Serbia: Amended Takeover Act Brings More Precise Rules for Takeover Procedures
→ Srećko Vujaković
→ Marina Nikolić
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 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.
- Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids.
- 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.
- 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.