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Corporate andCommercial Law —global updateWinter 2016 edition

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Corporate and Commercial Law — global update 1


Dear readers,

We are pleased to present the Winter 2016 edition of our Corporate and Commercial Law global update. In this issue, we have articles from a total of 22 jurisdictions on current legal affairs around the globe.

Our EY Law network consists of 1,800 qualified professionals providing legal advice within 75 jurisdictions across the globe, and assisting our clients across a wide range of legal matters with a focus on multi-disciplinary and multi-jurisdictional services. Our legal services are client-focused and rendered in close collaboration with our colleagues from other EY service lines in order to provide you with the good quality, comprehensive advice needed to meet your increasingly complex business needs in a cost-competitive manner.

The articles in this Corporate and Commercial Law Global Update reflect the global reach of our Global EY Law Network as well as the diversity of our services. If you wish to receive more detailed information on our global law network or on the topics discussed in this issue, please feel free to contact us. Contact details for each of the countries covered by our global law practice can be found at the back of this issue. In addition, we have included the contact details of the authors of each article in case you want to contact them directly.

We hope you will enjoy reading this new Corporate and Commercial Law Global Update.

Kind regards

Rutger LambriexEY Global Corporate Law [email protected]+31 88 40 70425

Stephen d’[email protected]+352 42 124 7188

Edito

rial



Belgium 4• Cross-border conversions

Brazil 5• Transferring licenses and product registrations

Colombia 6• Data privacy developments

Cyprus 7• Examinership of companies

Denmark 8• Shareholder loans might soon be legal

Finland 9• Shareholder of liquidated company found liable

France 10• The impact of the reform of French Contract Law on the shareholders

agreements

Georgia 11• Ruling on shareholder liabilities in limited liability companies

Germany 12• Requirements for inspecting goods and making immediate complaints

Greece 13• Developments on managing loan and credit claims

India 14• Company law and appellate tribunals

Japan 15• Beginning class actions for consumers

In this issue …

Editorial 1



Luxembourg 16• Commercial company law modernized

Mexico 17• New trademark opposition system

New Zealand 18• How robust is your corporate governance?

Norway 19• Amendment to the competition rules for mergers and acquisitions

Poland 20• New rules for compensating executives

Portugal 21• Private equity legal framework

Russia 22• New regulations for large-scale and interested-party transactions

Serbia 23• New register lists temporary restrictions on businesses

Slovakia 24• Direct criminal liability of legal entities

Vietnam 25• Data Privacy and Data Protection

This quarterly publication highlights a range of international corporate law matters and covers recent law developments in specific countries.

Recent publications 26

Contacts 28


Corporate and Commercial Law — global update4


Cross-border conversionsThe rising mobility of companies throughout the European Union has placed increasing importance on cross-border conversions. This is the transaction where a company moves its legal seat from one jurisdiction to the other but continues its legal personality. With such move, the applicable law changes, and the business converts from one country’s company form to a company form of the other country.

Each jurisdiction’s own laws determine whether a certain in- or outbound cross-border conversion is possible and what the legal consequences are of such a conversion. Additionally, each country’s national laws determine the criteria to establish whether its company law is applicable.

Under Belgian law, the legal seat of a company is the location of the company’s real seat of establishment (werkelijke zetel/siège réel). If a company wishes to fall within the scope of Belgian law, its real seat

must be in Belgium and if a company moves its real seat outside Belgium, Belgian law does no longer apply.

Despite the increasing importance of cross-border conversions, no regulatory framework establishes rules and procedures for this transaction, creating many uncertainties. The European Court of Justice (ECJ) has officially acknowledged that cross-border conversions fall within the scope of the freedom of establishment of companies. The ECJ has also indicated that a cross-border conversion triggers the subsequent application of national conversion procedures in the two countries involved. Under Belgian law, the national conversion procedure is the most suitable, but the remaining uncertainties give rise to the need for a specific legal framework. Although initiatives have yet to produce such a framework, cross-border conversions remain possible, both from and to Belgium. That said, proper guidance from legal counsels in both countries is paramount.

Belgium

Peter [email protected]

Chloë [email protected]




Transferring licenses and product registrations The Brazilian Health Surveillance Agency (ANVISA) regulated the transfer of licenses between companies through Resolution RDC No. 102 of 24 August 2016, published in the Official Gazette on 25 August 2016.

The resolution introduced significant changes, including removing bureaucracy from the transfer of licenses and product registrations to another company. This article covers the most significant changes under RDC No. 102.

Law 13,097, published in 2015, allowed the ownership of product licenses to be transferred between companies under business operations and commercial transactions. Considering that previous regulations limited transfers to corporate reorganizations — such as mergers, spin-offs and amalgamations — companies had long awaited regulations to be issued for the new procedure.

Modifications The main modification is the possibility to transfer licenses and registrations under commercial operations (i.e., the purchase and sale of assets). Such transfers are allowed only when the conditions and technical and health characteristics of the companies, products and clinical trials are fully maintained.

An application for a transfer should be submitted to ANVISA by the successor company within 180 days, counted either from the filing date for the corporate act related to the corporate reorganization or from the execution of the agreement transferring the assets. ANVISA will then issue a new registration number and publish it in the Official Gazette, which will take effect 90 days after publication.

The new holder should adjust the labels, packages and leaflets after the new registration number is published.

Effective date This resolution will take effect within 120 days of its publication. RDC No. 102 repealed RDC No. 22 of 17 June 2010, which limited transfers to corporate transactions.

Brazil

Gustavo [email protected]

Graziela G [email protected]




Data privacy developmentsTo demonstrate its commitment to stemming data breaches and following guidelines set by the Organisation for Economic Co-operation and Development, Colombia has adopted comprehensive regulations and controls to protect personal information in recent years.

Legislation has strengthened obligations for individuals and companies that handle personal data, including requirements to obtain consent before collecting information and to make updated privacy policies available to clients, employees and suppliers. Under the purpose limitation principle — a core concept of the data privacy legislation — owners must be told why their personal data is being collected, processed and/or used.

Colombia has also adopted international safeguards, such as the accountability principle, which aims to implement an integral privacy data protection program. Companies and individuals responsible for personal data should develop and launch a comprehensive program that verifies:

• That an administrative structure — proportional to the organization’s

size — is in place to implement personal data protection measures, including appointing a data protection officer and allocating resources;

• That internal mechanisms are in place to implement policies for handling personal data, including training and education programs;

• That proceedings to address claims by data owners are adequate.

Furthermore, pursuant to Law 1581 of 2012, personal information databases operating in Colombia must be registered with the National Registry of Databases, managed by the Superintendence of Industry and Commerce (SIC), before 8 November 2016. Registration must be updated yearly and, with certain claims and security breaches, upon occurrence. Those responsible for handling data must confirm that they have taken appropriate security measures.

Failure to register, untimely registration or any breach of regulations can lead to fines (personal and institutional) of up to 2,000 monthly minimum wages (approximately US$400,000), with other penalties possible.

Colombia

Ximena [email protected]

Carolina Herná[email protected]




Cyprus

Examinership of companiesIn the past year, examinership was introduced into the Cypriot legal order through an amendment to the Companies Law, Cap. 113. A company can enter examinership through a court order if it has a reasonable prospect of survival and if at least part of its undertaking is a going concern.

For examinership to take place, the court must find that:

• The company is, or is likely to be, unable to pay its debts.

• No resolution for winding up the company has been passed and published in the Official Gazette of the Republic.

• No order to wind up the company has been issued.

In reviewing an application for examinership, the court must assess the company’s viability and financial situation and consider an independent expert’s report.

A request to appoint an examiner can come from the company itself, any creditors or any guarantor. Shareholders holding at least 10% of the company’s capital can also

file a request. Only a natural person and licensed insolvency practitioner can be appointed examiner.

After an examiner is appointed, the company is under court protection for four months, and no winding-up procedures, foreclosure, or asset sale or sequestration can take place without the examiner’s consent. During this period, the examiner will review the company’s affairs and submit a scheme of creditor arrangement to the court.

The duties and powers of the examiner include:

• Preparing scheme of arrangement between the company and its creditors

• Receiving directions from the court

• Managing secured assets subject to the court’s sanction

• Substituting the company’s directors with court approval

The examinership with court’s protection, ends after the four month period from the date of the application for the examiner’s appointment or upon the approval of the scheme of arrangement by the court or at any date the court may order.

Anastasios [email protected]

Maria [email protected]




Shareholder loans might soon be legalContrary to EU regulations, shareholder loans are illegal in Denmark. Under the current Danish Companies Act, companies cannot directly or indirectly advance funds to, make loans to or provide security for their shareholders or members of management. Such transactions are allowed only if they are in accordance with the company’s normal course of business.

To create equal competitive conditions and increase flexibility for Danish companies, the Danish Business Authority has proposed a bill to amend the provisions on shareholder loans in the Danish Companies Act.

If the bill passes, companies will be able to directly or indirectly advance funds to, make loans to or provide security for their shareholders or members of management. They must meet certain requirements so the transaction does not impose a loss on the company and its creditors. The transaction must be:

• Out of the company’s free reserves by funds that could have been legally distributed as ordinary dividends

• Concluded under normal market terms and conditions

• Adopted by the general meeting or the central governing body if prior authority is given by the general meeting

The authorization may be subject to financial and time restrictions. Furthermore, shareholder loans can be made only after the company has submitted its first annual report and only if the company has sufficient liquidity to meet current and future liabilities.

The bill was introduced before the Parliament session on 25 October 2016 and is now submitted to the relevant committees for their consideration. The bill is scheduled for adoption on 1 December 2016 and is due to take effect as of 1 January 2017.

Denmark

Henrik [email protected]




Finland

Shareholder of liquidated company found liableThe Finnish Supreme Court has ruled (KKO 2016:26) that a judgment against a liquidated limited liability company was binding on its sole shareholder. Like many other jurisdictions, Finland generally does not hold shareholders personally responsible for the liabilities of limited liability companies. Moreover, the legal force of judgments typically extends only to the parties involved. A recent Finnish Supreme Court case, however, illustrates that both of these general rules can be pierced.

In 1981, a company was ordered to compensate an employee who was injured in an accident at work. The company was later liquidated. The employee’s injuries worsened, and he filed another claim against the dissolved company in 2004. The Rovaniemi Court of Appeal ruled that the dissolved company was obliged to pay more damages.

The next year, the employee brought another suit, this time against the sole

shareholder of the dissolved company. The shareholder disputed the claim, arguing, among other things, that the employee was not entitled to more damages from the company in the first place.

Under the Finnish Companies Act, a dissolved company can no longer acquire rights or bind itself in any undertakings. Measures taken on behalf of a dissolved company are the responsibility of those who decided on them and those who carried them out. The Supreme Court concluded that a judgment against a dissolved company can also be extended to its shareholders. In this case, such an action was deemed reasonable because the shareholder knew of the 2004 claim and, as the sole shareholder, had a chance to protect its interests in the proceedings.

Consequently, the shareholder couldn’t dispute the employee’s right to compensation from the company. The case was returned to the Court of Appeal to consider whether the shareholder was in fact liable for the company’s obligations toward the employee.

Taina [email protected]




The impact of the reform of French Contract Law on the shareholders agreementsThe adoption of the ordinance n°2016-131 dated 10 February 2016 on the reform of contract law and of the obligations’ general and evidence rules (the Ordinance) is a milestone in the modernization of the French contract law. The French legislature has, in particular, clarified the regime applicable to the specific performance of the shareholders’ agreements. Please note that shareholders agreements concluded before 1 October 2016 will continue to be governed by the old rules, with the exception of the new interrogatory tool (described below), which will apply to all contracts, regardless of their effective date.

Among the legal tools used in the shareholders agreements, the Ordinance introduces in the French Civil Code the concepts of preference agreements and of unilateral promises, which have been ruled, so far, by case law.

Article 1123 of the French Civil Code defines the preference agreement as “a contract by which one party undertakes to first offer the beneficiary to deal with him in case he decides to contract” (e.g., preemptive right, right of first offer or refusal). In case of breach, the beneficiary may (i) obtain compensation for the damage suffered and (ii) seek to have a court cancel the invalid agreement or substitute the beneficiary for

the third party provided that the third party has known the existence of the preference agreement and the intent of the beneficiary to take advantage of it. This codification is consistent with the existing case law relating to the preference agreement.

Additionally, Article 1123 introduces an interrogatory tool (“action interrogatoire”) that is intended to enable a third party to put an end to an ambiguous situation by forcing the beneficiary of the preference agreement to confirm the existence of such an agreement and, if any, his intent to take advantage of it.

Article 1124 of the French Civil Code defines the unilateral promise as “a contract by which one party, the promisor, grants the other, the promisee, the right to opt for the conclusion of a contract whose essential elements are determined, and for the conclusion of which only lacks the consent of the promisee”.

According to article 1124:

(i) the promisee can specifically enforce performance of the promise by the promisor if the promisor withdraws his promise prior to the expiration of the option period; which challenges the jurisprudence (held in 1993) of the French Cour de Cassation providing that only money damages are available under the same circumstances; and

(ii) the agreement concluded, in violation of the promise, with a third party who has known the existence of such promise is void.

The possibility to seek specific performance for mechanisms such as drag along or tag along, often used in shareholders agreements, remains discussed. Similarly, the possibility to obtain the specific performance of voting agreements remains uncertain. In this respect, the scope of this new regime provided by the Ordinance could be usefully clarified by case law.

France

Frédérique [email protected]

Yann Le [email protected]




Georgia

Ruling on shareholder liabilities in limited liability companiesOn 6 May 2015, the Chamber of Civil Cases of the Supreme Court of Georgia offered a significant interpretation on the personal liability of shareholders and directors for a company’s tax obligations.

The court discussed whether to hold shareholders and directors liable, with their property, if a company cannot meet its tax obligations and whether the Revenue Service (the creditor) should be entitled to demand payment.

The court clarified Article 3.6 of the Law on Entrepreneurs, under which shareholders in a limited liability company are personally liable to creditors if they abuse the legal form. The court emphasized that the provision is subject to a broad definition

that includes not only the abuse of limited liability by a company but also the abuse of the notion of limited liability. That occurs when shareholders use the privilege of limited liability to the detriment of others and impose their own economic risks and losses on somebody else by deliberately deluding the creditor.

The court decided that shareholders abuse limited liability when they personally lead and pursue an activity aimed at tax evasion — that is to say, when partners use the company to generate undeclared income.

The court ruled that shareholders and directors are personally liable for unpaid tax and penalties set forth by the Tax Code. Their liability is subsidiary to the company’s obligations toward the state, and joint and several to one another.

Dr. George [email protected]

Mariam [email protected]




Requirements for inspecting goods and making immediate complaintsIn Germany, the purchaser’s duties to examine delivered goods and make immediate complaints about defects play a significant role in bilateral commercial transactions. According to the intention of Section 377 HGB (Handelsgesetzbuch — the German Commercial Code), the seller should be protected from recourse when a defect is found long after delivery because the seller might not be able to foresee or calculate potential consequential loss due to further processing of the goods. In its most recent ruling (VIII ZR 38/15, 24 February 2016), the Federal Supreme Court emphasized that the specific requirements of Section 377 depend on the relevant industry or the individual case.

In the case at hand, a roll journal intended for construction and delivered by the seller was damaged. The court of appeal rejected the action brought by the purchaser, finding that the delivered workpieces were deemed approved pursuant to Section 377. The court held that the purchaser failed in its obligations by limiting its examination on delivery to a visual inspection and by not making a complaint immediately after the defect was found.

The Federal Supreme Court, however, found in favor of the purchaser, ruling that the court of appeal had been one-sided toward

the seller when assessing the duties to examine the goods and make an immediate complaint. The court said the purchaser’s examination in the case at hand was based on generally accepted standards or customs in the industry. The court found that Section 377 primarily serves the seller’s interest in a fast completion of the transaction but added that the purchaser’s examination duties should not be pushed too far. If they are, deficient performance by the seller might be passed on to the purchaser inequitably.

The authoritative factors in determining what’s reasonable for the purchaser should be:

• The costs and time involved in the examination

• The inspection options available

• The need for some technical knowledge

• The need to include third parties

According to the Federal Supreme Court, more stringent examination duties can apply in any given case based on the nature of the goods or industry practices. These could apply, for example, if there is a risk of particularly significant consequential harm caused by a defect or if there is already an awareness of weaknesses based on past deliveries.

The court also clarified that the two-year statute of limitations applies in the case at hand. The general legal principle is that the referring party must set forth and prove

pleas in bar. So the seller, who pleads that the shorter, two-year statute of limitations has expired, bears the primary burden of proving its application.

ConclusionThe Federal Supreme Court’s ruling provides indications of how seller and purchaser interests are weighed when determining what examination measures are necessary and reasonable. In practice, the purchaser-side goods-in inspection department should use the indications as guidance.

Germany

Christian F. [email protected]

Frank Schä[email protected]




Developments on managing loan and credit claimsFollowing two crucial amendments — Law 4389/2016, issued in May 2016, and Law 4393/2016, issued in June 2016 — Law 4354/2015 broadened and reformed the legislative framework for transferring and managing debt receivables from any loans or credits in Greece. The law provides for receivables management companies (RMCs) and receivables acquisition companies (RACs). Only RMCs are licensed by the Bank of Greece, not RACs, even though Bank of Greece supervises and regulates all transactions and the entire market. The law also sets no restrictions on the status of loans or credits to be serviced or purchased, covering both performing and nonperforming loans.

The law, as amended and in force now, attempts to attract international investors, by providing that the RACs are not supervised by the Bank of Greece. The main reason is that the law also regulates that the transfer of debt receivables from loans or credits may only take place when a management assignment agreement for said loans’ and credit’ receivables has already been executed between a RAC and a RMC licensed and supervised by the Bank of Greece. This requirement must also be fulfilled in any further transfer

of the portfolio. Thus, RACs, which can only acquire receivables, are obliged to cooperate with a regulated RMC for the management of said receivables.

RMCs must have a presence in Greece, through either a société anonyme (SA) or a branch. SAs must keep a minimum share capital of EUR 100,000 with registered shares. RMCs can also acquire an additional license for borrower refinancing and restructuring. In that case, they must have a minimum share capital of EUR 4.5 million fully paid up at all times.

In general, RMCs are liable for all obligations against the state and third parties that burden RACs and that derive from the transferring of claims. Said obligations include, inter alia, the special contribution of art. 1 of law 128/1975 (which burdens on an annual basis all loans, grants as well as outstanding balances of loans and grants provided by all Greek credit institutions), complying with the Greek Banks Code of Conduct, as well as obligations deriving from Consumer Protection legislation and Anti - Money Laundering laws.

RMCs’ licensing criteria, operating principles and reporting obligations are set out in the law and in the respective acts of the Bank of Greece.

Greece

Vassileios [email protected]




Company law and appellate tribunalsThe Indian Ministry of Corporate Affairs has issued a notification for constituting the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), effective 1 June 2016. The NCLT is a quasi-judicial body that will adjudicate corporate law issues for companies in India. Its decisions can be appealed to the NCLAT.

The Companies (Second Amendment) Act 2002 already provided the legislative framework for setting up the two institutions. However, their establishment was delayed because of debates and discussions about the constitutional validity of the NCLT. These disputes were settled by Madras Bar Association v. Union of India, in which the Supreme Court held that the NCLT was valid. The court did observe that provisions on the qualification of technical members and the composition of the selection committee for those members, as prescribed in the Companies Act 1956

and in the Companies Act 2013, were defective. The Government has introduced the Companies (Amendment) Bill 2016 to rectify the issue. The bill is pending before the parliamentary standing committee.

Under a notification dated 1 June 2016, the Government also enacted some provisions of the Companies Act 2013 that deal with the NCLT’s powers. The NCLT will take over all pending cases before the Company Law Board and will dispose of them in accordance with the provisions of the Companies Act 2013. However, no notification has been issued for provisions on transferring the power of the high courts to the NCLT with respect to winding-up and compromise or arrangement. For now, the jurisdiction for these provisions remains with the high courts.

The NCLT has started with 11 benches — two at New Delhi and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.

India

This article is provided by PDS Legal Advocates & Solicitors, an independent member firm of Ernst & Young Global Limited.

Probal [email protected]

Nishant [email protected]




Japan

Beginning class actions for consumersFrom 1 October 2016, Japan has launched class actions as a special procedure of civil litigation to remedy damage caused to consumers. To prevent abuses, the law set limits on filing class action lawsuits.

Who can sue?Plaintiffs must be consumer organizations approved by the Government (specified qualified consumer organizations, or SQCOs). Only qualified consumer organizations (QCOs) — those approved by the Government and engaging in certain consumer protection activities provided under the Consumer Contract Act — are eligible to be SQCOs. Only 14 organizations are approved as QCOs. Lawyers must handle the court proceedings.

What can plaintiffs seek?Cases are limited to monetary claims related to the consumer contract, requesting:

• Performance of an obligation under the contract

• Compensation for damage due to the breach of obligation (including nonperformance)

• Restitution of an unjust profit

• Compensation for damage due to defects

• Compensation for damage due to tort

Defendants are basically business operators that are parties to the consumer contract. These claims are not subject to the class action:

• Consequential damage

• Lost profit

• Damage caused to the body or by death

• Consolation money

What is the procedure?Class actions consist of two steps. The first is confirming the obligation to pay the money — a process of normal litigation. The second is determining the amount to be paid based on the obligation. In this step, the court and the SQCOs will notify and collect consumers who are eligible for compensation.

Kotaro [email protected]




Luxembourg

Commercial company law modernized The long-awaited Bill of Law 5730 amending and modernizing Luxembourg’s law on commercial companies — initially enacted on 10 August 1915 and amended from time to time — entered into force on 10 August 2016.

The new law recognizes and provides a legal basis for well-established market practices, and it seeks to develop new legal instruments to attract investors, multinational enterprises and private equity firms.

Companies have a 24-month transition period to adapt their articles of association to the new provisions.

The new law introduces the following key amendments, among others.

For private limited liability companies (SARL):

• Maximum number of shareholders raised from 40 to 100

• Possibility to issue redeemable shares and debt securities to the public

• Possibility to have authorized share capital

• Possibility to pay interim dividends (same rules as in an SA)

• Simplification of the majority-rules requirements for general meetings

• Possibility to issue beneficiary shares (parts bénéficiaires) with or without voting rights

• Possibility to suspend the voting rights of shareholders not complying with their obligations

For public companies limited by shares (SA):

• Possibility to issue shares below their par value

• Abolition of the limitation of 50% for nonvoting shares

• Possibility to restrict the transferability of shares, beneficiary units (parts bénéficiaires), subscription rights and certain convertible debt securities

• Possibility that shares of unequal value or without nominal value will confer voting rights proportional to the share capital they represent (unless otherwise stated in the articles)

• Simplification of the conditions for issuing nonvoting shares

• Possibility to issue free shares to employees of affiliated companies or directors

• Possibility to create an executive board (comité de direction) and appoint a chief executive (directeur général)

For all company types:

• Possibility to issue so-called tracking shares

• Possibility to issue shares of unequal nominal value

• New regime for issuing bonds and convertible securities

• Recognition of voting arrangements• Recognition of a dissolution without

liquidation regime for companies with a sole shareholder, triggering a universal transfer of all assets and liabilities to that shareholder

• Abolition of unanimity requirement to change a company’s nationality

The new law also introduces a simplified company form: the SAS, a simplified public limited company (société par actions simplifiées), inspired by the French SAS. The legal regime for the SAS is based on the rules for the SA, except for the organization of its corporate governance, which can be freely determined under the articles of association.

Stephen d’[email protected]




Mexico

New trademark opposition systemSeeking to attract foreign investment and promote economic development, Mexico amended its Industrial Property Law on 28 April 2016 to implement a trademark opposition system, effective 30 August 2016. The change adheres to the Madrid Protocol and other trade agreements to align Mexico’s industrial property framework with legislation in other countries.

The new trademark opposition system includes the following stages:

• The Mexican trademark office, IMPI (Instituto Mexicano de la Propiedad Industrial), will publish in the IMPI Gazette the applications for trademark registration within 10 working days after they are filed.

• Within one month of the circulation date for the IMPI Gazette, any third party can file an opposition to the registration of a trademark.

• When the opposition period expires, IMPI will publish a list of opposed applications so the applicants can argue in their legal interest within the non-extendable period of a month. If applicants do not state their position, it does not imply a tacit recognition of the trademark opposition.

The new opposition system has several advantages:

• The trademark registration process will not be interrupted by the filing of an opposition, streamlining the process.

• Applications will be published in a shorter time period, providing legal certainty to applicants.

• Even though the arguments of a trademark opposition will not be binding for the IMPI examination, they may help the authority to make a better assessment and reduce the possibility that new registrations infringe on previously granted rights.

Marisol [email protected]

Alonso de la Peñ[email protected]




New Zealand

How robust is your corporate governance? New Zealand has an unusual provision that allows the corporate veil to be lifted during liquidations. Section 271 of the Companies Act 1993 allows a court to order a company to pay some or all of the liquidation claims made against another company if (a) the companies are related and (b) it is just and equitable to do so.

Recent litigation on this provision has grabbed media attention and has served as a cautionary tale for all entities with subsidiaries in New Zealand.

In the case, Steel & Tube Holdings Ltd. (STH) paid lease expenses on behalf of its subsidiary, Stube Industries (Stube). In June 2013, Stube was put into liquidation. Lewis Holdings, the landlord, sought damages

under Section 271 for the loss of future rent.

In December 2014, the High Court found that STH Group acted as a single unit and upheld Lewis Holdings’ claim. STH appealed.

In August 2016, the Court of Appeal upheld the ruling, agreeing that Section 271 requires a balancing of policy considerations — respect for the separate corporate identity vs. a desire to avoid any mischief that might result from an overly strict application of the separate corporate identity.

The court stated that a group should structure its affairs in accordance with the principle of separate corporate personality. STH had not done so.

This case offers a reminder of the importance of good corporate governance.

Sinead [email protected]




Norway

Amendment to the competition rules for mergers and acquisitionsParliament recently adopted an amendment that harmonizes the Norwegian Competition Act with the EC Merger Regulation on the conditions required for the Norwegian Competition Authority to intervene against mergers and acquisitions (concentrations).

Formerly, the Competition Act required the authority to prohibit concentrations that create or strengthen a significant restriction of competition contrary to the purpose of the act, which seeks to further competition and thereby contribute to the efficient utilization of resources. The assessment under this provision was based on the Substantial Lessening of Competition (SLC) test, which focuses on how the concentration will damage competition in the market rather than the efficiency gains.

The new legislation replaces the SLC test with the Substantial Impediment to Effective Competition (SIEC) test. The

Competition Authority is now required to prohibit concentrations that significantly impede effective competition, particularly by creating or strengthening a dominant position. Concentrations with a negative net effect for consumers, typically through lower quality or higher prices, will be prohibited even if the concentration on the whole leads to an economic gain for the community.

The difference between the SIEC and SLC tests is small. The most important consequence of the amendment is that it harmonizes Norwegian competition law with laws of neighboring countries. Both EU case law and administrative practice will now have a direct bearing on the Norwegian Competition Authority in concentration cases as a result of the harmonization.

The amendment took effect on 1 July 2016.

Jane [email protected]

Ane [email protected]




Poland

New rules for compensating executivesPoland added new rules for compensating executives of companies with public shareholders through an act that took effect on 9 September 2016.

The legislation redefines the principles of determining remuneration for members of management and supervisory boards at commercial companies whose shareholders include public entities such as the State Treasury or local government units. The act applies not only to state-owned enterprises but also to those in which public entities are minority shareholders. According to the new laws, a public shareholder is obliged to undertake actions necessary to adopt the resolution on establishment of remuneration rules that are compliant to the statutory principles. The new act covers an estimated 3,900 limited liability and joint-stock companies.

The act is intended to make the maximum fixed compensation for executives contingent on the size and the type of the company and to introduce clear and objective criteria for granting variable remuneration. Variable remuneration must be based on how well executives fulfill previously established management objectives. The objectives can include higher net profit, increased sale or production indicators, a particular investment or a change in the company’s market position.

New laws also stipulate that legal relationships with members of management boards can be based only on civil-law contracts. Employment contracts with such people will not be possible.

The regulations call for public companies to comply with the new compensation rules by the next ordinary shareholders meeting — the middle of 2017 in most cases.

Zuzanna [email protected]

Michal [email protected]




Private equity legal frameworkIn 2015, Portugal adopted a new statutory framework governing private equity (PE) investment. The regime intends to pursue the EU’s growth agenda for small and medium-size enterprises by fostering collective funding by qualified investors or the general public as an alternative to traditional bank debt financing. PE involves short and medium-term investments in equity or debt instruments of companies with high growth potential.

To provide investors with safeguards and to prevent systemic risks, the new regime sets out rules on conflicts of interest, minimum capital requirements and exposure limits, among others. Based on the de minimis exemption provided in Directive 2011/61/EU, the regime softens the requirements applicable to PE investment vehicles whose portfolios comprise of:

• Leveraged assets with a value equal to or below EUR100 million;

Or

• Non-leveraged assets with a value equal to or below EUR500 million and the portfolios have no redemption rights exercisable during a period of 5 years following the date of initial investment.

Investments above these thresholds are subject to prior authorization by the Portuguese supervisor and face stricter requirements on information disclosure, corporate governance, risk assessment, liquidity management, and leverage and reuse of collateral.

Special tax regimePortuguese PE funds are exempt from income tax. Nonresident investors in PE funds are also exempt from Portuguese income tax on proceeds from the ownership and disposal of units. These exemptions do not apply when the income is attributable to a Portuguese permanent establishment or when the recipient is (i) directly or indirectly held in more than 25% by Portuguese resident entities or (ii) located in blacklisted jurisdictions. Nonresident investors who do not use the exemption and ordinary resident investors are subject to tax according to their situation.

PE companies may deduct investments in companies with growth potential from the relevant year’s tax liability. The deduction is limited to the sum of the previous five years’ tax liabilities.

Portugal

Rodrigo Falcão [email protected]

Vasco Freitas da [email protected]




Russia

New regulations for large-scale and interested-party transactionsCurrently, large-scale transactions are those involving 25% of a company’s assets. Depending on its volume, a particular large-scale transaction requires approval of the board or the shareholders.

Starting 1 January 2017, a large-scale transaction has an additional criterion: it should not only involve more than 25% of a company’s assets but also go beyond the normal course of business. Transactions in the normal course of business are those that:

• Are usual for a company or other companies engaged in the same business, irrespective of whether the company executed such transactions before

• Do not lead to a termination of company activity or change its nature or scale

A company’s board members, CEO, shareholders controlling twenty or more percent and certain other individuals may be recognized as interested parties, e.g. where they or their relatives are a party to a transaction with the company or hold management positions in the company’s counterparty, and in certain other instances. Currently, interested party

transactions require advance approval by the non-interested shareholders or board members.

Starting 1 January 2017 interested-party transactions by default will not require approval. However, the CEO should notify the non-interested shareholders in advance and should report on such transactions at the annual general meeting. The CEO, board members and certain others mentioned in the law can claim compulsory approval of an interested-party transaction by the board of directors or general meeting.

Contributions to assets are now available to joint stock companiesContributions to assets have long been a popular financing tool in Russian limited liability companies, primarily wholly owned subsidiaries of foreign entities. Such contributions — an exception to the general ban on donations between legal entities — allow funds to be transferred from parent to subsidiary without inflating the charter capital of the latter or creating debt.

This tool had been unavailable to joint stock companies (JSCs). As of 15 July 2016, however, contributions to assets are also possible for JSCs. Shareholders can contribute money, goods, shares,

Oleg [email protected]

Alexey A [email protected]

intellectual property and other assets without changing the company charter capital or nominal share value. To document the contribution, shareholders and the company must conclude an agreement on financial aid. In a public JSC, the agreement requires board approval.

The charter of a nonpublic JSC can set the maximum contribution and other restrictions and can oblige shareholders to make such contributions.

Disclosure of ultimate beneficiary owners Starting 21 December 2016, Russian companies must know their ultimate beneficiary owners and must update the information at least annually and keep it for five years. To obtain such information, the company may address its shareholders who are obliged to provide the company all information that is necessary for identifying beneficiary owners. If their identification is impossible, the company should at least retain evidence that it approached the shareholders with respective requests. Companies should also disclose the information — e.g., to tax authorities. Noncompliance can lead to a fine of RUB100,000 to RUB500,000 (approximately USD1,600 to USD7,900).




Serbia

New register lists temporary restrictions on businessesA Serbian law effective 1 June 2016 introduces a register of temporary restrictions imposed on business entities.

The Central Register of Temporary Restrictions of Rights of Entities Registered with the Serbian Business Registers Agency (SBRA) represents a novelty in the legal system. It’s the first time such information is available on the SBRA website.

By contrast, information about sanctions imposed on individuals in court proceedings is not publicly available and can be obtained only pursuant to regulations governing criminal records.

The main aim of the law is to improve security and transparency in business transactions. Companies can now access information about other companies involved in transactions with them. The Central Register should help decrease non-payable claims due to limitations imposed on companies by authorities.

The law provides for these temporary restrictions to be registered in the Central Register:

• Injunctions, restrictions or precautionary measures that prohibit the performance of registered business activities

• Injunctions that prevent disposal of monetary assets

• Injunctions that restrict responsible representatives in a legal entity or entrepreneur from practicing their duties or professions

• Injunctions against the disposal of shares or other restrictions pursuant to regulations governing the legal status of companies

• Measures provisioned by tax regulations

• Measures imposed by relevant inspections

• Measures revoking authorizations, licenses, permits, approvals, concessions, subsidies, incentives and other entitlements provided by special laws

• Other measures in accordance with the law

State authorities are responsible for providing SBRA with all information on limitations imposed on companies.

Marijanti [email protected]

Sofija [email protected]




Direct criminal liability of legal entitiesThe new Slovak Act on the Criminal Liability of Legal Entities, effective 1 July 2016, introduced direct criminal liability of legal entities, meaning that companies and other legal entities may be convicted and punished for crimes.

The legislation applies to both Slovak and foreign legal entities, so it may have complex legal consequences outside Slovakia.

Under certain conditions, a legal entity is criminally liable for specific offenses committed by its representatives (even regular employees not formally authorized to act on its behalf). These include:

• Tax-related crimes

• Environmental crimes

• Corruption, including bribery

• Cybercrimes

• Unlawful employment

The new law also includes legal ways for companies to avoid criminal liability by executing sufficient supervision and control over representatives. The act exhaustively states the possible penalties, including the winding-up of the entity, forfeiture of property, a financial penalty up to EUR1.6 million and a prohibition on participating in public procurement.

Each company operating in Slovakia can reduce the risk of committing a criminal offense attributable to the company by increasing its diligence and making certain it has effective and functional corporate governance.

That could mean introducing preventive instruments (e.g., effective control mechanisms, employee training, internal regulations) and reactive instruments (e.g., investigating and remediating breaches of company regulations) that might shield the company from criminal liability.

Slovakia

Robert Kováč[email protected]

Robert Petrá[email protected]




Vietnam

Data Privacy and Data ProtectionCurrently, Vietnam does not have a consolidated law governing data privacy or data protection, but piecemeal regulations can be found in various forms of legislation.

• Article 31 of the Civil Code of Vietnam stipulates an individual’s rights with respect to photographs. Using a photo of a person who is the subject of the photo requires that person’s consent. If the person has died, lost the capacity for civil acts or is a minor, consent must be provided by a parent, a spouse, an adult child or a legal representative. Use of the picture is strictly prohibited if it would infringe on the person’s dignity or reputation.

• Article 38 of the Civil Code of Vietnam provides more detail on data privacy, mandating that personal privacy must be respected and protected by laws. Information about a person’s private life cannot be collected or published without that person’s consent unless an authorized state body requires it. Mail, telephone and electronic information about an individual must be kept confidential. Only an authorized state body can control such content.

• Chapter VI of the Law on E-commerce 2005 regulates security, safety, protection and confidentiality in e-commerce transactions. Article 46 indicates that bodies, organizations and individuals cannot use, provide or disclose any private information about another body, organization or individual without consent, unless otherwise stipulated by law.

• Article 72 of the Law on Information Technology 2006 regulates information safety and confidentiality on a network. Lawful personal information that’s exchanged, transmitted or stored on the network must be kept confidential. Organizations and individuals can perform no acts that erode the safety or confidentiality of information stored on the network about another organization or individual.

• Data privacy infringement may be considered a crime under Article 125 of Criminal Law 1999. Using personal data for slander and insult to other persons could be subject to a criminal penalty of seven years of imprisonment.

Rod [email protected]

Trang Thuc-Minh [email protected]




OHADA’s new Uniform Act — April 2016

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Albania Jona Bica [email protected] +355 4241 9575

Algeria Maya Kellou [email protected] +213 21 891652

Argentina Jorge Garnier [email protected] +54 11 4515 2634

Armenia Monica Harutyunyan [email protected] +374 10 500 790

Australia Doug Robertson [email protected] +61 39 288 8376

Austria Helen Pelzmann [email protected] +43 1 26 095 2145

Azerbaijan Arzu Haijyeva [email protected] +99 41 2490 7020

Belarus Alexey A. Markov [email protected] +7 495 641 2965

Belgium Peter Suykens [email protected] +32 2 774 9834

Brazil Graziela Baffa [email protected] +55 11 2573 3447

Contacts

Bulgaria Boris Smolyanov [email protected] +359 2817 7100

Canada Tony Kramreither [email protected] +1 41 6943 2188

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China Lin Zhong [email protected] +86 21 2228 8358

Colombia Ximena Zuluaga [email protected] +571 484 71 70

Congo1 Crespin Simedo [email protected] +22 13 3849 2222

Costa Rica Juvenal Sánchez [email protected] +50 64 031 0360

Croatia Joško Perica [email protected] +385 1 5800 949

Cyprus Anastasios A. Antoniou [email protected] +357 96 676785

Czech Republic Daniel Weinhold [email protected] +420 225 385 336

Denmark Henrik Kany [email protected] +45 2529 3310

El Salvador Irene Arrieta [email protected] +50 3224 87000

Equatorial Guinea Maria Jose Mbengono [email protected] +240 333 09 67 19

Estonia Ranno Tingas [email protected] +372 611 4578

Finland Taina Pellonmaa [email protected] +358 5054 22900

France Frederique Desprez [email protected] +33 1556 11973

Gabon2 Fatima-Kassory Bangoura [email protected] +24 10 530 1020

Georgia George Svanadze [email protected] +995 32 215 88 11

Germany Christian Bosse [email protected] +49 71 1988 125772

Greece Christina Koliatsi [email protected] +30 210 288 6509

Guatemala Enrique Möller [email protected] +502 2268 2616

Hong Kong Harry Lin [email protected] +852 26293201

Corporate and Commercial Law Services — Lead country contacts




Hungary Peter Vaszari [email protected] +36 1451 8616

India Probal Bhaduri [email protected] +91 11 6623 3270

Italy Matteo Zapelli [email protected] +39 028 514 3852

Ivory Coast3 Lydia Desiree Kouadio [email protected] +22 5203 06050

Japan Kotaro Okamoto [email protected] +81 3350 91669

Kazakhstan Borys Lobovyk [email protected] +7 727 258 5960 Ext: 1250

Latvia Liene Cakare [email protected] +371 67043606

Lithuania Julija Lisovskaja [email protected] +37 05 219 9895

Luxembourg Stephen D’Errico [email protected] +352 42 124 7188

Mexico Francisco Forastieri [email protected] +52 55 1101 7293

Netherlands Rutger Lambriex [email protected] +31 8840 70425

New Zealand Sinead Hart [email protected] +64 9377 4790

Nigaragua Santiago Alvira [email protected] +505 2253 8438

Norway Jane Wesenberg [email protected] +47 2400 2391

Peru Marcial Garcia [email protected] +51 1 411 4424

Poland Zuzanna Zakrzewska [email protected] +48 225 577 816

Portugal António Garcia Pereira [email protected] +351 226 066 366

Romania Dragos Radu [email protected] +40 2140 24060

Russian Federation Alexey A. Markov [email protected] +7 495 641 2965

Senegal4 Badara Niang [email protected] +221 338 49 22 17

Serbia Marijanti Babic marijanti.babic.rs.ey.com +381 11 2095 752

Singapore Mark Wong [email protected] +65 6827 5555

Slovakia Robert Kovacik [email protected] +421 3333 9262

Slovenia Marc van Rijnsoever [email protected] +386 1 583 1874

South Korea Kee Woong Park [email protected] +82 2201 80806

Spain Alfonso Garcia Fuster [email protected] +34 9157 25194

Sweden Paula Hogéus [email protected] +46 8 5 2058 695

Switzerland Maja Krapf [email protected] +41 58 286 4328

Taiwan Helen Fang [email protected] +886 2757 8888

Turkey Mehmet Kucukkaya [email protected] +90 212 368 5724

UK Sarah Holmes [email protected] +44 20 7951 7995

Ukraine Albert Sych [email protected] +380 44 499 2011

Venezuela Juan Osario [email protected] +58 2129 056796

Vietnam Roderick Cameron [email protected] +84 8382 45252

1 Including the Democratic Republic of Congo.2 Including Cameroon, Central African Republic,

Chad and Guinea Conakry.3 Including Benin, Burkina Faso and Niger.4 Including Mali.



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