Serbia: Amended Takeover Act Brings More Precise Rules for Takeover Procedures

→ Marina Nikolić

→ Srećko Vujaković

In December 2011, the Serbian Parliament enacted amendments to the Takeover Act (Official Gazette of the Republic of Serbia, nos. ⁴⁶⁄₂₀₀₆, ¹⁰⁷⁄₂₀₀₉, ⁹⁹⁄₂₀₁₁; Amendments) thus completing the corporate legislative changes brought by the new Companies Act and Capital Markets Act. As of February 2012, all three acts are applicable, substantially reforming Serbian corporate law and, in part, modernising capital markets rules.

Most changes in the Takeover Act relate to syn­chro­ni­sa­tion with pro­vi­sions of the oth­er men­tioned Acts. But many changes refer to har­mon­i­sa­tion with EU Direc­tives¹, pro­tec­tion of minor­i­ty share­hold­ers’ rights and intro­duc­tion of more pre­cise rules meant to solve prob­lems that emerged in prac­tice. As such, the Amend­ments can be viewed as the most impor­tant change in Ser­bian takeover law since the intro­duc­tion of the Takeover Act.

New definition of target company

The def­i­n­i­tion of tar­get com­pa­ny has been changed and is now defined as a joint stock com­pa­ny (in terms of the Com­pa­nies Act)² (i) whose shares are trad­ed on the Ser­bian reg­u­lat­ed mar­ket or mul­ti­lat­er­al trade plat­form (MTP)³ or (ii) that has over 100 share­hold­ers on the last day of the pre­ced­ing three months and share cap­i­tal of at least EUR 3,000,000. The rights of minor­i­ty share­hold­ers of unlist­ed com­pa­nies are thus pro­tect­ed since acqui­si­tion of a sig­nif­i­cant num­ber of shares in such com­pa­nies will now lead to a manda­to­ry pub­li­ca­tion of a takeover bid if the sec­ond cri­te­ri­on is ful­filled.

Enclosure of the preferred shares into takeover bid; calculation of a shareholding in the target company and price

Before the Amend­ments, only ordi­nary shares with vot­ing rights could have been the sub­ject of a takeover bid. This cre­at­ed dif­fi­cul­ties in prac­tice because investors could acquire a major­i­ty or all shares with vot­ing rights but had to acquire pre­ferred shares of the tar­get com­pa­ny by trad­ing on the stock exchange. To solve these prob­lems and encour­age the use of pre­ferred shares as means of cap­i­tal increase in list­ed com­pa­nies with­out dilu­tion of vot­ing rights, the Amend­ments allowed pre­ferred shares to be includ­ed in a takeover bid.

The Amend­ments also attempt­ed, with vary­ing degrees of suc­cess, to solve the dif­fi­cul­ties in cal­cu­lat­ing per­cent­ages held in the tar­get com­pa­ny. The num­ber now includes, inter alia: acquired shares, shares trans­ferred to third par­ties as col­lat­er­al and shares over which a right of use exists. The per­cent­age is cal­cu­lat­ed in rela­tion to all shares of the com­pa­ny, specif­i­cal­ly includ­ing the com­pa­ny’s own shares and shares with exclud­ed or lim­it­ed vot­ing rights.

The min­i­mum price to be offered in a takeover bid now depends on whether the shares are active­ly trad­ed (ie, to the pre­scribed extent for the pre­ced­ing six months). For active­ly trad­ed shares, the bid­der must offer the high­est of: (i) the aver­age weight­ed price for the pre­vi­ous three months; (ii) the last mar­ket price on the last day before pub­li­ca­tion of the takeover inten­tion with pre­scribed trade scope; (iii) the price paid by the bidder/persons act­ing joint­ly for acqui­si­tion of shares with­in the pre­vi­ous 12 months; and (iv) the aver­age weight­ed price paid by the bidder/persons act­ing joint­ly for acqui­si­tion of at least 10% of the vot­ing rights shares with­in the pre­vi­ous two years.

For shares not active­ly or pub­licly trad­ed, the bid­der must offer the high­est of: (i) the high­est price among prices deter­mined in the man­ner men­tioned for active­ly trad­ed shares; (ii) the book val­ue; and (iii) the esti­mat­ed price.

Squeeze-out

Squeeze out rules were moved from the Takeover Act into the new Com­pa­nies Act, and the “squeeze-out thresh­old” has been low­ered to 90%. The squeeze-out pro­ce­dures have also been changed and now close­ly resem­ble the squeeze-out sys­tem used in Ger­many.

One relat­ed rule insert­ed by the Amend­ments into the Takeover Act gives each share­hold­er a right – if the bid­der fails to pub­lish the takeover bid under con­di­tions pre­scribed by the Act – to require via court the pur­chase of its shares by the bid­der under the con­di­tions that should have been con­tained in the takeover bid.

Definition of joint activity

The Amend­ments changed the def­i­n­i­tion of per­sons per­form­ing joint activ­i­ties (act­ing joint­ly / in con­cert). The def­i­n­i­tion is now per­sons coop­er­at­ing among them­selves or with the tar­get com­pa­ny under explic­it or implic­it agree­ment, oral or writ­ten, with the aim of acquir­ing shares with vot­ing rights, har­monised per­for­mance of vot­ing rights or pre­ven­tion of anoth­er per­son to car­ry out a takeover pro­ce­dure.

Per­sons who were not deemed to act joint­ly under the orig­i­nal word­ing of the Takeover Act but are deemed to do so under the Amend­ments, and who joint­ly hold more than 25% of the vot­ing shares of the tar­get com­pa­ny, must pub­lish a takeover bid in case of a fur­ther acqui­si­tion of shares. Investors should thus ver­i­fy their exact share­hold­ing in Ser­bian com­pa­nies under the new def­i­n­i­tions to check if they are under an oblig­a­tion to pub­lish a takeover bid.

The Amendments also attempted, with varying degrees of success, to solve the difficulties in calculating percentages held in the target company. The number now includes inter alia: acquired shares, shares transferred to third parties as collateral and shares over which a right of use exists.

1

Direc­tive 2004/25/EC of the Euro­pean Par­lia­ment and of the Coun­cil of 21 April 2004 on takeover bids.

2

The Com­pa­nies Act aban­doned the divi­sion between open and closed joint stock com­pa­nies. Now there is only one type, while there are addi­tion­al rules for those pub­licly offer­ing their shares.

3

Seg­ments of the finan­cial instru­ments mar­kets pur­suant to the Cap­i­tal Mar­kets Act are: reg­u­lat­ed mar­ket and MTP. Reg­u­lat­ed mar­ket is seg­ment­ed into list­ed mar­ket and open mar­ket (non-list­ed), while list­ed mar­ket is fur­ther seg­ment­ed into prime list­ings and stan­dard list­ings.