On 13 July 2006 amendments to the Financial Instruments Market Law came into force. The aim of the amendments is to implement the Takeover Directive (Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids). Amendments also clarify several issues that so far were not regulated or were insufficiently regulated.
The amendments substantially change existing regulation of takeover bids. So far, a mandatory takeover bid had to be made by a person that acquires, directly or indirectly, the voting rights in the amount of 50% or more of the total number of shares with the voting rights or who has voted for a decision on discontinuing the trading of the shares on the regulated market. According to the amendments, mandatory takeover bids have to be made not only by persons that individually comply with these criteria, but also by those persons that act in concert and comply with these criteria.
The amendments introduce a new exemption from the duty to launch a mandatory takeover bid. Thus, persons who as a result of a voluntary takeover bid acquire, directly or indirectly, the shares with the voting rights in the amount of 50% or more of the total number of shares with the voting rights, have no duty to launch a mandatory takeover bid. Furthermore, the amendments regulate the way the board of the offeree company (the securities of which are the subject of a bid) can take defensive measures against the takeover bid or even frustrate the bid.
The amendments specify the rights of the shareholders that may be limited during the takeover bid procedure. For example, any restrictions on the transfer of securities provided for in the articles of association of the offeree company or in contractual agreements between holders of the offeree company's securities shall not apply vis-à-vis the offeror during the time allowed for acceptance of the bid. Similarly, where, following a bid, the offeror holds 75% or more of the capital carrying voting rights, no restrictions on the transfer of securities or on voting rights, nor any extraordinary rights of shareholders concerning the appointment or removal of board members provided for in the articles of association of the offeree company or shareholders agreements shall apply.
These limitations shall not apply to securities where the restrictions on voting rights are compensated for by specific pecuniary advantages. Where the above mentioned rights are limited, equitable compensation shall be provided for any loss suffered by the holders of those rights. If the parties involved cannot agree on the appropriate compensation, the amount of compensation shall be determined by the court.
The amendments also provide a time limit within which persons entitled to make a final takeover bid can exercise this right. In general the right of squeeze out will have to be used within three months from the moment the person has acquired the offeree company’s capital carrying voting rights of not less than 95%. The transitional provisions provide certain exceptions for those cases when the triggering event has occurred before the amendments became effective. In such cases the squeeze out rights can be exercised within three months from the moment the amendments became effective.
Another important issue introduced by the amendments is a right of minority shareholders to request a buy out of their shares. If a person directly or indirectly owns 90% or higher percentage of shares of the company, each of the remaining shareholders shall have a right to request this person to buy out its shares. In such event the price shall be determined in the same way as in the event of a mandatory takeover bid.
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