mergers & acquisitions - boyanov · georgia revaz javelidze and eka siradze colibri law firm...
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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
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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
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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.
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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
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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• 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.
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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62 Getting the Deal Through – Mergers & Acquisitions 2012
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
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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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