12
Mergers & Acquisitions in 68 jurisdictions worldwide Contributing editor: Casey Cogut 2012 Published by Getting the Deal Through in association with: Aabø-Evensen & Co Advokatfirma Æ ´ LEX Arfidea Kadri Sahetapy-Engel Tisnadisastra (AKSET) ASAR – Al Ruwayeh & Partners Baião, Castro & Associados | BCS Advogados Bersay & Associés Biedecki bizconsult law LLC Bonn & Schmitt Bowman Gilfillan Boyanov & Co Carey y Cía Casahierro Abogados Colibri Law Firm Corpus Legal Practitioners Debarliev, Dameski & Kelesoska Attorneys at Law Divjak, Topi´ c & Bahtijarevi´ c Law Firm ELIG Attorneys-at-Law Estudio Trevisán Abogados Ferrere Abogados Freshfields Bruckhaus Deringer LLP Gilbert + Tobin Gleiss Lutz Grata law firm Harneys Aristodemou Loizides Yiolitis LLC Headrick Rizik Alvarez & Fernández Hoet Peláez Castillo & Duque Homburger Hoxha, Memi & Hoxha Iason Skouzos & Partners JA Treviño Abogados Jade & Fountain PRC Lawyers Kettani Law Firm Khaitan & Co Kim & Chang Kimathi & Partners, Corporate Attorneys Law Office of Mohanned bin Saud Al-Rasheed in association with Baker Botts LLP LAWIN LAWIN Lideika, Petrauskas, Vali¯ unas ir partneriai Lloreda Camacho & Co Madrona Hong Mazzuco Brandão Advogados Mares, Danilescu & Asociatii MJM Limited Nagashima Ohno & Tsunematsu NautaDutilh Nielsen Nørager Law Firm LLP Odvetniki Šelih & partnerji, op, doo Pérez-Llorca RIAA LAW Salomon Partners Schönherr Setterwalls Advokatbyrå Simont Braun Simpson Thacher & Bartlett LLP Slaughter and May Stankovic & Partners Stikeman Elliott LLP Thanathip & Partners Legal Counsellors Limited Ughi e Nunziante – Studio Legale Walker Kontos Advocates Walkers Weil, Gotshal & Manges Wong Beh & Toh WongPartnership LLP Young Conaway Stargatt & Taylor, LLP ®

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Page 1: Mergers & Acquisitions - Boyanov · Georgia Revaz Javelidze and Eka Siradze Colibri Law Firm 133 Germany Gerhard Wegen and Christian CascanteFax: +44 20 7229 6910 Gleiss Lutz 138

Mergers & Acquisitions

in 68 jurisdictions worldwideContributing editor: Casey Cogut

2012Published by

Getting the Deal Through in association with:

Aabø-Evensen & Co AdvokatfirmaÆLEX

Arfidea Kadri Sahetapy-Engel Tisnadisastra (AKSET)ASAR – Al Ruwayeh & Partners

Baião, Castro & Associados | BCS AdvogadosBersay & Associés

Biedeckibizconsult law LLC

Bonn & SchmittBowman Gilfillan

Boyanov & CoCarey y Cía

Casahierro AbogadosColibri Law Firm

Corpus Legal PractitionersDebarliev, Dameski & Kelesoska Attorneys at Law

Divjak, Topic & Bahtijarevic Law FirmELIG Attorneys-at-Law

Estudio Trevisán AbogadosFerrere Abogados

Freshfields Bruckhaus Deringer LLPGilbert + Tobin

Gleiss LutzGrata law firm

Harneys Aristodemou Loizides Yiolitis LLCHeadrick Rizik Alvarez & Fernández

Hoet Peláez Castillo & DuqueHomburger

Hoxha, Memi & HoxhaIason Skouzos & Partners

JA Treviño AbogadosJade & Fountain PRC Lawyers

Kettani Law FirmKhaitan & CoKim & Chang

Kimathi & Partners, Corporate AttorneysLaw Office of Mohanned bin Saud Al-Rasheed in association with Baker Botts LLP

LAWINLAWIN Lideika, Petrauskas, Valiunas ir partneriai

Lloreda Camacho & CoMadrona Hong Mazzuco Brandão Advogados

Mares, Danilescu & AsociatiiMJM Limited

Nagashima Ohno & TsunematsuNautaDutilh

Nielsen Nørager Law Firm LLPOdvetniki Šelih & partnerji, op, doo

Pérez-LlorcaRIAA LAW

Salomon PartnersSchönherr

Setterwalls AdvokatbyråSimont Braun

Simpson Thacher & Bartlett LLPSlaughter and May

Stankovic & PartnersStikeman Elliott LLP

Thanathip & Partners Legal Counsellors LimitedUghi e Nunziante – Studio Legale

Walker Kontos AdvocatesWalkers

Weil, Gotshal & MangesWong Beh & Toh

WongPartnership LLPYoung Conaway Stargatt & Taylor, LLP

®

Page 2: Mergers & Acquisitions - Boyanov · Georgia Revaz Javelidze and Eka Siradze Colibri Law Firm 133 Germany Gerhard Wegen and Christian CascanteFax: +44 20 7229 6910 Gleiss Lutz 138

Global Overview Casey Cogut and Sean Rodgers Simpson Thacher & Bartlett LLP 4

European Overview Stephen Hewes and Richard Thexton Freshfields Bruckhaus Deringer LLP 6

Albania Shpati Hoxha Hoxha, Memi & Hoxha 8

Argentina Pablo Trevisán, Laura Bierzychudek and Walter Beveraggi Estudio Trevisán Abogados 15

Australia Neil Pathak, David Clee and Alex Kauye Gilbert + Tobin 21

Austria Christian Herbst Schönherr 28

Belgium Sandrine Hirsch and Vanessa Marquette Simont Braun 35

Bermuda Peter Martin and Andrew Martin MJM Limited 42

Bolivia Carlos Pinto-Meyer and Cristian Bustos Ferrere Abogados 48

Brazil Maria PQ Brandão Teixeira Madrona Hong Mazzuco Brandão Advogados 52

Bulgaria Yordan Naydenov, Angel Angelov and Nevena Kostadinova Boyanov & Co 58

Canada Richard E Clark and Curtis A Cusinato Stikeman Elliott LLP 66

Merger Control in Canada Susan M Hutton Stikeman Elliott LLP 71

Cayman Islands Rob Jackson and Ramesh Maharaj Walkers 74

Chile Pablo Iacobelli and Cristián Eyzaguirre Carey y Cía 79

China Lawrence Guo, Henry Xiao and Sophie Sha Jade & Fountain PRC Lawyers 84

Colombia Enrique Álvarez, Santiago Gutiérrez and Tomás Calderón Lloreda Camacho & Co 90

Croatia Damir Topic and Mate Lovric Divjak, Topic & Bahtijarevic Law Firm 97

Cyprus Nancy Erotocritou Harneys Aristodemou Loizides Yiolitis LLC 101

Denmark Thomas Weisbjerg, Jakob Mosegaard Larsen and Martin Rudbæk Nielsen

Nielsen Nørager Law Firm LLP 106

Dominican Republic Roberto Rizik Cabral, Sarah De León and Claudia Taveras

Headrick Rizik Alvarez & Fernández 112

England & Wales Michael Corbett Slaughter and May 117

France Sandrine de Sousa and Yves Ardaillou Bersay & Associés 127

Georgia Revaz Javelidze and Eka Siradze Colibri Law Firm 133

Germany Gerhard Wegen and Christian Cascante Gleiss Lutz 138

Ghana Kimathi Kuenyehia, Sr, Atsu Agbemabiase and Kafui Baeta

Kimathi & Partners, Corporate Attorneys 146

Greece Theodoros Skouzos and Georgia Tsoulou Iason Skouzos & Partners 152

Hungary David Dederick, László Nagy and Eszter Katona Weil, Gotshal & Manges 158

India Rabindra Jhunjhunwala and Bharat Anand Khaitan & Co 164

Indonesia Johannes C Sahetapy-Engel and Kartika Putri Wohon Arfidea Kadri Sahetapy-Engel Tisnadisastra

(AKSET) 171

Italy Fiorella Federica Alvino Ughi e Nunziante – Studio Legale 178

Japan Ryuji Sakai, Kayo Takigawa and Yushi Hegawa Nagashima Ohno & Tsunematsu 183

Kazakhstan Artem Timoshenko and Aliya Zhumabek Colibri Law Firm 189

Kenya Michael Kontos, Jitin Mediratta and David Wayumba Walker Kontos Advocates 194

Korea Sang Hyuk Park and Gene (Gene-Oh) Kim Kim & Chang 199

Kuwait Ibrahim Sattout and John Cunha ASAR – Al Ruwayeh & Partners 204

Mergers & Acquisitions 2012

Contributing editor Casey Cogut Simpson Thacher & Bartlett LLP

Business development managers Alan Lee George Ingledew Robyn Hetherington Dan White

Marketing managers Ellie Notley Alice Hazard

Marketing assistants William Bentley Zosia Demkowicz

Admin assistant Megan Friedman

Marketing manager (subscriptions) Rachel Nurse [email protected]

Assistant editor Adam Myers

Editorial assistant Lydia Gerges

Senior production editor Jonathan Cowie

Chief subeditor Jonathan Allen

Subeditors Martin Forrest Caroline Rawson Editor-in-chief Callum Campbell

Publisher Richard Davey

Mergers & Acquisitions 2012 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Tel: +44 20 7908 1188 Fax: +44 20 7229 6910 © Law Business Research Ltd 2012

No photocopying: copyright licences do not apply.

ISSN 1471-1230

The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of May 2012, be advised that this is a developing area.

Printed and distributed by Encompass Print Solutions Tel: 0844 2480 112

COntEntS

®

LawBusinessResearch

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COntEntS

2 Getting the Deal through – Mergers & Acquisitions 2012

Kyrgyzstan Zhanyl Abdrakhmanova and Kerim Begaliev Colibri Law Firm 209

Latvia Raimonds Slaidins and Krista Zarina LAWIN 214

Lithuania Robertas Ciocys LAWIN Lideika, Petrauskas, Valiunas ir partneriai 219

Luxembourg Alex Schmitt, Chantal Keereman and Philipp Mössner Bonn & Schmitt 227

Macedonia Emilija Kelesoska Sholjakovska and Elena Miceva

Debarliev, Dameski & Kelesoska Attorneys at Law 232

Malaysia Wong Tat Chung Wong Beh & Toh 238

Mexico Daniel I Puente Medina and Mauricio Garza Bulnes JA Treviño Abogados 244

Morocco Nadia Kettani Kettani Law Firm 249

netherlands Willem Calkoen and Martin Grablowitz NautaDutilh 255

nigeria Theophilus Emuwa, Chinyerugo Ugoji and Ayoyinka Ayeni ÆLEX 261

norway Ole K Aabø-Evensen Aabø-Evensen & Co Advokatfirma 267

Pakistan Bilal Shaukat, Mayhar Kazi and Mahum S Shere RIAA LAW 277

Peru Percy Castle and Carlos Carrasco Casahierro Abogados 283

Poland Ludomir Biedecki and Radosław Biedecki Biedecki 289

Portugal Victor de Castro Nunes, Maria José Andrade Campos and Cláudia de Meneses

Baião, Castro & Associados | BCS Advogados 296

Romania Simona Mares and Lucian Danilescu Mares, Danilescu & Asociatii 303

Russia Anton Klyachin and Igor Kuznets Salomon Partners 309

Saudi Arabia Babul Parikh and O Ali Anekwe Law Office of Mohanned bin Saud Al-Rasheed

in association with Baker Botts LLP 314

Serbia Nenad Stankovic, Dusan Vukadin and Sara Pendjer Stankovic & Partners 321

Singapore Ng Wai King and Chan Sing Yee WongPartnership LLP 328

Slovenia Nataša Pipan Nahtigal and Jera Majzelj Odvetniki Šelih & partnerji, op, doo 336

South Africa Ezra Davids and David Yuill Bowman Gilfillan 343

Spain Vicente Conde Pérez-Llorca 349

Sweden Anders Söderlind, Anders Holmgren and Ola Grahn Setterwalls Advokatbyrå 356

Switzerland Claude Lambert, Dieter Gericke, Dieter Grünblatt and Gerald Brei Homburger 362

tajikistan Denis Bagrov and Shirinbek Milikbekov Colibri Law Firm 370

thailand Thanathip Pichedvanichok and Issariya Vimonrat Thanathip & Partners Legal Counsellors Limited 374

turkey Salih Tunç Lokmanhekim and Saniye Simge Eren ELIG Attorneys-at-Law 379

United Arab Emirates Patrick Ko and Omar Momany Freshfields Bruckhaus Deringer LLP 387

United States Casey Cogut and Sean Rodgers Simpson Thacher & Bartlett LLP 393

United States, Delaware Rolin P Bissell and Elena C Norman Young Conaway Stargatt & Taylor, LLP 398

Uzbekistan Babur Karimov and Nodir Yuldashev Grata law firm 403

Venezuela Jorge Acedo Hoet Peláez Castillo & Duque 409

Vietnam Tuan Nguyen, Phong Le, Hanh Bich, Huyen Nguyen, Hai Ha and Thuy Huynh bizconsult law LLC 413

Zambia Sharon Sakuwaha, Lupiya Simusokwe and Robin Msoni Corpus Legal Practitioners 420

Appendix: International Merger Control David E Vann Jr and Ellen L Frye Simpson Thacher & Bartlett LLP 425

Page 4: Mergers & Acquisitions - Boyanov · Georgia Revaz Javelidze and Eka Siradze Colibri Law Firm 133 Germany Gerhard Wegen and Christian CascanteFax: +44 20 7229 6910 Gleiss Lutz 138

Bulgaria Boyanov & Co

58 Getting the Deal Through – Mergers & Acquisitions 2012

BulgariaYordan Naydenov, Angel Angelov and Nevena Kostadinova

Boyanov & Co

1 Types of transactionHow may businesses combine?

The most common methods for achieving the combination of two or more businesses that are used in the Bulgarian legal practice are the following:• theacquisitionofamajorityorallofthesharesorstocksofacompany–theacquirerwouldassumecontroloverthetargetbyacquiringthemajorityofitsvotingrights;

• thetransferofthegoingconcernofoneentitytoanother–thetransferor shall transfer all of its assets, liabilities and goodwill totheacquirerthroughasingletransaction;

• thetransferofalltheassetsandcontractspiecebypiecebyonecompanytoanother–thetransferorshalltransferallorsomeofitsassetsandcontractsviaseriesoftransactions.Normallythisprocedureisusedincaseofuncertaintyaboutundisclosedorhiddenliabilitiesonthetransferor’sside;

• themerger byway of acquisition (one ormore entities areabsorbedintoanotherentityandtheabsorbedentitiesceasetoexist)orbywayofincorporation(twoormoreentitiescombineto establish a new one and all of the combined entities cease to exist);

• thedemergerbywayofacquisition–aportionoftheassetsandliabilitiesofanentityaresplitoffandpassontoanotherentity;and

• theenteringintovariouscontractualarrangementsleadingtotheestablishmentofjointventures,consortiaorsimilarunincorpo-rated structures.

2 Statutes and regulationsWhat are the main laws and regulations governing business

combinations?

Notallformsofbusinesscombinationaregovernedbyspecificleg-islation.Theapplicabilityofaspecificlegislationdependsmainlyonthetypeofthecombinationand/orthebusinessofthecompaniesinvolved:• theCommerceActof1991,asamended,isthemainlegislativeactregulatingthelegalstatusofcompanies,mergers,acquisi-tions,saleofsharesinlimitedliabilitycompaniesandstocksinjoint-stockcompanies,transferofgoingconcerns,etc;

• theContractsandObligationsActof1950,asamended,appliestoallissuesnotcoveredbytheCommerceAct,aswellastothetransfers of assets, transfers or novation of contracts, etc. It also governsgeneralissuessuchasthenullityofthecivilcontracts;

• theCommercialRegistryActof2006regulatestheproceduresforregistrationofbusinesscombinations(whensucharesubjecttoregistration)withtheCommercialRegistry;

• thePublicOfferingofSecuritiesActregulatesthelegalstatusandthespecialrequirementsapplicabletopubliclytradedjoint-stockcompanies,theproceduresfortheacquisitionoftheirnon-physicalshares,theobligationsforthelaunchoftenderoffers

oncecertainshareholdingthresholdsareexceeded,etc;and• thePrivatizationandPost-privatizationControlActregulatesthe

special procedures applicable with respect to the privatisation of state and municipal companies and assets.

Thelegislationspecificallygoverningtheregulatedindustriesshouldalsobeconsideredwhenamergeroracquisitionismadewithinthatindustry,forexample:• theCreditInstitutionsActanditsregulationssetupspecialper-mitrequirementsofthebankingregulatorwithrespecttotheacquisitionofsharesinabankinginstitutionorthetransforma-tionofbanks;

• theMarketsinFinancialInstrumentsActregulatestheestab-lishment and the requirements with respect to investmentintermediaries;

• theInsuranceCoderegulatesthelegalstatusofinsurancejoint-stockcompanies,includingrulesonbusinesscombinations;and

• theTelecommunicationsActsetsforthspecialpermitrequire-mentswithrespecttotheacquisitionofsharesinapublictel-ecommunications operator.

CertainBulgarianlawsmayaffecttheproceduresforthepaymentoftheacquisitionprice,suchas:• theForeignExchangeActregulatingthedeclarationoftransac-

tions involving sums over certain amounts for national statistics purposes;

• theCorporateIncomeTaxAct,whichmayimposeawithhold-ingtaxobligation,respectivelythevariousdoubletaxtreatiestowhichBulgariaisapartyandwhichmayalterthesaidobliga-tion,andtheTaxandSocialSecurityProcedureCode,whichestablishes the procedure for the application of the double tax treaties;and

• theMeasuresAgainstMoneyLaunderingAct,regulatingspecificobligationsofthebankstoidentifytheentitiesthateffectcertainpayments,etc.

Withrespecttogeneraladministrativelaw,theProtectionofCom-petitionActregulatingconcentrationclearancesbytheBulgarianCommissionfortheProtectionoftheCompetition(theCompetitionCommission)isalsorelevant.

3 Governing lawWhat law typically governs the transaction agreements?

Onmanyoccasionsthepartiesmaychooseaforeignlawtogoverntheircontractualrelations.InthosecasestheapplicabilityoftheBul-garianlawsmaynotbederogatedwithrespecttomaterialelementsof the deal such as:• theformoftheagreement–especiallyiftheagreementissubjecttoregistrationorenforcementinBulgaria;

• corporaterequirementswithrespecttotheadoptionofcorporatedecisionsbytheBulgarianparticipantsinthedeal;

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Boyanov & Co Bulgaria

www.gettingthedealthrough.com 59

• administrativerequirementssuchastheregistrationofthedealandthefeesassociatedtherewith,gettingofthenecessarypermitsforthedeal,etc;and

• duetaxes–withholdingtax(inthecaseofsaleofsharesinaBulgariancompany),localtaxes(inthecaseofsalesofrealestatelocatedinBulgaria),VAT,etc.

IfthetransactionisgovernedbyBulgarianlaw,thenthefollowinglegislationwouldapplyinmostcases:• theCommerceActgovernstheformsoftheagreementsforthetransferofshares,physicalstocksorgoingconcerns,theproce-dures for the adoption of the relevant corporate decisions, the procedures for the effective assumption of control after the deal closes,thedealregistrationrequirements,theproceduresforthecompanies’transformation,likemergersordemergers,etc;

• theContractsandObligationsAct–accordingtotheCommerceActtoallmattersnotregulatedbyittheprovisionsofcivilleg-islationshallapply.ThelawformingthebackboneofthecivillegislationistheContractsandObligationsAct,thereforeitmay,andmostprobablywill,beapplicabletomanyelementsofanM&Aproject;and

• thePublicOfferingofSecuritiesActappliestoacquisitionsortransformationsinvolvingpubliclytradedcompanies,etc.

4 Filings and feesWhich government or stock exchange filings are necessary in

connection with a business combination? Are there stamp taxes or

other government fees in connection with completing a business

combination?

Commercial registrationMostbusiness combinations require registrationwith theCom-mercialRegister.Atpresent,theCommercialRegisteriskeptbytheRegistryAgency,whichissubordinatedtotheMinistryofJustice.Commercialregistrationisrequiredwithrespecttoallofthetrans-formationprocedures(ie,mergersanddemergers),transferofgoingconcerns,transferofsharesinalimitedliabilitycompany,transferof100percentofthestocksinajointstockcompany,etc.Registra-tionnormallyrequiresafeetheamountofwhichisrelativelylow.TherefusalsoftheCommercialRegisterofficialstoregisterbusi-nesscombinationsaresubjecttojudicialcontrol.Dependingontheconcretetypeofthebusinesscombinationandthelegalformofthecompaniesinvolved,theprocedureforcarryingoutofabusinesscombinationvariesintermsofstepstobeundertakenanddocumentstobeexecuted.Forexample,theCommerceActprovidesforeasierand shorter procedure for registering business combinations between daughtercompaniesorbetweenamotherandadaughtercompany–comparedtothegeneralcasescenario,whereitisnecessarytodraftand submit a special plan or agreement for the combination, to have itexaminedbyanindependentexaminer,etc.

Transactions concluded on and off the floor of the stock exchangeTransactionswithsharesofpubliclytradedcompaniesattheflooroftheexchangeareautomaticallyannouncedtoandregisteredbytheCentralDepository.Theonesconcludedoff the floorof theexchangearesubjecttoregistrationwiththeCentralDepositoryand announcement at the exchange. Transactions with dematerial-isedsharesissuedbynon-publiclytradedcompaniesarealsosubjecttoregistrationwiththeCentralDepository.Allthoseannouncementsorregistrationsaresubjecttoafeedeterminedonthebasisofspecialtariffs and could be defined as reasonable.

Assets deal registrationsIf such a deal is implemented, then registrations must be made with respecttoallassetsthataresubjecttospecialregistrationand/orcon-trol(realestate,trademarks,motorvehicles,securities,ships,aircraft,

weaponsandammunitions,etc).Thefeespayabledependonthenature of the asset and are in general reasonable.

Auxiliary registrationsNormallyabusinesscombinationisassociatedwithchangesintheconstituent documents of the target, its management bodies, address ofmanagement,tradingname,etc.Thosechangesarealsosubjectto commercial registration. In addition, and depending on the form oftheM&Atransaction,registrationsmayhavetobemadewithrespecttoallassetsthataresubjecttospecialregistration(pleaseseeabove).Themakingofthoseregistrationsisalsoconditionaluponthepaymentofafee,whichinmostcasesisreasonable.

Concentration clearanceConcentrationclearanceisrequiredifthesumoftheturnoversoftheparticipantsintheconcentrationontheterritoryofBulgariaexceeds25millionBulgarianlevsfortheyearprecedingtheyearoftheconcentrationand(i)theturnoverofeachoneofatleasttwooftheparticipantsexceeds3millionlevs;or(ii)theturnoveroftheparticipantbeingacquiredexceeds3millionlevs.Thefeepayablefortheissuingoftheclearanceis0.1percentofthecombinedturnover,butnomorethan60,000levs.Incasetheconcentrationhasacommunitydimension,asdefined

bytheMergerRegulation(CouncilRegulation(EC)No.139/2004),thentheconcentrationclearanceistobeissuedbytheEuropeanCommission.

Regulatory permitsRegulatorypermitsare requireddependingon thenatureof thetransactionandthe industrysector inwhichthetargetoperates.The general principle is that in case the business is of a regulated nature(ie,thecompanypossessespermits,licencesorconcessions),theobtainingofapermitbytheauthoritymonitoringandregulat-ingtherespectivebusinessisamust,ifthesurvivingentitywantstokeepthebusiness.SuchauthoritiesincludetheBulgarianNationalBank,theFinancialSupervisionCommission,theCommissionforProtectionofCompetition,theStateEnergyandWatersRegulatoryCommission,theTelecommunicationsRegulatoryCommission,etc.Usuallytheissuingofthepermitincursafee.

It should be noted that whenever fees are collected in connec-tion with the performance of a business combination their amount is either fixed in advance in a special tariff or can be calculated on the basis of rules contained in such a document and does not depend on thejudgementordiscretionoftherelevantofficials.Incertaincasesthebusinesscombinationmayentailthepay-

mentoflocaltaxes.Forexampleinanassetdealinvolvingrealestatethepartiesmayhavetopaylocaltaxesofupto3percentofthetransfervalueoftherealestate.Someformsoftransferagreementsmayrequirenotarisation(eg,transferofgoingconcerns,transferofsharesinalimitedliabilitycompany,transferofrealestatesandmotorvehiclesinanassetdeal).Thenotaryfeesarecomputedpursu-anttoaprogressivetariffandtheirmaximummaynotexceede3,000(dependingonthedeal).

5 Information to be disclosedWhat information needs to be made public in a business

combination? Does this depend on what type of structure is used?

Theinformationthatshallbemadepublicdependsprimarilyonthetypeofbusinesscombinationaswellasonthelegalformoftheparticipants.Incertaincasesthereisnorequirementforpublicannouncement(eg,acquisitionoflessthan100percentofthesharesinanon-publiclytradedjoint-stockcompany).Inothercases,thepartiesmayhavetodisclosematerialamountsofinformationtothegeneralpublic,theregulatorsortheCompetitionCommission.

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Bulgaria Boyanov & Co

60 Getting the Deal Through – Mergers & Acquisitions 2012

Inthecaseofaplannedtransformationofnon-publiclytradedcompanies, the public will be informed about the planned merger throughtheadvanceannouncementintheCommercialRegisterofthe merger documents and the invitation for the general meeting. GiventhattheCommercialRegisterispublic,anyperson(notjusttheshareholders)maylearnallofthedetailswithrespecttothetrans-formation, such as its form, the participants therein, the proposed exchangeofshares,theamountofcashpayments,ifanyhavebeenenvisaged,andthetimeperiodwithinwhichpaymentmustbemade,etc.Eachpersonacquiring5percentormoreof theshares ina

publiclytradedcompanyshouldmakeanannouncement.Asimilarrequirementapplieswithrespecttosubsequentacquisitionswherethetotalshareholdingwouldexceed10percent,15percentandotherpercentagesdivisibleby5.Inaddition,adisclosuretotheregulatedmarketistobemade

whenapotentialacquirerentersintoconfirmednegotiationsfortheacquisitionofcontroloverthepubliclytradedcompany.Inthecaseofacquisitionofcontroloveracompany,thesharesof

whicharepubliclytraded,theacquirershouldlaunchatenderoffertotheminoritystockholders.Theminimumcontentofthetenderofferisdeterminedbylawandincludes,interalia,informationabouttheacquirer,itsbusinessplansforthefuture,planswithrespecttotheemployees,offertoacquiretheminoritysharesandindicationofthepriceatwhichthiswillbedone,etc.Anoticeaboutthetenderoffer and the text of the tender offer are to be published in at least twonationaldailynewspapers.The information disclosed to the CompetitionCommission

usuallycoversawiderangeofcommerciallysensitiveinformation,therefore,thepartiesmayindicateintheirfilingsthedatathattheyconsidercoveredbycommercialsecrecy.TheCompetitionCommis-sionmaythendisclosethenon-confidentialinformationtothepublicvia announcements on its official website.Forthepurposesofobtainingtheregulatorypermit(ifrequired)

theapplicantsmayalsoneedtodisclosetotheregulatoramaterialamountofinformation,includingontheirbusinessplans;however,this information will not be made public.ThePrivatisationAgencymustpublishreportsonitsactivity

intheofficialgazette.Accordingtothelaw,thosereportsshouldinclude information on transferred shares or assets, the name of the acquirer,thepurchasepriceandtheadditionalobligationsassumedbytheacquirer,suchastheobligationtomakeinvestmentsortheobligationtomaintaincertainnumberofemployees.Theaboveisonlyanexampleonthedifferenttypesofrequire-

mentsapplicabletodifferenttypesofbusinesscombinationsandneithercoversandexhaustsalltherequirementsforrevealingofinformation nor spreads over all the possible business combinations.

6 Disclosure of substantial shareholdingsWhat are the disclosure requirements for owners of large

shareholdings in a company? Are the requirements affected if the

company is a party to a business combination?

AccordingtotheCommerceActandtheCommercialRegisterAct,thenamesoftheshareholdersinalimitedliabilitycompanyandtheirshareparticipationarepublicandcanbeseenbyanythirdparty.Theshareholdersinanon-publiclytradedjoint-stockcompany

arenotrequiredtobeannouncedwiththeCommercialRegistry.However,ifapersonacquires100percentofthecapitalofsuchcompany,thenhisorhernameshallberecordedintheregistry.Asmentionedabove,eachpersonacquiring5percentormoreof

thecapitalofapubliclytradedjoint-stockcompanyshoulddisclosethistotheregulatedmarketonwhichtheacquisitiontookplace,aswellastothecompanyitselfandtotheCommissionforFinancialSupervision(theCommission).

7 Duties of directors and controlling shareholdersWhat duties do the directors or managers of a company owe to

the company’s shareholders, creditors and other stakeholders in

connection with a business combination? Do controlling shareholders

have similar duties?

Managersanddirectorsplaydifferentrolesdependingonthetypeofthe business combination that is to be implemented.

In the case of mergers and demergers, the role of the managing bodies is fundamental for the successful completion of the planned combination, as they are responsible for the entire procedure,including preparation of the merger agreement and the reports of the management bodies, securing the proper auditing of the merger documentation and the disclosure of information to the sharehold-ers, convocation of the general meeting of the shareholders to vote therequisiteresolutions,registrationofthecombination,etc.

Without the assistance of the management bodies the prepara-tion of a competition clearance filing would be impossible. However, it is up to the selling shareholder to secure their assistance. The same isvalidwithrespecttotheregulatorypermitfilings.TheCommerceActprovidesthatthemembersofthemanaging

bodies of the companies participating in a merger or demerger will beliabletothepartnersandshareholdersinthecompaniesforanydamages resulting from a failure to fulfil their duties in preparing and effecting the combination.Themanagementofthesurvivingoracquiringcompany(incases

ofmergers,demergersoracquisitionsofagoingconcern)isobligedto secure the separate management of the assets for six months after thebusinesscombinationiscomplete.Shouldtheyfailtoobservethisrequirementtheyshallbeliabletothecreditorsfortheresultingdamages.Themembersofthemanagingbodiesofpubliclytradedjoint-

stock companies are jointly liable for any detriment asmay beinflictedbyreasonofanyuntrue,misleadingordeficientparticularsintheprospectussubmittedtotheCommission.

No specific obligations exist with respect to the controlling shareholders.

8 Approval and appraisal rightsWhat approval rights do shareholders have over business

combinations? Do shareholders have appraisal or similar rights in

business combinations?

Certainbusinesscombinationsdorequireapprovalbythegeneralmeetingofshareholders,whereasothersmaybeimplementedbyaresolutionofthemanagementorjointlybythemanagementandsupervisorybodies.

Transformation of the company (merger or demerger)Resolutionofthegeneralmeeting isneededtobepassedwithamajorityofthree-quartersof(i)theentirecapitalwhentransformingalimitedliabilitycompany;or(ii)thepresentedvotingshareswhentransformingajoint-stockcompany.Incaseofstocksfromdifferentclasses,thedecisionshallbetakenbythestockownersfromeachclass.Totransformapartnershiplimitedbystocks,itisnecessarytohaveadecisionoftheunlimitedliabilitypartnerstakenunani-mouslyinwritingwithnotarisationofthesignatures,andadecisionofthegeneralmeetingoftheshareholderstakenbyamajorityvoteofthree-quartersoftherepresentedshares.Atransformationofageneral partnership or a limited partnership shall be done upon the agreement of all partners given in writing with notarisation of the signatures.

Transfer of the entire going concernResolutionofthegeneralmeetingisneeded,however,thispowermaybedelegatedtothemanagementorthemanagementandsuper-visorybodiesjointlybythestatuteofthejoint-stockcompany.

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Transfer of assets which value exceeds one-half of the total value of the assets as per the last audited balance sheetResolutionofthegeneralmeetingisneeded,however,thispowercanbedelegatedtothemanagementormanagementandsupervisorybodiesjointlybythestatuteofthejoint-stockcompany.

Entering into consortia or similar arrangementsEnteringintoconsortiaorsimilararrangements maybedelegatedtothe management bodies.

Appraisal rightsIn the case of a merger or demerger the shareholders have to receive areportbyalicensedauditorconfirmingthefairnessoftheexchangecoefficients at which their shares would be exchanged.Incaseofamandatorytenderofferinapubliclytradedcompany

the shareholders have to receive a report from the management of thecompanyontheproposedofferandthecalculationofthepriceistobereviewedfirstandapprovedbytheCommissionforFinancialSupervision.

9 Hostile transactionsWhat are the special considerations for unsolicited transactions?

Ingeneral,inthecaseofatransferofsharesinalimitedliabilitycompany,thenewshareholderneedstobeapprovedbyalloftheshareholders. There is no such legal rule for the transfer of shares inanon-publiclytradedjoint-stockcompanybuttheshareholderscould implement similar protective mechanisms though ‘right of first refusal’orsimilarclausesinthestatuteofthecompany.However,thisisnotapplicablewithrespecttopubliclytradedjoint-stockcom-panies,thesharesofwhicharesupposedtobefreelytransferable.TheBulgarianstockmarketisstillunderdevelopedandhasseen

nohostiletakeoverstodate.Furthermore,thefree-floatofBulgar-ianpubliccompaniesisusuallysmallwhichmakeshostiletakeoverspracticallyimpossible.Asarule,anypersonpossessing5percentormoreofthecapital

ofapubliccompanyandwishingtoacquiremorethanone-thirdof thecapitalmayregistera tenderofferaddressedtoallof theshareholders.Thesaidtenderoffer(aswellasanyothertenderoffer–seeques-

tion12)istobebasedonthefollowinggeneralrules:• alloftheshareholdersshouldbetreatedequally;• theshareholdersshouldbegivensufficienttimetoassesstheofferandtakeagroundeddecision;

• themanagementmustactintheinterestsofthetargetcompany,itsshareholdersandemployees;and

• nomarketmanipulationsofthesharesofthetargetcompanyorother affected companies are allowed.

Themanagementofthetargetcompanyhastoberequestedtopro-vide an opinion on the tender offer.Duringthetenderoffer,thetargetcompanymaynotissueshares,

rights, warrants or other securities convertible into voting shares orenterintotransactionsthatwouldmateriallyalteritsproperty,redeemsharesortakeanyotherstepstopreventtheacceptanceofthe tender offer, or create material difficulties or inflict additional expenses to the offeror.Thelawdoesnotprovideforanyspecificmeasuresthattheman-

agementofthetargetcompanymaytaketopreventahostiletakeo-ver.However,itmayprovideanegativeopiniononthetenderofferaslongassuchopinioncouldbebackedwitharguments.Duetothereasons explained above there is no court practice on such cases.

10 Break-up fees – frustration of additional biddersWhich types of break-up and reverse break-up fees are allowed?

What are the limitations on a company’s ability to protect deals from

third-party bidders?

Thelawrequiresthatallpre-contractualrelationsandnegotiationsshouldbeconductedingoodfaith.Sincethiswordingisquitebroadprudentinvestorsprefertosettleissuesliketheexclusivityfornegoti-ations,break-upfees,andthepossibilitytonegotiatewithmorethanonepartyinadvancethroughwritteninstruments.Thosedocumentswouldalsoregulatethepossiblebreak-upfeepayabletothebuyershouldthirdpartiesinterferesuccessfullyintheplannedtransaction.Thebreak-upfeescouldbeincludedinthosedocumentsalsoasapenaltyforbreachingthepre-contractualobligationnottonegotiatewithathirdparty.Thelawcontainsnolimitationwithrespecttobreak-upfeesand

itmaybefreelynegotiatedbetweentheparties.However,ifthesellerisanindividualandthebreak-upfeeisnegotiatedasa‘penalty’thenthesellercanclaimitsamountisexcessiveifitismateriallyhigherthanthedamagesactuallysufferedbythepotentialbuyer.Althoughthebreak-upfeeismoreoftenintendedtoprotectthe

potentialbuyer,thereisnolegalprohibitiononagreeingafeeinfavour of the seller too.Itshouldbenotedthatevenwithoutabreak-upfeearrangement,

theremaybepre-contractualliabilityifonepartyleavesthenegotia-tionswithoutjustgroundsandinbadfaith.TheCommerceActprohibitsjoint-stockcompaniesfromgrant-

ingcreditsorprovidingsecurityfortheacquisitionoftheirownshares.Thewordingofthe‘financialassistance’prohibitionisquitebroad and still there is no strong court practice on its application. Nosuchprohibitionexistswithrespecttosharesinlimitedliabilitycompanies.

11 Government influenceOther than through relevant competition regulations, or in specific

industries in which business combinations are regulated, may

government agencies influence or restrict the completion of business

combinations, including for reasons of national security?

If all the prescriptions of the law are observed, no government agencies may influence or restrict the completion of businesscombinations.

12 Conditional offersWhat conditions to a tender offer, exchange offer or other form of

business combination are allowed? In a cash acquisition, may the

financing be conditional?

TheBulgarianPublicOfferingofSecuritiesActregulatesthreetypesof tender offers.

Compulsory offersAnyperson,whoacquires,whetherdirectlyorthroughconnectedpersons,morethan50percentofthevotesinthegeneralmeet-ingofanypubliccompany,musteitherregisterwiththeCommis-sionforFinancialSupervisionatenderoffertotherestofthevotingstockownersforthepurchaseoftheirstocksorforexchangewithstockstobeissuedbytheofferorforthispurpose,ortransfertherequisitenumberofsharessoastohold,whetherdirectlyorthroughconnectedpersons,lessthan50percentofthevotesinthegeneralmeeting.Similarrequirementsapplytopersonsacquiring,directlyor together with related persons, two-thirds of the voting shares of alistedcompany.Thecompulsorytenderofferruleisalsotriggeredincasetwoormorepersonsownjointlythethresholdsaspointedout with the previous sentences and such persons have entered into agreementforjointmanagementandvoting.

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Voluntary offers (usually to delist the company)Personswhoownmorethan90percentofthevotingcapitalofalistedcompanymayaddressatenderoffertotheremainingminor-ityshareholders.Asaresultthereofthecompanycouldbedelisted.

Voluntary offers (usually to take over the company)Ashareholderinalistedcompanyowning5percentormoreofthesharesmayaddressatenderoffertotheothershareholdersifheorshewishestoacquiremorethanone-thirdofthevotingcapital.Asarulethetenderofferisunconditionalandmaynotbewith-

drawn with the following exceptions:• avoluntarytenderofferaimedatacquiringmorethanonethirdofthevotingcapitalmaybewithdrawnfreely;and

• mandatorytenderoffersandvoluntarytenderofferbyashare-holderwithmorethan90percentofthecapitalmaybewith-drawnafteritspublicationexceptionallyifitscompletionhasbecomeimpossibleowingtoreasonsbeyondthecontroloftheofferor and provided that the period for acceptance of the tender offerhasnotexpired.ThewithdrawalissubjecttoapprovalbytheCommissionforFinancialSupervision.

The tender offer documentation, to be filedwith theCommis-sionforFinancialSupervision,shouldcontain,interalia,evidencethattheofferorisinpossessionofthefundsneededtopayfortheacquiredshares,anddetailsofthesecuritiesthatshallbetransferredinexchangefortheacquiredshares.Theofferormayfinancetheacquisitionthroughitsownfundsorthroughaloan.Inanycase,theofferorshallensurethepossibilityforfullpaymentoftheshares(ie,incaseofconditionalfinancing,theCommissionshalljudgewhethersuchconditionsmayaffectthecapabilityoftheofferortopaythepurchase price for the shares).

13 FinancingIf a buyer needs to obtain financing for a transaction, how is this dealt

with in the transaction documents? What are the typical obligations of

the seller to assist in the buyer’s financing?

Bulgarianlegislationdoesnotprovideforanyspecificrulesregardingtheseller’sassistanceinthefinancingofthebuyer.However,onthebasis of the general principal of freedom of contracts such arrange-ments could be included in the transaction documentation.

In the current financial crisis environment there have been a num-ber of transactions where the sellers have provided certain access to theirbusinessdocumentationanddatatothebuyer’screditinginsti-tutionssothattheycouldassessthesecuritytheycouldobtainpost-completion(subjecttothefinancialassistanceprohibitionrules).Thesellers were also prone to assume negative pledge or similar obliga-tions(alsoaspartoftheirstand-stillpre-closingobligations).InsomecasesthesellersintroducedbuyerstoBulgarianfinancialinstitutionsthusmakingthefinancingprocesssmoother.

14 Minority squeeze-outMay minority stockholders be squeezed out? If so, what steps must

be taken and what is the time frame for the process?

TheCommerceActdoesnotallowforthesqueeze-outofminorityshareholdersbythemajorityshareholderinanon-publicjoint-stockcompanyorlimitedliabilitycompany,irrespectiveofthepercentageheldbythelatter.Itwouldnotbeunthinkable,however,toimplementamecha-

nismfortheseparationofanexistingcompanyintotwoormoreentities, where one of the successors would receive the entire business whiletheother(s)wouldreceive,forexample,onlycash.Themajor-ityshareholderinterestedinsqueezingouttheminoritysharehold-erswouldthenreceivesharesintheoperationalcompany,whereastheminorityshareholderswouldbecomeshareholdersinthecashcompany(ies).

TheCommerceActprovidesexplicitlyforfewoptions,theeffectofwhich,ifappliedtominorityshareholders,shallbethesameasasqueeze-out.

Non-payment of the shares value in a limited liability companyAshareholderwhohasnotpaiduporcontributedhisintereststakeshallbedeemedexpelledfromacompanyifhefailstopayuporpayinhisstakewithinatimelimitasdeterminedadditionallybythe general meeting.

Expel of a shareholder in a limited liability companyAshareholderinalimitedliabilitycompany(includingthemajorityshareholder)maybeexpelledbythegeneralmeetingfollowinganoticeinwritingifhe(i)failstoperformhisobligationsforprovid-ingassistanceforthecarryingoutoftheactivitiesofthecompany;(ii)failstoabidetheresolutionsofthegeneralmeeting;or(iii)actsagainsttheinterestsofthecompany.

Non-observance of a resolution for additional monetary contribution or capital increase in a limited liability companyThemajorityshareholdersinalimitedliabilitycompanymayadoptaresolutionforacapitalincreaseoradditionalmonetarycontribu-tionwhichimplyfinancialobligationstoaminorityshareholder.Ifthelatterwouldfailtocomplywiththeresolution,thenhemaybeexpelledfromthecompany.Aminorityshareholderwhoisdissent-ingwiththeadditionalcapitalcontributionsmayleavethecompanyvoluntarily.

Non-payment of the issuance value of the stocks in a joint-stock companyIfthepaymentoftheissuancevaluewaspostponedandastock-holderisindelayandfailstopaythesaidvaluewithinonemonthasof written notice to do so, he shall be deemed expelled.

Squeeze-out in a public joint-stock companyInapublicjoint-stockcompanytheminorityshareholderscouldbesqueezedout,subjecttothefollowingprocedure:• themajorityshareholdershouldhavehad launchedatenderoffer;

• asaresultthereofheshouldhaveacquiredmorethan95percentofthevotingcapital;

• withinaperiodofthreemonthsfollowingthecompletionofthetenderofferthemajorityshareholdermaypublishaninvitationtotheremainingminoritiestoacquiretheirshares;

• theminorityshareholdersareobligedtotransfertheirshareswithinonemonthfollowingthepublication;

• thesharesofthoseminorityshareholderswhodidnottransfertheirshareswillbeconsideredpropertyofthemajorityshare-holderupontheexpiryoftheperiod;and

• theinvitationistobesubmittedinadvancetotheCommissionforFinancialSupervisionforapproval.Rulessimilartotherulesforapprovalofatenderofferandtheofferedpricewouldapply.

15 Cross-border transactionsHow are cross-border transactions structured? Do specific laws and

regulations apply to cross-border transactions?

Asarule,foreignentitiesenjoythesameeconomicrightsasBulgar-ian entities. However, the involvement of an international element affects in most cases the structure of the business combination. The following should be mentioned.

In most cases of cross-border transactions the parties would choose a foreign law to govern their relations, provided however, thatcertainmandatoryprovisionsoftheBulgarianlawsshallequallyapply.

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InthecaseofsaleofsharesinaBulgariancompanybyaforeignseller,thewithholdingtaxrequirementsoftheBulgarianlawsshouldbe complied with.

The parties to a cross-border transaction prefer to choose foreign courts or arbitral institutions as the forum competent to settle their disputes.ThePrivateInternationalLawCodeprovidesthattheforeign

companyshallbedulyregisteredandvalidlyexistingunderthelawsoftherelevantcountry.Suchregistrationandexistencecanbeprovedbypresentingacertificateissuedbytheproperauthoritykeepingthecommercialregistriesintherelevantcountry.AsofDecember2007,Directive2005/56/ECoftheEuropean

ParliamentandoftheCouncilof26October2005oncross-bordermergersoflimitedliabilitycompanieshasbeenimplementedintheBulgarianlegislation.Therulesoncross-bordermergersapplyinthecaseofmergerbetweenjoint-stockcompanies,limitedliabilitycom-paniesandpartnershipslimitedbysharesseatedinBulgaria,ontheonehandandanotherlimitedliabilitycompany(withinthemean-ingofarticle1ofDirective68/151/EEC)seatedindifferentmemberstatesoftheEuropeanUnionorcontractingpartiestotheagreementontheEuropeanEconomicArea,ontheotherhand.ThePublicOfferingofSecuritiesActprovidestherequirements

forpublicofferingbynon-residentpersonsinBulgariaofstocksthatarenotpubliclytradedinanothercountryandforpublicofferingabroadofstocksissuedbyresidentpersons.Ifanon-residentcompanywantstoperformpublicofferingin

Bulgaria it shall fulfil the following conditions:• thestocksmustsatisfytherequirementsofthePublicOfferingofSecuritiesAct,includingonthedisclosureofinformationviaapprovedprospectus;

• theissuershallpresentevidenceofconformitywiththelawoftheplaceofhisregistration;and

• realisation of the rights of the resident investors shall beguaranteed.

Ifthestocksarephysical,theymaybeofferedtothepublicafterbeingimmobilisedattheCentralDepository.TheCommissionshallbenotifiedofanypublicofferingabroad

of stocks issuedby residentpersons.Upon submissionofdocu-ments for public offering abroad to the competent foreign institu-tions,theissuerortheinvestmentintermediaryshallsubmittotheCommission:• thedraftprospectusandanyotherdocumentsasmayberequiredaccordingtotheforeignlaw;

• adeclarationpledgingtosubmittotheCommissioncopiesofalldocumentsasmaybepublishedorpresentedabroadaccordingtotheforeignlaw;and

• anyotherdocumentsasmaybeprescribedbyordinance.

TheForeignExchangeActprovides that transactionsofmoneybetweenforeignandresidentpersonsofmorethan100,000levsshallbedeclaredbeforetheBulgarianNationalBankwithspecialformsforstatisticalpurposesonly.Thebankeffectingthetransferwouldneedtoreceivevalidevidenceabouttheneedtodothetransfer(eg,shares transfer agreement, closing protocol, other).Incasethesellerofthesharesorstockisaforeignentitythenit

shall need to consider its withholding tax obligations with respect of thecapitalgain,whichisof10percentinthegeneralcase,butcouldbereducedto5orzeropercentbyoperationofadoubletaxtreaty.ThesellermayfilefortheapplicationofthemorefavourabletaxratewiththeBulgarianNationalRevenueAgency.

16 Waiting or notification periodsOther than as set forth in the competition laws, what are the relevant

waiting or notification periods for completing business combinations?

Thetimeforcompletingabusinesscombinationdependsmainlyontheformchosen.Generallymergersanddemergersarecompleted

withinaperiodofthreetosixmonths(includingthewaitingperiodfortheconcentrationclearanceandregulatorypermits).Thepro-ceduresfortransferofgoingconcernsareslightlyshorter,includ-ingwhereassociatedwithconcentrationclearanceandregulatorypermits.Otherwise, the transfer of the going concern, once theagreementisexecuted,couldberegisteredwithin15to20days.TheCommerceActprovidesforlesscomplicatedproceduresintermsofmergers and demergers, in case such combinations are made between daughtercompaniesormotherandadaughtercompanyandsuchdaughter companies haveone shareholderonly. In such cases amergerordemergermaybecompletedwithinamonth.Someexamplesofwaitingperiodsarediscussedbelow.Aconcentrationclearanceistobeissuedwithin25businessdays

followingthefiling(extensionsarepossibleforcollectionofaddi-tional data and curing defects). The clearance will enter into force in 14daysfollowingitsannouncementunlessappealed.TheCommis-sionmayallowtheimmediateenforcementoftheclearanceinwhichthetransactioncouldbeclosedrightaway,yettheclearancecanstillbeappealed(andifsuchanappealissuccessfulthetransactionmayhave to be unwound).Announcementofthemergerordemergerdocumentation–30

dayspriortothedateofthegeneralmeetingtoapprovethemergeror demerger. The registration of the merger or demerger is to be done upontheexpiryof14daysfollowingthefiling.Certificateofnotificationtothetaxauthorities–someforms

ofbusinesscombination(eg,transferofgoingconcerns,mergerordemerger)requirethefilingwiththeCommercialRegistryofacertifi-catetobeissuedbythetaxauthoritiesevidencingtheywerenotifiedabouttheplannedcombinationbytheentityorentitiesparticipatingtherein.Suchacertificatecanbeissuedinupto60daysfollowingthe filing.

It must be noted that after registering a business combination in theCommercialRegistryintheformoftransferofagoingconcernor merger, a six-month period starts to run within which the assets of theacquiredbusinessshallbemanagedseparately.Nospecialactionsare needed to be performed when this term expires.

The combinations involving companies from regulated indus-triesarenormallysubjecttoregulatorypermits(banking,insurance,investmentbrokerage, telecommunications, companiesoperatingunder concessions for subsoil resources, etc).

17 Sector-specific rulesAre companies in specific industries subject to additional regulations

and statutes?

Businesscombinationsincertainsectorsaresubjecttospecificrulesproviding for additional authorisations and permits to be given bydifferentauthoritiesforthepropercompletionoftheplannedcombination.Suchindustriesincludebanking,insurance,telecom-munications(especiallywherescarcerecoursesareused),energy(dis-tribution,transmission,storage,electricityproductionabovecertainthresholds),investmentintermediation,regulatedmarketoperators,etc.

18 Tax issuesWhat are the basic tax issues involved in business combinations?

Thetaximplicationsshalldependprimarilyonthechosenformofthe business combination.

Corporate taxInthecaseofamerger,thesurvivingornewlyincorporatedcom-panyshouldpaythefinalcorporatetaxoftheterminatedcompaniescalculated as of the date of registration of the merger in one month following such registration.

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64 Getting the Deal Through – Mergers & Acquisitions 2012

Withholding taxesWithholding taxes become due with respect to incomes of Bulgarian sourcespaidorpayabletoforeignpersons.Typicallythewithhold-ingtaxesissueariseswithrespecttoshareacquisitions,althoughtheoreticallythiscouldhappeninassetdealstoo.Thestandardrateapplicabletoincomesfromthesaleofsharesis10percentbutmaybereducedbyoperationofvariousdoubletaxtreatiestowhichBul-gariaisaparty.

Local taxesLocaltaxesaredueinthecaseofassetdealsinvolvingrealestateand motor vehicles. The maximum rate is of 3 per cent. No local taxes are charged in merger or demerger combinations or transfers of going concerns.

VATThe transfers of shares or going concerns and the transformation of companiesarenotsubjecttoVAT.However,incaseofmergertheterminatedentitywillbederegisteredforVATpurposesanditssuc-cessorwouldhavetochargeVATovertheacquiredassetsexceptifthesuccessorisVATregisteredorbecomesVATregistered.

19 Labour and employee benefitsWhat is the basic regulatory framework governing labour and employee

benefits in a business combination?

The obligations of the companies participating in a business trans-actionare regulatedprimarilyby theLabourCodeof1987 (asamended).

Asarule,therelationshipwiththeemployeeshallnotbetermi-nated in case of merger or demerger of companies, transfer of going concernsorautonomouspartsthereof.Suchchangescouldoccurat a later stage after the organisation and the structure of the new employerisoptimised,providedthattheemploymentcanbetermi-natedongroundsandsubjecttocompliancewiththerequirementsandprocedureslaiddownintheLabourCode.

In the above cases, the legal successor or the new owner shall becomeemployersbydirectoperationofthelaw.Priortoputtingintoeffectabusinesscombinationofthetype

describedabove(orofanyofthemostcommontypesofbusinesscombinationslistedinquestion1)theemployershallbeboundtonotifytheemployeesabouttheanticipatedchangesandthedateoftheireffect;thereasonsforthechanges;thepossiblelegal,economicandsocialconsequencesofthechangesfortheemployees;themeas-uresplannedinrespectoftheemployees.Thenotificationshallbegivenatleasttwomonthsbeforetheoccurrenceoftheconsequencesfortheemploymentandtheworkingconditionsoftheemployees.

Where the business combination could lead to the implementa-tionofcertainmeasureswithrespecttotheemployees,theemployerisobligedtoconductinduetimeconsultationsandtotrytoachieveagreement with the representatives of the trade unions and with rep-resentativesoftheemployeesbeforegivingthenotification.

In case of surviving of the two participants in the combination, wheretransferofemployeesis involved,unlessotherwiseagreedbetweenthetwoemployers,liablefortheobligationstotheemploy-ees originating before the implementation of the combination, shall be both the participants.

The rules regulating the main forms of business combinations were only enacted in 2003. Since then, a vast number of business combinations took place which lead to the introduction of amendments to the legislation for the purpose of better regulation of the processes. The accession of Bulgaria to the EU in 2007 recognised the harmonisation of the Bulgarian law with the acquis communautaire.

The future development of the Bulgarian legal framework will strongly depend on the pieces of legislation adopted by the EU. In addition, the trend for bettering of the administrative services and procedures applicable to business combinations will continue. One of the examples is the start and the already fluent and quick work of the Commercial Register, which is internet-based, fully accessible and with the possibility for filings to be made by means of using e-signature and scanned papers only.

The knowledge and competence of the Bulgarian revenue authorities has evolved significantly during the last decade. The control over the possible attempts for tax evasion or tax fraud as a result of a business combination has strengthened significantly. At the same time some of the measures introduced on the requirement of the revenue authorities have the capacity to slow down the business combination process (eg, the requirement for 60 days’ advance notice – see question 16).

The financial crisis has seriously affected the Bulgarian M&A market. As a result thereof there was a significant growth of the insolvency proceedings, including transfers of going concerns as a result of such proceedings.

Update and trends

Yordan Naydenov [email protected] Angel Angelov [email protected] Nevena Kostadinova [email protected]

82, Patriarch Evtimiii Blvd Tel: +359 2 8055 055

1463 Sofia Fax: +359 2 8055 000

Bulgaria www.boyanov.com

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www.gettingthedealthrough.com 65

20 Restructuring, bankruptcy or receivershipWhat are the special considerations for business combinations

involving a target company that is in bankruptcy or receivership or

engaged in a similar restructuring?

Ifacompanyisinbankruptcyproceedingsitmayparticipateinabusinesscombination(eg,mergerordemerger)onlyiftheapprovedbythebankruptcycourtrecoveryplanprovidesso.Alternatively,theapprovedrecoveryplanmayprovideforthetransferoftheentiregoingconcernofthebankruptcompanytoathirdparty.Itshouldbealsonotedthattherecoveryplanmayprovidefor

the conversion of the receivables of a creditor or creditors into capital asaresultofwhichsuchcreditororcreditorscouldacquirecontroloverthecompany.Ifnorecoveryplanisapprovedapossibilityexistsforsellingof

thewholegoingconcernofthebankruptcompanyinsteadofcash-ingitoutonapiecemealbasis.Forsuchasaletheapprovalofthebankruptcycourtisneeded.

21 Anti-corruption and sanctionsWhat are the anti-corruption and economic sanctions considerations

in connection with business combinations?

Bulgarianlawdoesnotprovideanyspecificanti-corruptionregula-tion in connection with business combinations. However there are generalprovisionsintheCriminalCodethatdefinebriberyasacrimeandprovideforsanctions.Thebriberyprovisionsincludethefol-lowing crimes:

• offering,promisingorgivingofabribetoanofficer(manage-mentorhigh-levelofficialsofacompanyincluded)forthepur-poseofthenon-observanceorobservanceofhisoffice;

• askingfororacceptanceofabribebyanofficer(managementorhigh-levelofficialsofacompanyincluded)forthepurposeofthenon-observanceorobservanceofhisoffice;and

• intermediation foroffering,promising, giving, asking fororreceivingofabribeaswellasprovokingofbribery.

Thepenaltyfortheabovecrimesisimprisonmentandafine,wheretheexactimprisonmentperiodandtheparticularfineamountvarydependingonthespecificsofthebribe(ie,whetherthebribedofficerhasbrokenhisofficewithregardtothebribe,whatistheparticularposition which the bribed officer occupies, etc).Inaddition,asmentionedabove,themanagementmaybeheld

liabletowardsthecompanyand/ortheinvestorsincaseofdamagescausedtothecompanyortheinvestors.

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