to enter into or has determined to effect a
specified “alternative transaction”, in which case all outstanding or subsequent contemporaneous takeover bids will be subject to a shorter 35-day minimum period.
An “alternative transaction” includes an amalgamation, merger, arrangement or similar transaction
resulting in the interests of an equity securityholder being terminated without the holder’s consent, or a sale of
all or substantially all of the property of the target. The CSA have tried to comprehensively include transactions
agreed to or initiated by the target that could result in the acquisition of an issuer or its business in the definition
of “alternative transaction”, but have not revised the definition to include transactions that “affect materially” the
control of the target. The CSA noted that a transaction initiated by a target’s board in the context of a take-over
bid may, regardless of whether or not it is an “alternative transaction”, still be subject to review under National
Policy 62-202 Take-Over Bids – Defensive Tactics.
Minimum Tender Condition and Mandatory 10-day Extension
More than 50% of the outstanding securities owned by persons other than the bidder and any joint actors
must be tendered and not withdrawn before the bidder can take up securities under the bid. The bid period must
be extended by 10 days after the minimum tender condition is satisfied and all other conditions of the bid have
been satisfied or waived. These amendments reflect provisions which are generally included in "permitted bid"
provisions of shareholder rights plans and are designed to alleviate target shareholder coercion concerns.
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
Except in the case of a partial bid, the mandatory 10-day extension must be a period of at least 10 days
and, if an offeror chooses to extend its bid after expiry of such period for a period of more than 10 days, the
offeror will be required to take up securities deposited during the extension period not later than 10 days after the
deposit of the securities. The CSA have also clarified that, in the case of a partial take-over bid, the mandatory
10-day period must not exceed 10 days and an offeror cannot extend its partial bid after the expiry of such
Ontario joins MI 62-104
In connection with the Take-Over Bid Amendments, the take-over bid regime as between Ontario and
the rest of the Canadian provinces will be harmonized, with Ontario adopting Multilateral Instrument 62104 Take-Over Bids and Issuer Bids (MI 62-104), which is currently in force in all other Canadian provinces and
which will become a national instrument
Effective Dates
Provided all necessary approvals are obtained, the Take-Over Bid Amendments will come into effect on
May 9, 2016. Take-over bids and issuer bids commenced before such date will continue to be subject to the
current take-over bid regime. Similarly, competing bids in respect of take-over bids commenced before May 9,
2016, and take-over bids in respect of the securities of an issuer that announced an alternative transaction before
May 9, 2016, will also be governed by the current regime.
Data Privacy in M&A Transactions: Currently More Questions Than Answers
By Jörg Rehder, Partner, Schiedermair Rechtsanwälte, Frankfurt, Germany ([email protected])
A New York-based company comes upon a software development entity in Germany that it is interested
in acquiring. The parties conclude a letter of intent setting forth the basic terms of the acquisition – the New
York entity will acquire 100% of the target company’s shares, the purchase price is cash only, due diligence is to
be completed within four weeks, there are no antitrust filings necessary because the magnitude of the transaction
does not exceed any of the thresholds, and signing and closing are to take place simultaneously. All in all, a
relatively standard transaction.
Only when the US buyer sends a due diligence checklist to the German seller does it become apparent
that this transaction may be more difficult than the parties originally assumed. Not only does the buyer require
more extensive information than the seller had anticipated, but much of the requested information constitutes
“personal data” – especially employee data and customer data. The seller informs the buyer that it cannot
transfer this information to New York for data privacy reasons. Having completed a number of deals over the
years in Europe, including in Germany, the seller’s response surprises the buyer; never has this buyer been
refused due diligence information for data privacy reasons in the past.
From a practical perspective it is true that, due largely to ignorance of the law or low risk in terms of
enforcement and the imposition of a fine, data privacy plays a minimal, if any, role in many cross-border M&A
transactions completed between the United States and the European Union. The general awareness of data
privacy, however, has skyrocketed in the United States over the last few years, if not only the last few months or
even weeks. Key reasons include the European Court of Justice (ECJ) holding in October, 2015 that the EU/US
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
Safe Harbor Agreement is invalid, much-publicized US data breaches (including in 2015 alone the health insurer
Anthem, Inc., the U.S. Office of Personnel Management, the information service group Experian, United
Airlines, and the IRS), and the Apple vs. FBI dispute in 2016.
Data privacy laws do not provide for a “due diligence exception”, i.e., if a company is engaged in due
diligence as part of an M&A transaction, it must nevertheless observe data privacy laws. Assuming the New
York buyer had been properly self-certified under the Safe Harbor Agreement, the German seller could have,
until recently, transferred data to the buyer in the United States. On October 6, 2015, however, as mentioned
above, the ECJ held the Safe Harbor Agreement to be invalid primarily because (i) the perceived unfettered
access by the National Security Agency (NSA) to data transferred to the United States, and (ii) the failure to
have a structure in place allowing EU citizens to make privacy complaints in the United States in the event of a
data privacy violation. (As to the latter point, President Obama did sign the Judicial Redress Act (the “Act”)
into law on February 24, 2016, that will ostensibly allow EU citizens to file civil claims in the United States if
their personal data is misused; the Act, however, does include specific exceptions (including a US national
security exception) that cause a number of commentators to conclude that it does not go far enough to assuage
the concerns of the European Union.)
Regardless, the German seller now essentially has three options available to transfer the requested data
to New York: (i) enter into binding corporate rules (from a practical perspective, along with a number of other
concerns, it would simply take too long to pursue this option); (ii) enter into standard contractual clauses as
provided by the European Union (this has the disadvantage that the seller is subject to joint and several liability
with the buyer if there is a breach or the seller may opt to engage in sufficient due diligence on the buyer to
ensure that the latter will observe the standard contractual clauses or face liability), or (iii) obtain the individual
consent from each employee and/or customer whose personal data is to be transferred (disregarding for the
moment that it may be premature to disclose the pending transaction to the employees and/or customers
involved, the sheer number of persons may also make this option unworkable).
The invalidity of the Safe Harbor Agreement and the disadvantages associated with the other options
place companies that desire to transfer personal data from the European Union to the United States, such as our
above-mentioned German seller, in an untenable situation. The Privacy Shield that the European Union and the
United States originally “agreed” to on February 2, 2016 – as the successor to the Safe Harbor Agreement – did
not provide any definitiveness. This changed on February 29, 2016, when the US Department of Commerce
released details regarding the Privacy Shield, including information from the Office of the Director of National
Intelligence and the US Department of Justice. Though the Privacy Shield is more stringent than the Safe Harbor
in some ways (e.g., requiring annual recertification regarding compliance, more expansive notice requirements
on self-certified entities in terms of the purpose of disclosing personal data to third parties, data subjects’ access
to personal data, and restrictions on access to data for national security reasons), it already has its share of
naysayers, i.e., those who do not believe that the Privacy Shield will provide adequate protection for personal
data as is required under EU law; these naysayers believe the ECJ would hold the Privacy Shield to be
insufficient if challenged. Simultaneous with the release of the Privacy Shield, the EU Commission released a
draft decision confirming that the Privacy Shield would indeed cause the United States to provide the requisite
adequate protection. The European Union has now initiated a procedure to formally recognize the Privacy Shield
as providing adequate protection. This procedure is apparently to be concluded sometime during the summer
months of 2016. Whether the draft decision will be adopted in its current form remains an open issue.
In the meantime, since the end of February, German data privacy authorities have initiated enforcement
actions against some German companies that are transferring data to the United States on the basis of the invalid
Safe Harbor Agreement. The fines could be for hundreds of thousands of Euros.
As a result, German companies (or for that matter, European companies) transferring data to the United
States should take care not to rely on the Safe Harbor Agreement (nor on the Privacy Shield that the EU has not
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
yet “approved”). If feasible, the German company should anonymize its personal data before transferring it to
the United States. Anonymous information is not subject to data privacy laws. This means the seller should not
identify the employees or customers to the buyer, but instead bundle the information in such a manner that the
buyer is still able to make its necessary due diligence findings and conclusions, but without the benefit of names
or any other identifiable information regarding the employees and natural person customers. Finally, once the
transaction is consummated, the buyer is well advised to conduct a data privacy audit on the recently-acquired
entity to get a grasp of the type of data this entity is processing and transferring to determine whether it is in
compliance with data privacy laws. Of course, once the European Union approves the Privacy Shield, the
applicable data privacy laws may have been amended. As a result, the buyer needs to keep a close eye on
developments in this area of the law.
M&A Trends in 2015: Focus on “ease of doing business”
By Satyajit Gupta, Principal, Advaita Legal, New Delhi, India ([email protected])1
With the National Democratic Alliance (“NDA”) gaining a decisive majority in the 2014 general
elections, the expectation was that India would experience dramatic growth in all sectors, as the government and
administration would leave behind the policy paralysis that had been the hallmark of the previous regime. In an
unpredictable global economy where the Indian economy has shown resilience, the NDA government has set
about making radical and positive reforms to boost foreign investment and create a business friendly climate in
India. In 2015, the Indian economy saw an average growth of approximately 7.5% making it one of the fastest
growing economies in 2015. In fact, OECD has also pegged India’s growth rate at a healthy 7.4% for the next
financial year in a report released recently.
However, in the reported M&A deals space, there appeared to be a slowdown with the total quantum
dropping to USD $20 Billion, a dip of 40% compared to the deal volume of USD $33 Billion in 2014. To
combat this, the Government has proposed several regulatory relaxations and liberalizations in the FDI policy,
exchange control norms etc. and it is hoped that this forward looking outlook continues and drives the deal
volume up. The Government’s focus is on ‘ease of doing business’ and its growth focused initiatives – ‘Start Up
India’ and ‘Make in India’ – are also enterprises to garner investor traction and contribute to the India growth
Company Law Reform
Compliances under the Companies Act, 2013 have been sought to be relaxed especially in relation to
private companies, through amendments and exemptions. Private companies have been provided various
exemptions ranging from those in relation to general meetings (such as exemptions from provisions relating to
notices of meetings, statements to be annexed to notices, quorum for meetings, and chairman of meetings) to
exemptions from the requirement of shareholders resolutions (for exercising borrowing powers, disposing of an
undertaking of the company, remitting any debt due from a director, etc.). In terms of setting up of a company,
the requirement of minimum paid-up capital has been removed, a consolidated form has been introduced to fast
track the incorporation procedure and the requirement of a company seal and certificate of commencement of
business have also been done away with.
Developments in Anti-Trust Laws
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
The Competition Commission of India (“CCI”) has clarified that communication of a combination to a
statutory authority per se cannot be considered as a trigger to file a notice with the CCI, but public
announcements under SEBI Takeover Regulations can be considered a trigger to file. The CCI has also
introduced e-filing facility on December 1, 2015 to help it promptly handle submissions related to combinations
and also to simplify the process for entities to submit information. The CCI also clarified the ambit of
acquisitions ‘solely for investment purposes’, while also fining certain Zuari entities a hefty INR 30 Million for
not notifying it in time for an acquisition which was strategic in nature (and which was picked up by the
regulator due to a television interview).
Evolution in Securities Laws
In the securities law space, the Securities and Exchange Board of India (“SEBI”) overhauled the Insider
Trading Regulations. Definitions of ‘insiders’, ‘connected persons’ and ‘unpublished price sensitive information’
have been widened under the new regulations. The new regulations have been made applicable to all securities
as defined under Securities Contracts (Regulation) Act, 1956 except units of mutual funds. The regulations
permit sharing of “unpublished price sensitive information” in PE/ M&A backed diligences and introduce certain
valid defences for insiders as well as the concept of trading plans.
Also, through amendments introduced in the SEBI Takeover Regulations and SEBI Delisting Regulations,
acquirers have been allowed to delist the company pursuant to making an open offer provided he declares his
intention of delisting at the time of making the detailed public statement of the proposed acquisition. SEBI has
also granted exemptions to certain transactions (e.g. conversion of debt into equity under a strategic debt
restructuring scheme) from complying with the Takeover Regulations through amendments to the said
regulations. Additionally, SEBI has notified new listing norms for start-ups on Institutional Trading Platform,
thereby relaxing the norms for raising money for small enterprises.
FDI Norms
Significant changes have been introduced in the year 2015-2016 by the Indian Government with regard to the
foreign investment norms, to attract investment in sectors like defence, railways, insurance etc. A few examples
are set out below:
Insurance and Pension - The foreign investment cap of the sector has been increased from 26% to 49%,
however investment above 26% has been made subject to government approval. The Insurance
Regulatory and Development Authority (“IRDA”) has also provided clarity on the ‘Indian ownership
and control’ test required to be met by all Indian insurance companies and insurance intermediaries. The
IRDA has defined ‘control’ to mean the right to appoint a majority of the directors or control the
management or policy decisions.
Railway infrastructure - The foreign investment limit in construction, operation and maintenance of
specified infrastructure projects like suburban corridor projects through PPP and high speed train
projects, have been raised to 100% through automatic route.
Construction and development - Relaxations in the conditions of foreign investment in the sector have
been introduced. These include easing of exit norms and removal of the requirements of minimum
capitalization and minimum land area.
Defence - Foreign investment in the sector has now been permitted up to 49% in the automatic route and
investment above this level can be permitted on case by case basis where it provides the country access
to modern state of the art technology.
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
Retail trading – Various changes, including the removal of local sourcing norms for state of the art
products, have been introduced.
An interesting judgment was rendered by the Bombay High Court, which evaluated a downstream FDI
structure and ruled that the investment in the holding company was a ‘sham’ structured to invest downstream by
way of redeemable instruments, which are not permitted by Indian FDI norms. The court held that it would not
provide assistance to enforce transactions which are not compliant with the FDI norms.
Arbitration Law Reforms
At the end of 2015, the Government introduced amendments to arbitration law by way of ordinances (replaced
by an amendment act), intended to ease the process of arbitration, impose timelines and rationalize costs. Some
key changes include: (a) a twelve-month timeline for completion of arbitrations seated in India; (b) flexibility for
parties to approach Indian courts for interim reliefs in aid of foreign-seated arbitrations; and (c) introduction of
‘costs follow the event’ regime.
The medium to long term macro-economic outlook for India has remained mostly promising and, after
the general elections in 2014, the outlook has improved exponentially. However, the euphoria on the macroeconomic front has not resulted in any high value deals in 2015. It is difficult to pin down the hurdles that are
blocking large deals in India especially given the presence of large buyout firms as well as attractive (and,
perhaps, under-valued) targets. The large block of promoter holdings in Indian companies, non-availability of
cheap and external credit and regulatory factors may be some factors impeding M&A deals in India.
Reforms in laws applicable to real estate sector and insolvency/bankruptcy norms are still stuck in the legislative
process. These need to be expedited to bring much-needed clarity and predictability in Indian laws impacting
M&A. Further relaxations to FDI norms and quicker statutory approvals are also key to attracting further foreign
enterprises to explore India as a target destination..
1. The author wishes to place on record his gratitude to Saurabh Sharma and Avichal Mathur, associates at Advaita Legal for their assistance in preparing this update.
Legal Insight into M&A Regulation in Kazakhstan
By Yerkebulan Rakhmenov, PricewaterhouseCoopers, Almaty, Kazakhstan ([email protected])
and Arlan Yerzhanov, PricewaterhouseCoopers, Almaty, Kazakhstan ([email protected])
Introduction to Kazakhstan M&A Transactions
The structure of a Kazakhstan M&A transaction usually involves the purchase or sale of an offshore
holding company which owns a stake in a Kazakhstan legal entity. Typically, foreign investors prefer to use
foreign law (in particular, English law) in combination with Kazakhstan law to govern the transaction. However,
Kazakhstan law will predominate in M&A transactions between Kazakhstan parties. In addition, the Kazakhstan
civil code requires that transactions involving the direct transfer of a participation interest in a Kazakhstan legal
entity be governed by Kazakhstan law.
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
This article mainly focuses on the requirements of Kazakhstan laws relevant to domestic transactions on
direct sales and purchases of stakes in Kazakhstan legal entities. It should be noted that this article is not aimed
to comment on transactions under foreign laws.
Regulation of M&A Transactions
While there are no separate laws in Kazakhstan regulating M&A transactions, the following legislation will
typically apply:
The Civil Code of the Republic of Kazakhstan;
The Law of the Republic of Kazakhstan On Joint Stock Companies;
The Law of the Republic of Kazakhstan On Limited and Additional Liability Companies;
The Entrepreneurial Code of the Republic of Kazakhstan (in the part of “economic concentration”
Depending on the target’s activities, there may be additional laws applicable to the transaction, including
the Law on Subsurface and Subsurface Use, the Law on Natural Monopolies and Regulated Markets, the Law on
Natural Security, the Law on Banks and Banking Activities, etc.
Limited Liability Companies and Joint Stock Companies
Different laws will also apply depending on the types of companies involved. Specifically, there are two
main forms of legal entities commonly used in Kazakhstan: the limited liability company and the joint stock
Limited Liability Companies
Acquisitions of participation interests in the charter capital of a limited liability company are regulated
by the Law on Limited and Additional Liability Companies. Under this legislation, prior to offering the
participation interests to third parties, the participants of a limited liability company must offer them to the other
existing participants, who may use their pre-emptive rights to purchase the participation interests. If the existing
participants waive from their pre-emptive rights, a limited liability company may use the pre-emptive right to
purchase the participation interest itself.
Transfer of the participation interest also requires the adoption of a new version or the introduction of
amendments to the constituent documents of a limited liability company. Generally, where a participation
interest is being acquired by a third party, the limited liability company will need to be re-registered with the
Kazakhstan justice authorities due to change of its participants, with some exceptions2.
Joint Stock Companies
Transactions on acquisitions of shares in a joint stock company are regulated by the Law on Joint Stock
Companies. According to this legislation, in case of (i) acquisition of shares being initially placed or (ii)
realisation of previously bought out shares, a joint stock company should offer such shares to its existing
shareholders to use their pre-emptive right prior to such placement/realization to third party.
Rules for Foreign Buyers
Generally, foreign investors have the same rights and obligations as Kazakhstan purchasers. However,
there are certain restrictions on foreign participation depending on the target’s activities. In particular, there are,
among others, the following restrictions on foreign participation:
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
Foreign legal entities and foreign persons are not allowed directly/indirectly to use, possess or dispose
and (or) manage in total more than 49% of the voting shares or participation interests in a legal entity
carrying out activities in telecommunications as an operator of inter-city and/or international
telecommunication that has ground communication lines, unless there is a positive decision of the
Government of the Republic of Kazakhstan;
Foreign individuals and legal entities as well as stateless persons are not allowed directly/indirectly to
use, possess, dispose and (or) manage more than 20% of the shares or participation interest in a legal
entity that owns mass media in Kazakhstan or that carries out activities in such sphere;
Foreign legal entities, legal entities with foreign participation, foreigners, and stateless persons are not
allowed to carry out security activities, establish or be founders of private security organizations;
Legal entities registered in offshore zones (as per an approved list) are not allowed directly/indirectly to
own and (or) use, and (or) dispose of voting shares of insurance (reinsurance) organizations/second tier
banks in Kazakhstan, except for those shareholders which have minimum required rating of rating
Pursuant to Kazakhstan Civil Code, any transactions involving the transfer of a participation interest in a
Kazakhstan legal entity should be governed by Kazakhstan law. It is worth mentioning that Kazakhstan law is
unfamiliar with certain M&A tools which are commonly used abroad, such as warranties, representations,
indemnities, deadlock resolutions, drag-along/tag-along rights, waiver of rights, etc., or it may be that such tools
are poorly developed in Kazakhstan. Inclusion of such tools into transaction documents may contradict statutory
provisions of Kazakhstan law often resulting in invalidity of the respective provisions. Obtaining Kazakhstan
regulatory consents (such as antimonopoly clearance, consents and state waivers for the transfer of stake in
subsoil user, etc.) may also be time consuming and involve disclosure of all information (i.e., disclosure of
information on all companies within the group of purchasers is required for obtaining antimonopoly clearance).
Required Consents
Both acquisitions of shares or a participation interest in a Kazakhstan legal entity may be subject to
obtaining prior consents or registrations with Kazakhstan state authorities. In particular, there are, among others,
the following requirements to obtain prior consent/registration:
As a general rule, in a direct or indirect acquisition of stake in a company whose activities require the
use of subsoil, the purchaser must obtain prior consent for the acquisition as well as state waiver from its
priority right to purchase the stake in such company;
Acquisition of more than 50% of the voting shares or participation interest in a Kazakhstan legal entity is
considered as economic concentration and obtaining prior consent is required if certain thresholds are
Acquiring the status of “major participant of the bank” or “bank holding” requires prior consent from the
National Bank of Kazakhstan;
There may be additional regulatory requirements depending on the nature of the target’s activities as
well as transaction structure.
There are other types of legal entities (such as state enterprises, business partnerships, etc.) which are normally not subject to M&A transactions
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
It should be noted that the constating documents of a limited liability company may contain restrictions on transfer of participation interests by the participant to third parties
or require obtaining prior consent of other participants.
Romanian M&A Market: Overview of last year and perspectives for 2016
By Sabin Volciuc, Volciuc-Ionescu, Bucharest, Romania ([email protected])
The Romanian mergers and acquisitions market recorded a strong growth last year, exceeding EUR 3
billion total value from a level of EUR 2.24 billion in 2014. The number of M&A transactions in 2015 was
lower than in 2014 (119, as opposed to 131 in 2014) and most of the deals were small and medium size, but there
were also a few large ticket transactions that drove the significant increase in total value.
M&A deals are taking place in many sectors, with financial services, manufacturing and production, real
estate, retail and transportation being among the main drivers. Some key transactions have also taken place or
have been announced in the consumer goods, health, IT, agriculture and energy areas, which is a sign of the
potential of such areas in the future. M&A activity was dominated by inbound deals (more than 60% share),
while domestic deals accounted for approximately 30% and outbound transactions for less than 8%.
Some of the reference transactions in the financial services sector in the last year include the acquisition
by UniCredit SpA (Italy) of the remaining 45% stake in Unicredit Tiriac Bank for a market estimated deal value
of EUR 700 million, the purchase of Volksbank Romania by Banca Transilvania, and the acquisition of several
portfolios of non-performing loans. The financial services sector is expected to generate further M&A activity,
in particular deals involving the Greek banks, and possibly deals involving smaller banks that have not been able
to achieve a certain market share.
The manufacturing and production segments saw a number of large transactions. For example, CRH plc
(Ireland) acquired the cement operations of Lafarge in Romania for a deal value of EUR 400 million and Abris
Capital Partners (Poland) acquired the tissue paper production group Pehart from the European Bank For
Reconstruction and Development for a market estimated deal value of EUR 100 million.
A key transaction in the transportation and related services sector was the acquisition by Archer Daniels
Midland Co (ADM) (United States) of 78% stake in North Star Shipping S.R.L. (Black Sea port operator) for a
market estimated deal value of EUR 90.5 million. Transportation and infrastructure in the CEE region is also on
the radar of Chinese investors, so this sector may provide further opportunities for M&A deals in the near future.
In the energy and natural sector it is worth mentioning the merger between Schlumberger and Cameron,
both companies having operations in Romania and the acquisition by the Carlyle Group of the entire Romanian
E&P business of Sterling Resources. In the beginning of 2016, Repower, the Swiss energy group, announced its
intention to sell its Romanian electricity trading and supply business with a turnover of EUR 106 million and a
5% share on the electricity retail competitive market.
In addition to the more mature economic sectors where most of the M&A transactions have taken place,
new sectors with the potential to generate M&A growth are emerging. One of the fastest growing sectors is
technology, with Romania quickly becoming one of the most attractive destinations for IT and business process
outsourcing. One transaction recently announced in this sector is the sale of Netcity Telecom, a company which
is building an underground optical fibre network in Bucharest. Agriculture is another sector attracting interest
due to low costs, large areas and good quality of agricultural land.
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
Privatizations are not expected to contribute substantially to M&A activity in Romania in the next year.
The government announced its intention to sell on the stock exchange only minority stakes of certain stateowned companies active in the transportation sector (namely, state-owned companies operating ports and
airports) and in the energy sector, for example: Hidroelectrica, key electricity producer from hydro sources, with
a quota of approximately 30% of the total electricity domestic production and a market value of over EUR 3
billion; Complexul Energetic Oltenia, key electricity producer operating coal mines and coal power plants, with
a quota of approximately 23% of the total electricity domestic production. Other significant privatization targets
in the next years may include the postal operator Posta Romania and the national freight railway transport
company CFR Marfa.
In a year marked by economic and financial stabilization for Central European countries, Romanian
market players are optimistic regarding the country’s GDP growth this year, their expectations being in line with
the World Bank’s prospects forecasting a 3.9% growth for 2016. The estimated growth is one of the highest in
the region. This will depend on political and economic stability and continued fiscal and structural reforms in
Based on this economic growth, the positive impact on the business of the new Fiscal Code, and low
levels of interest rates around the world, the market expects increased M&A activity. This optimism is also
backed by the interest showed by large investments funds and some strategic investors to enter the Romanian
market. In addition, after a period of austerity and reduced access to financing, the appetite for investments has
increased. The strength of Romania’s M&A market is underpinned by the fact that deals are generated by many
sectors across the economy, with new sectors emerging as further M&A drivers. The first months of 2016
confirm the positive trend, with a number of large deals being already announced.
International Mergers & Acquisitions and Joint Ventures - Spain
By Albert Garrofé, Cuatrecasas, Gonçalves Pereira, Barcelona, Spain ([email protected])
and Idoya Fernández, Cuatrecasas, Gonçalves Pereira, Barcelona, Spain ([email protected])
There has been no parliamentary activity in Spain in the last few months due to the end of the term and
the general elections. However, the following are some court rulings of interest:
Supreme Court Ruling of December 17, 2015, No. 708/2015: Directors’ Remuneration
The Supreme Court ruled on the enforceability of an “indemnity for dismissal” clause where such clause
was included in the plaintiff’s employment contract but was not in the bylaws of the company which employed
the plaintiff. The employer company was controlled by a single shareholder, which later sold all of its shares to a
different shareholder. Shortly after the change of sole shareholder, the plaintiff was dismissed and she filed a
claim against the company on the basis of the indemnity contained in her contract. The new sole shareholder
refused to pay the indemnity and argued that the contractual clause was invalid on the basis that the bylaws did
not cover the director’s remuneration and that the indemnity was never entered into the commercial registry.
The Supreme Court applied the “own acts” doctrine to the new sole shareholder, who was aware of the
indemnity for dismissal clause when he acquired the company’s shares. The Supreme Court reviewed case law
on the importance of accuracy in a company’s bylaws and the need for shareholders to have oversight on issues
as sensitive as directors’ remuneration. The Court then went on to mention rulings that have qualified these
requirements in light of the own acts doctrine, which is precisely the doctrine that was applied to this case. The
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
rationale justifying the need for bylaws to cover directors’ remuneration loses weight in the case of a sole
shareholder who was fully aware of the remuneration regime in place and, therefore, suffered no damages. On
this basis, the Court concluded that the indemnity for dismissal clause was enforceable.
Supreme Court Ruling of December 11, 2015, No. 695/2015: Director’s Liability For Transfer Of Clientele
To Another Group Company
In this case, which involved a group of related corporations, the Court ruled that the director of one
subsidiary company was jointly and severally liable for having contributed to diverting customers to another
company in the same group. Directors have a duty of loyalty to the company they manage and the Court held
that “group interest” could not be used to justify harm to the subsidiary company. Moreover, the fact that this
director’s actions were agreed to by the management of the larger corporate group did not release the individual
director from liability. The Court reiterated that directors must act with loyalty and in defense of the interests of
the company, have their own range of autonomy, and cannot be affected by a sort of “due obedience” to
instructions from the corporate group.
When conflicts arise between the interests of the group as a whole vis-à-vis the specific interests of one
of the companies belonging to the group, a reasonable balance must be sought to enable the flexible operation of
the business unit while avoiding the neglect of the subsidiary’s corporate interests. This balance may be struck
by granting compensatory advantages to the subsidiary, but these advantages must be verifiable, justified, and
have a financial value proportional to the damage caused to the subsidiary. In this particular case, there was no
proof that the group had compensated the subsidiary in advance of, simultaneously with or subsequent to the
detrimental action.
Ruling By The Madrid Provincial Court (Section 28) Of December 4, 2015: A Ten-Year Post-Contractual
Non-Compete Clause Is Contrary To Public Policy
The Court ruled that a ten-year post-contractual non-compete clause in an agreement for the sale of a
company’s units constitutes an inadmissible restriction on the freedom to work. Non-compete clauses in business
transfer agreements involving the transfer of clientele, know-how, or other specialized knowledge may be fully
justified and enforceable by the parties for the purposes of ensuring the effectiveness of the transfer. In this case,
however, the ten year term of the non-compete clause was clearly excessive. Preventing the defendant from
working for ten years was held to be an inadmissible restriction on the freedom to work (found in art. 35 of the
Spanish Constitution). The Court therefore found this covenant to be contrary to public policy and declared it
null and void, at least insofar as it exceeds two years.
Implementation Act European Directive on Annual Accounts
By Eva Das, Stibbe, New York, NY, USA ([email protected])
and Frederik de Hosson, Stibbe, New York, NY, USA ([email protected])
Legislation implementing the European Directive on Annual Accounts (2013/34/EU) (the
"Implementation Act") in the Netherlands entered into effect on 1 November 2015. This article addresses some
of the relevant effects of the Implementation Act for financial reporting in the Netherlands.
Reduced Maximum Filing Term for Annual Accounts
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
An amendment that will be important in practice is the reduction of the maximum term for filing the
annual accounts at the Dutch trade register, from 13 months to 12 months after the end of a financial year. The
term for preparing the annual accounts remains the same: five months after the end of the financial year for
(unlisted) public limited companies and private companies with limited liability, four months after the end of the
financial year for legal entities that have listed securities admitted to trading on a regulated market ("listed
companies"), and six months after the end of the financial year for cooperatives, mutual insurance associations,
associations and foundations. However, the term by which the general meeting (or, in case of a foundation, the
body designated for this purpose by the articles of association) can extend the period for preparation of the
annual accounts, is reduced by a month: from six to five months for (unlisted) public limited companies and
private companies with limited liability, and from five to four months for cooperatives, mutual insurance
associations, associations and foundations. In relation to listed companies, it had already been stipulated that it is
not possible to extend the term for preparation of the annual accounts.
Increase of the Threshold Amounts in Categorizing Small and Medium-Sized Legal Entities
The Implementation Act also changes the threshold amounts used in distinguishing the different
categories of small, medium-sized and large legal entities. Moreover, a new category of micro-enterprises has
been introduced. The threshold amounts of small and medium-sized legal entities have been increased by
approximately 20% and will be as follows:
Former thresholds
≤ EUR 4,400,000
≤ EUR 17,500,000
> EUR 17,500,000
≤ EUR 8,800,000
≤ EUR 35,000,000
> EUR 35,000,000
Average number of employees
< 50
< 250
≥ 250
New thresholds
≤ EUR 350,000
≤ EUR 6,000,000
≤ EUR 20,000,000
> EUR 20,000,000
≤ EUR 700,000
≤ EUR 12,000,000
≤ EUR 40,000,000
> EUR 40,000,000
Average number of employees
≤ 10
< 50
< 250
≥ 250
The increase of the threshold amounts means that more legal entities are now eligible for the relevant
exemptions. Small and medium-sized legal entities have to file less information at the Dutch trade register than
large companies. In addition, the annual accounts of small legal entities do not need to be audited by an
accountant. Listed companies and other legal entities of public interest ("PIEs")1 cannot make use of these
Prohibition to Use 403-Exemptions and Amendment of Article 2:402 of the Dutch Civil Code
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016
Another change introduced by the Implementation Act, is that PIEs can no longer apply for certain
exemptions with respect to the lay out, audit and publication of their own annual accounts ("403 group
exemptions"). With respect to financial years starting on or after 1 January 2016, PEIs also can no longer make
use of the option to merely include a simplified income statement in the separate annual accounts, which was
permitted if such PEI also published consolidated annual accounts. Before the Implementation Act this was
common market practice for listed companies.
Entering into Effect
The amended regulations apply to annual reports and accounts prepared for financial years starting on or
after 1 January 2016, but legal entities can also opt to apply these regulations to annual accounts pertaining to
financial years starting before 1 January 2016. In the explanatory memorandum to the Implementation Act, the
legislator has clarified that legal entities, in any event, can apply the new regulations to the annual accounts
pertaining to the financial year 2015. However, whether or not these regulations can also be applied
retrospectively to the annual accounts over split financial years, prior financial years, or longer or shorter
financial years remains unclear. Although the Implementation Act stipulates that the provisions refer to annual
reports and accounts "that are prepared", in our opinion the amended regulations can only be applied to annual
reports and accounts that still have to be adopted. This means that if the annual accounts pertaining to the
financial year 2014 have already been adopted, the new regulations may only be applied to the annual accounts
for the financial year 2015.
The Implementation Act does not explain how the transition rule ("in- en uitgroeiregeling") should be
applied in this respect. The transition rule stipulates that a legal entity can only make use of the exemption for
small or medium-sized legal entities if it continuously meets the criteria prescribed by law on two consecutive
balance sheet dates. Considering that most legal entities will have adopted their annual accounts pertaining to the
financial year 2014 by now, in our view, the increased threshold amounts can be applied for the first time in to
be prepared annual accounts pertaining to the financial year 2015. If the annual accounts pertaining to the
financial year 2014 have not yet been adopted however, the increased thresholds can already be applied to these
annual accounts..
1. At the moment, these include listed companies, but also unlisted companies and certain insurance companies.
ABA SIL M&A and Joint Ventures Committee Newsletter - issue 1/2016