European M& A

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					Mergers & Acquisitions

in europe
Some key issues

eVerYtHing MAtters

introduction

This booklet is intended to provide a brief overview of certain key issues likely to affect the structure and timing of mergers and acquisitions in various European jurisdictions.
It does not cover tax, EU or national competition issues (a wallchart setting out merger filing thresholds is available) or issues specific to regulated industries. This booklet should not be relied upon as a definitive statement of the law, and specific advice should always be sought on any particular topic. The information stated is up to date as at 1 July 2008. effecting cross-border Mergers: iMpAct of europeAn union legislAtion Cross-border mergers between companies established in different EEA member states have been simplified by:
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regulation 2157/2001 on the statute for a european company (“se”) This regulation has direct effect in all EEA member states. It enables the formation of an SE by the merger of existing public limited liability companies established in different EEA member states. the cross-border Mergers directive (2005/56/ec) This directive should have been implemented by all EEA member states by 15 December 2007. It facilitates mergers between limited liability companies established in different EEA member states. All of the jurisdictions detailed in this booklet are EEA member states except for Bosnia and Herzegovina, Croatia, Russia, Serbia and Ukraine.

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contents

04 Austria 08 Belgium 12 Bosnia and Herzegovina 15 Bulgaria 18 Croatia 21 Czech Republic 24 Denmark 27 France 31 Germany 35 Hungary 39 Italy

43 Netherlands 47 Norway 50 Romania 53 Russia 56 Serbia 59 Slovak Republic 63 Spain 66 Sweden 69 Ukraine 71 United Kingdom

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AustriA

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of shares in a publicly listed company if the shares represent more than 30 percent of the voting rights. The acquisition of shares representing more than 26 percent but not more than 30 percent of the voting rights must be notified to the Takeover Commission. The buyer cannot exercise voting rights exceeding 26 percent of all voting rights unless a public offer has been conducted, or unless specifically permitted by the Takeover Commission. Can a foreign company acquire by merger? A cross-border merger is possible, but rarely used in practice. Restrictions on share or business transfers? Shares Shares are, in principle, freely transferable. Restrictions (eg pre-emption rights, approval requirements) may be contained in the articles of association or in a privately negotiated shareholders’ agreement. Businesses Restrictions (eg pre-emption rights, approval requirements) may apply to certain assets (eg real property).

Shares and businesses If certain assets are involved (eg the acquisition of real property or the acquisition of a company which owns real property) the acquisition may require the approval of public authorities. preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding, unless the parties have clearly expressed that certain provisions are to be legally binding (eg those relating to confidentiality, lockout/exclusivity, exclusion of damages for terminating negotiations without cause). Duty to negotiate in good faith? The conduct of a party (eg in continuing with negotiations) may create a justified expectation of another party that the acquisition will take place. If such expectation is not met without good cause, damages may be payable, unless agreed otherwise (eg in the letter of intent). eMploYees Consultation requirements Shares Similar information and consultation requirements to those applicable to business transfers (see below) may apply to share acquisitions. Depending on the structure of the acquisition

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and the shareholding to be transferred, the works council (if established) of the target company should be informed; in addition, if its business is affected by the transfer, the works council (if established) of the buyer should be informed. Businesses The seller and the buyer must inform and consult with the seller’s works council (or, if no works council is established, the employees affected by the business transfer). Generally, there are no sanctions for noncompliance. In practice, both the seller and the buyer will aim to obtain the support of the works council in order to prevent reactions by the employees that could potentially harm the economic interests of the target business. Business transfers
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It is not possible to make any contractual change which would contradict any applicable collective bargaining agreements (CBAs). In some cases, the buyer may be obliged to observe the CBA applicable to the seller, particularly if there is no similar agreement applicable to the buyer. Acquisition docuMents Any provisions incorporated by statute/law? Certain provisions (eg statutory warranties regarding the quality of the assets being transferred, statute of limitations) will apply by statute/law unless the parties agree otherwise. However, the precise wording of the specific contractual provisions governs. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to certain mandatory statutory rules. The actual transfer of shares must be governed by Austrian law. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Generally, financial assistance (eg loans, security or any advance payment) granted by a target company for the purpose of purchasing shares

Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees. Restrictions on post-transfer reorganisations? In general, the buyer may not change employment contracts unilaterally. Even changes made with the employee’s consent may be challenged by the employee on the grounds of coercion.

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in the target company or its parent is prohibited. An exception applies to loans granted by credit institutions within their usual scope of business. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). All business-related legal relationships of the seller, including the respective rights and liabilities existing at the time of the transfer, pass to the buyer unless:
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contracting party), the buyer may still be liable to third parties for the debts related to such legal relationship – any agreement excluding such liability is valid towards a third party only if the agreement is registered with the Companies Register or otherwise publicised in a usual way or notified to the respective third party. In addition to the above, and existing as an entirely separate legal obligation, the buyer of a business is jointly liable with the seller for any business-related debts (including arrears of taxes and social security contributions) which the buyer knew about, or should have known about had it made due enquiry, at the time of the acquisition. The amount of such liability is limited to the value of the assets acquired. Environmental liabilities for contaminated land may pass to the buyer, who could become liable to both the environmental authorities and private parties. Certain types of contract (eg certain real estate rental agreements, trademark licence agreements) pass to the buyer by operation of law. Assignment of burden of contract? See question above on the automatic transfer of assets.

the parties agree otherwise; or the other contracting party objects. (The other contracting party may object to the transfer of a contractual relationship from the seller to the buyer within three months of being notified of the transfer. Such notice has to inform the third party of its right to object. If the other contracting party does object, the contractual relationship remains with the seller).

Even if a business-related legal relationship does not pass to the buyer (due to an agreement between the parties or an objection by the other

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coMpletion forMAlities Notarisation? Shares All agreements relating to the transfer or proposed transfer of a share in a private limited liability company (GmbH) must be in the form of a notarial deed. Otherwise, the agreement regarding the transfer is not valid. Where a notarial deed is to be executed by a person acting under power of attorney, such power of attorney needs to be officially certified. Businesses Execution of a business transfer agreement does not require specific formalities. However, the transfer of certain assets (eg real property, intellectual property rights, such as trademarks, patents, etc) will need to be registered with the appropriate public registry and, as such, the execution of any document effecting such transfer (whether a business transfer agreement or, more commonly, a separate transfer) will need to be officially certified.

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belgiuM

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a listed public company and any non-listed public company that has more than 50 shareholders. Can a foreign company acquire by merger? Cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company, and mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation that implemented the Cross-Border Mergers Directive on 8 June 2008. (See further page 2). Restrictions on share or business transfers? Shares Shares in a public company (SA/NV) are, in principle, freely transferable. Restrictions (eg pre-emption rights) may be contained in the articles of association or in a privately negotiated shareholders’ agreement. Businesses Consent of third parties may be required to a transfer of debts and/or obligations, depending on whether or not the transfer takes place under the continuity regime. In some cases, third parties may demand a surety securing the contractual obligations of the seller.

Notification to the Income Tax Collector, VAT authorities and social security authorities may be required to prevent the buyer becoming jointly and severally liable for the seller’s tax/ social security liabilities. preliMinArY AgreeMents Legally binding? Under Belgian law, a contract can arise as soon as the parties have agreed the subject matter of the acquisition, the price and other essential issues. It is therefore important to ensure that assumptions, conditions precedent or a price range (rather than a specific price) are included in a preliminary agreement to prevent it from being legally binding. Duty to negotiate in good faith? Good faith performance is a principle of Belgian law. Although a party is free to withdraw from an acquisition, good faith obligations prevent it from doing so abruptly and for no reason, especially if the other party has fulfilled all of its obligations. Whilst it is unlikely that any compensation would be payable in the early stages of negotiations, the risk increases once letters of intent are exchanged. Compensation may be awarded in the final stages of the acquisition. Compensation would typically include costs incurred during negotiations, time lost and loss of other opportunities (especially if an exclusivity agreement was signed).

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eMploYees Consultation requirements Shares If the acquisition is likely to have consequences for employees, both the seller and the buyer should, prior to any decision being taken in relation to the acquisition, inform and consult workers’ representatives within the works council or, in the absence of a works council, the union delegation. In the absence of a works council or a union delegation, the information and consultation procedure will have to take place with the employees of both the seller and the buyer. Even if the acquisition is not likely to have consequences for employees, the works council must still be informed – preferably before the acquisition is agreed upon and, in any case, before the acquisition is made public. Non-compliance may give rise to criminal and administrative sanctions. Businesses Information and consultation obligations are imposed on both the seller and the buyer prior to the acquisition. The information about the transfer, to be provided in writing, includes:
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its legal, economic and social implications; and any measures which both the seller and the buyer envisage taking in relation to affected employees.

Business transfers
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Do employees automatically transfer? If so, what liabilities pass? Yes. At the date of the transfer the employees of the seller are automatically transferred to the buyer and have no choice in the matter. The rights and obligations associated with the contract of employment existing at the date of transfer and agreed with the seller will automatically transfer to the buyer. The buyer must respect all the conditions of the employment contracts (except those concerning the scheme of supplementary pension). The seller and the buyer are also jointly and severally liable to pay any debts existing at the date of the transfer and/or resulting from employment contracts existing at that time. Restrictions on post-transfer reorganisations? Unilateral changes made to individual employment contracts as a consequence of the transfer will constitute a breach of contract by the employer. Affected employees may consider themselves to be constructively dismissed.

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the fixed or proposed transfer date; the reasons for the transfer;

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In most cases, the employees’ or trade unions’ agreement (depending on the changes) will be required in order to effect post-transfer changes. The buyer is obliged to observe the collective bargaining agreement (CBA) applicable to the seller until it expires. Note that under Belgian legislation (except if a specific clause is mentioned and integrated into the CBA concerned), the CBA providing individual employment entitlements will integrate automatically within the employment contracts of the employees concerned and will continue to have effect even after the expiration of the CBA concerned. Acquisition docuMents Any provisions incorporated by statute/law? If the acquisition agreement is subject to Belgian law, Belgian contract law principles will automatically be incorporated (unless express provisions to the contrary are contained in the acquisition agreement and these do not violate any public order or mandatory law provisions). Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to mandatory Belgian law provisions.

finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Companies are prohibited from giving financial assistance for the acquisition of their own shares, although in certain circumstances they may assist in the acquisition of shares in a parent company. An SA/NV may grant loans or give security for the acquisition of its shares either by its employees or by a company in which at least 50 percent of the voting shares are held by its employees. In the latter case, the acquisition must relate to at least half of the voting rights of the company. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). If the transfer takes place by merger or by contribution/sale of a branch activity under the continuity regime, the assets and liabilities are automatically transferred. If the assets or liabilities or a branch operation are not transferred under the continuity regime,

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the buyer of a going concern may become jointly and severally liable with the seller for the seller’s tax liabilities, VAT liabilities and social security liabilities up to the amount of the purchase price paid unless the buyer notifies the tax/social security authorities of the acquisition and includes in the notification the relevant certificates confirming that the seller does not have any tax or social security liabilities. Depending on the region (Flemish, Walloon or Brussels), specific formalities and obligations (eg soil survey and clean-up obligations) may apply to the transfer of real properties and lease agreements, which could affect the costs and timing of the acquisition. Assignment of burden of contract? Unless the transfer is a merger or a contribution/ sale of a branch activity under the continuity regime, contracts can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations.

coMpletion forMAlities Notarisation? Shares No. Businesses No notarial formalities are required unless:
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the transfer is a merger or a contribution/ sale of a branch activity under the continuity regime; or real property is being transferred.

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bosniA & HerzegoVinA
deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of shares in a public company if the shares represent more than 30 percent of the voting rights. Can a foreign company acquire by merger? No. Bosnian law recognises the concept of a legal merger, but only where all the entities involved are Bosnian. Restrictions on share or business transfers? Shares Shares in a private company (d.o.o.): mandatory pre-emption rights are granted to existing shareholders by law; other restrictions on the transferability of shares may be agreed between shareholders and contained in the articles of association or a shareholders’ agreement. Registered shares in a public company (D.D.): transfers may be subject to the approval of the company (by virtue of the articles of association) or of regulatory authorities. preliMinArY AgreeMents Legally binding? Preliminary agreements have a binding effect, and the parties are obliged to execute a final agreement not later than six months following the date of contemplated execution of the final agreement provided in the preliminary agreement. If no such date is provided for in the preliminary agreement, the final agreement should be executed not later than six months following the date when the legal conditions for its execution are met. The signatures of the parties on the preliminary agreement must be certified by the competent public authorities in order for the preliminary agreement to be valid, but otherwise no specific formalities (such as a notarial deed) are required. Duty to negotiate in good faith? The conduct of a party (eg in continuing with negotiations) may create a justified expectation of another party that the acquisition will take place. If such expectation is not met without good cause, damages may be payable. Such damages will usually only cover costs incurred in expectation of completion of the acquisition.

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eMploYees Consultation requirements Shares None. Businesses None. In practice, however, both the seller and the buyer will aim to obtain the support of the employees’ council in order to prevent reactions by the employees that could potentially harm the economic interests of the target business. Business transfers
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Acquisition docuMents Any provisions incorporated by statute/law? Certain provisions (eg statutory warranties regarding the quality of the assets being transferred, statute of limitations) will apply by statute/law unless the parties agree otherwise. However, the precise wording of the specific contractual provisions governs. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to certain mandatory statutory rules. The actual transfer of shares must be governed by Bosnian law. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Financial assistance (eg loans, security or any advance payment) granted by a target company for the purpose of purchasing shares in the target company or its parent is prohibited.

Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer will be liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees. Restrictions on post-transfer reorganisations? In general, the buyer may not change employment contracts unilaterally. Even changes made with the employee’s consent may be challenged by the employee on the grounds of coercion. It is not possible to make any contractual change which would contradict any applicable collective bargaining agreements.

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). The buyer is liable for all liabilities related to the acquired business; however, such liability is limited to the value of the assets acquired. Environmental liabilities for contaminated land may pass to the buyer, who could become liable to both the environmental authorities and private parties. Assignment of burden of contract? Generally, contracts can only be transferred with the consent of the other contracting party. A transfer of contractual liabilities requires the consent of the other contracting party in order to release the seller from its obligations.

coMpletion forMAlities Notarisation? Shares The articles of association which have to be amended as a result of a share transfer must be fully notarised by the public notary. Furthermore, all signatures of the parties to the share transfer agreement (and not the agreement itself) must be verified by the public notary. Otherwise, notarisation is not required. However, all signatures of the parties on documents relating to the transfer of shares in a d.o.o. are required to be certified by the competent public authorities. This also applies to preliminary agreements. Businesses In general, a business transfer agreement does not require specific formalities unless the assets to be transferred include any shares in a d.o.o. (in which case, see above).

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bulgAriA

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of shares in a publicly listed company if the shares represent more than 50 percent of the voting rights. Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under Bulgarian law. Restrictions on share or business transfers? Shares The transfer of shares in a limited liability company (OOD) from one shareholder to another shareholder is unrestricted; the transfer to a third party is subject to shareholder approval. Other restrictions (eg pre-emption rights) may be contained in the articles of association or in a privately negotiated shareholders’ agreement.

Transfers of registered shares in a joint stock company (AD) may be subject to the approval of the company (by virtue of the articles). Businesses Restrictions (eg pre-emption rights, approval requirements) may be contained in the articles of association or in a privately negotiated shareholders’ agreement. preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding, unless the parties have clearly expressed that certain provisions are to be legally binding (eg those relating to confidentiality, lockout/exclusivity, exclusion of damages for terminating negotiations without cause). If the parties intend a letter of intent to be binding, it should be executed as a contract. Duty to negotiate in good faith? The conduct of a party (eg in continuing with negotiations) may create a justified expectation of another party that the acquisition will take place. If such expectation is not met without good cause, damages may be payable.

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eMploYees Consultation requirements Shares Both the seller and the buyer must consult the relevant trade union about the date of the transfer, the reasons for and consequences of the transfer and the measures proposed which may affect employees. The consultations should be conducted at least two months before the actual transfer or merger is executed. Businesses None. Business transfers
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Acquisition docuMents Any provisions incorporated by statute/law? Certain provisions (eg date of acquisition for accounting purposes, statute of limitations) will apply by statute/law unless the parties agree otherwise. However, the precise wording of the specific contractual provisions governs. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to certain mandatory statutory rules. The actual transfer of shares must be governed by Bulgarian law. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Generally, financial assistance (eg loans, security or any advance payment) granted by a target company for the purpose of purchasing shares in the target company or its parent is prohibited. An exception applies to loans granted by credit institutions within their usual scope of business.

Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees. Restrictions on post-transfer reorganisations? In general, the buyer may not change employment contracts unilaterally. It is not possible to make any contractual change which would contradict any applicable collective bargaining agreements.

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? The assets and contractual relationships are automatically transferred from the seller to the buyer. Employment liabilities (see above). The buyer of a business is jointly liable with the seller for any business-related debts (including arrears of taxes and social security contributions) unless otherwise agreed with the creditors. The amount of such liability is limited to the assets acquired. In an asset acquisition (ie the purchase of individual assets), lease rights, easements and pledges are transferred together with the purchased asset (this is particularly relevant in the case of real property).

Assignment of burden of contract? On the transfer of a business, all contractual relationships associated with the business pass from the seller to the buyer by operation of law. coMpletion forMAlities Notarisation? Shares An agreement for the transfer of shares in an OOD must be in writing. The signatures of the parties involved must be officially certified. Where the transfer agreement is to be executed by a person acting under power of attorney, the signature of the person who has executed the power of attorney must be officially certified. There are no notarisation requirements in relation to an AD. Businesses Merger agreements and transfer of business agreements need to be notarised.

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croAtiA

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of shares in a publicly listed company if the shares represent more than 25 percent of the voting rights. Can a foreign company acquire by merger? Currently, no. However, it is proposed that certain cross-border mergers will be possible once the Regulation on the Statute for a European Company and the Cross-Border Mergers Directive are implemented which is expected on the day of accession of Croatia into the European Union (currently proposed for 2010). (See further page 2). Restrictions on share or business transfers? Shares Shares in a private company (d.o.o.) are, in principle, freely transferable. Restrictions (eg pre-emption rights, approval requirements) may be contained in the articles of association or in a privately negotiated shareholders’ agreement. Transfers of registered shares in a public company (d.d.) that are issued in paper form may be subject to the approval of the company

(by virtue of the articles of association). However, all shares traded on any Croatian stock exchange and all shares registered with the Croatian Depository Agency are transferable without restriction. Shares and businesses The approval of the supervisory board and/or shareholders may be required pursuant to the provisions of the articles of association and/or because of the size of the acquisition. preliMinArY AgreeMents Legally binding? Letters of intent are not usually legally binding, unless the parties have expressed that certain provisions are to be legally binding. Other preliminary agreements could also have a binding effect provided that this is the intention of the parties and the wording of the document makes this clear. Duty to negotiate in good faith? The conduct of a party (eg in continuing with negotiations) may create a justified expectation of another party that the acquisition will take place. If such expectation is not met without good cause, damages may be payable.

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eMploYees Consultation requirements Shares Similar information and consultation requirements to those applicable to business transfers (see below) may apply to share acquisitions. Depending on the structure of the acquisition and the shareholding to be transferred, the works council (if established) of the target company should be informed. Businesses The seller and the buyer must inform and consult with the seller’s works council (or, if no works council is established, the employees affected by the business transfer). Generally, there are no sanctions for noncompliance. In practice, both the seller and the buyer will aim to obtain the support of the works council in order to prevent reactions by the employees that could potentially harm the economic interests of the target business. Business transfers
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Restrictions on post-transfer reorganisations? In general, the buyer may not change employment contracts unilaterally. However, Croatian labour regulations permit the buyer to terminate employment agreements where, due to technical, economic or organisational reasons, there would be no further need for such employees. Such termination of employment contracts would have to be in compliance with the provisions of applicable collective bargaining agreements.

Acquisition docuMents Any provisions incorporated by statute/law? Generally, the precise wording of the specific contractual provisions governs. Additionally, provisions of applicable law/statute may apply (eg limitation of liabilities) unless the parties agree otherwise by overriding/replacing respective statutory rules. Furthermore, certain provisions of law/statute are mandatory (eg limitation periods) and therefore cannot be excluded/amended by the parties. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to certain mandatory statutory rules. The actual transfer of shares must be governed by Croatian law.

Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer will be liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees.

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finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? A target d.d. (or any direct or indirect subsidiary of the target d.d.) may not provide any form of financial assistance (eg loans, security or any advance payment) to a third party for the purpose of acquiring shares in the target d.d. An exception applies to loans for acquiring shares granted to the target company’s employees as well as to employees of an affiliated company. A d.o.o. may generally give financial assistance unless this would result in the total value of the net assets of the d.o.o. being less than its registered share capital. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). In certain circumstances, the buyer will be jointly liable (up to the value of the assets acquired) with the seller for certain pre-existing debts of the target business.

Assignment of burden of contract? Generally, contracts can only be transferred with the consent of the third party. A transfer of a contractual liability requires the consent of the third party in order to release the seller from its obligations. coMpletion forMAlities Notarisation? Shares All agreements relating to the transfer or proposed transfer of shares in a d.o.o. must be in the form of a notarial deed. Otherwise, the agreement regarding the transfer is not valid. Where a notarial deed is to be executed by a person acting under power of attorney, such power of attorney needs to be officially certified. The transfer of shares of a d.d. which are not acquired through a Croatian stock exchange and are issued in electronic form and registered with the Central Depository Agency are transferable only if the transferor’s signature is certified by the Notary Public. Businesses In general, a business transfer agreement does not require specific formalities. However, the transfer agreement must be notarised or in the form of a notarial deed if the assets to be transferred include any real property or shares in a d.o.o.

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czecH republic

deAl structure Public company – formal offer required? A formal takeover procedure must be followed on the acquisition of a listed joint stock company when either an individual shareholder or shareholders acting in concert acquire 30 percent or more of the voting rights (or shareholders that together already hold 30 percent or more of the voting rights start to act in concert) and at the same time the acquiring shareholder/group of shareholders “controls” the target company by:
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Restrictions on share or business transfers? Shares The transfer of shares in a private company (s.r.o.) to another existing shareholder is subject to shareholder approval unless the memorandum of association provides otherwise. A transfer to a non-shareholder may only take place if the memorandum of association so permits, and the transfer may also be subject to shareholder consent. However, if an s.r.o. is a singlemember company, the shares of that member will always be transferable to third parties. Transfers of registered shares in joint stock companies (a.s.) can be restricted by the articles of association, although bearer shares are transferable without restriction. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that the wording of the document makes this clear. Duty to negotiate in good faith? There is no duty to negotiate in good faith.

having the right to appoint or remove a majority of the board of directors or the supervisory board; or having over 50 percent of the voting rights (or 40 percent where no shareholder holds more voting rights than the acquiring shareholder/group of shareholders).

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Can a foreign company acquire by merger? Generally, no. Czech law recognises the concept of a legal merger, but only where all the entities involved are Czech. However, certain cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company, and mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the CrossBorder Mergers Directive. (See further page 2).

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eMploYees Consultation requirements Shares Where a company or part of a company is transferred to a buyer, both the seller and the buyer must consult with the relevant trade union about the date of the transfer, the reasons for and consequences of the transfer and the measures proposed which will affect the employees. A penalty of up to CZK 200,000 can be imposed for non-compliance. Businesses None. Business transfers
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The terms and conditions of collective bargaining agreements cannot be changed unilaterally. Acquisition docuMents Any provisions incorporated by statute/law? As various terms and conditions are implied by law, long form acquisition documentation is not needed. However, the parties are free to include other provisions unless contrary to the mandatory provisions of law. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, but certain mandatory provisions of Czech law have to be observed. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? A company (whether an s.r.o. or an a.s.) is prohibited from providing financial assistance in the form of advance payments, loans or credit for the acquisition of its shares or for other purposes related to the acquisition of its shares.

Do employees automatically transfer? If so, what liabilities pass? Yes. All pre-transfer liabilities under the employment contracts of transferred employees will pass to the buyer. However, the seller is primarily liable by law for the buyer’s performance of employee-related obligations that arise before the date of transfer. Restrictions on post-transfer reorganisations? Employers and employees are generally free to agree changes to terms and conditions of employment contained in individual employment contracts, even where this is done in the context of a business transfer.

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Industrial property rights and other intellectual property rights are transferred/assigned to the buyer unless such transfer/assignment is contrary to any licence agreements. Employment liabilities (see above). Environmental liabilities may pass to the buyer in certain circumstances. Assignment of burden of contract? Creditors must be notified. Their consent is not required for the transfer of an obligation, but the seller remains liable to them for the buyer’s performance of the assigned obligations. In certain circumstances, a creditor may seek a court order stating that the assignment is not effective as far as that creditor is concerned.

coMpletion forMAlities Notarisation? Shares An agreement for the transfer of shares in an s.r.o. must be in writing. The signatures must be officially authenticated. Whenever a transfer of shares in an s.r.o. is dependent upon obtaining shareholder approval, a notarial deed relating to such approval is also required. There are no notarisation requirements in relation to an a.s. Businesses The business acquisition agreement does not need to be notarised. However, it must be approved by the shareholders in general meeting and the decision of the general meeting of the a.s./s.r.o. must be in the form of a notarial deed.

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denMArk Denmark

deAl structure Public company – formal offer required? No. Denmark has no detailed takeover code. Can a foreign company acquire by merger? In principle, yes. However, the national legislation implementing the Cross-Border Mergers Directive has not yet been adopted. (See further page 2). Restrictions on share or business transfers? Shares Shares are, in principle, freely transferable. Restrictions (eg pre-emption rights or board approval) may be contained in the articles of association or in a privately negotiated shareholders’ agreement. preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding, unless the parties have clearly expressed that certain provisions are to be legally binding (eg those relating to confidentiality and lockout/exclusivity).

Duty to negotiate in good faith? If a party enters into negotiations with no intention of entering into an acquisition agreement, or uses the negotiations solely as an incentive in separate negotiations, this may constitute a breach of a duty of good faith, which may give rise to liability to pay the innocent party’s costs relating to the acquisition. For liability to arise in this situation, the innocent party would normally have to establish gross negligence on the part of the party in breach. eMploYees Consultation requirements Shares No information or consultation obligations arise on a share acquisition unless major changes in the relationship between employees and the employer are to take effect. However, the terms of applicable collective bargaining agreements (CBAs) should be checked to confirm that there are no special provisions. Businesses The seller must comply with statutory requirements to inform and potentially consult with employee representatives in reasonable time before the transfer.

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Denmark

If it is envisaged that measures will be taken in relation to transferring employees, there is an obligation to consult with the representatives in good faith, with a view to reaching agreement about proposed measures. The buyer is obliged to supply the seller with details of any measures it proposes to take. The sanction for non-compliance is fines, but these are rarely enforced and of a relatively low amount. In contrast, non-compliance with an obligation to consult pursuant to a CBA can result in major fines. Business transfers
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organisational reasons, but still require the employee’s acceptance in order to avoid the risk of constructive dismissal. If the buyer chooses to enter into the seller’s CBA, no changes may be made to it. If the buyer does not choose to do so, it is obliged to observe the CBA until it expires. Acquisition docuMents Any provisions incorporated by statute/law? As a general rule, provisions are not incorporated into the acquisition agreement by reference to statute and/or law. The precise wording of the specific contractual provisions governs. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, but certain mandatory provisions of Danish law would still automatically apply. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Danish company law prohibits a company from making any loan to facilitate, or from granting any security in conjunction with, the acquisition of its own shares.

Do employees automatically transfer? If so, what liabilities pass? Yes. All pre-transfer liabilities under the employment contracts of transferred employees will pass to the buyer. In practice, the parties will use the acquisition agreement to apportion liabilities between them. Restrictions on post-transfer reorganisations? Changes made to individual employment contracts as a consequence of the transfer will constitute a breach of contract by the employer. Affected employees may consider themselves to be constructively dismissed. Changes unconnected with the transfer may be justified by economic, technical or

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Environmental liabilities may pass to the buyer, although (subject to certain exceptions) the parties may determine between themselves who is to be liable. Note, however, that such an agreement between the parties is not binding on the relevant environmental authorities. Generally, liabilities remain with the seller unless expressly assumed by the buyer. Assignment of burden of contract? Contracts can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations.

coMpletion forMAlities Notarisation? Shares and businesses Notaries are not involved unless the acquisition has an overseas element that requires certain documents to be notarised (eg a power of attorney may need to be notarised if it is to be used in a notarial completion meeting overseas).

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frAnce

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a public company that is quoted on a regulated French market. Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are possible under French law but are very difficult to achieve from a legal and practical perspective. Restrictions on share or business transfers? Shares Shares in a société par actions simplifée (SAS) or a société anonyme (SA) are, in principle, freely transferable. Restrictions (eg pre-emption rights) may be contained in the articles of association of companies that are not listed on a regulated market or in a privately negotiated shareholders’ agreement. Transfers of shares in an SARL (a less commonly used private company) to third parties are restricted and require the prior consent of a majority of shareholders holding at

least half of the share capital (the articles of association may provide for a higher threshold). Businesses The transfer of a business requires compliance with various formalities within strict time limits in order to protect creditors. This has significant timing implications. Creditors have a right to oppose the payment of the purchase price and make a higher bid for the business. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that this is the intention of the parties and the wording of the document makes this clear. However, if the terms of the letter are not sufficiently precise (ie if the non-binding effect is not clearly stated), a court may decide that the letter constitutes a preliminary binding agreement between the parties if it contains the essential elements of the acquisition (namely consideration and subject matter). Duty to negotiate in good faith? The parties are under a general obligation to negotiate in good faith in all contractual negotiations until completion of the acquisition, whether or not they have entered into a letter of intent. In summary, parties who enter into negotiations are free to terminate them (provided that the | 27

Mergers & Acquisitions in Europe: Some Key Issues

exchanges between the parties do not evidence that an agreement has in fact been reached) unless termination is effected in an “abusive” or “disloyal” manner and without a “legitimate motive”. The determination of whether a termination of negotiations is “abusive” is a matter entirely within the discretion of the courts taking into account, for example, whether or not the parties are sophisticated parties acting on an equal footing. Should a court find that a party has terminated negotiations abusively, the remedy will be damages (covering for instance expenses incurred during the negotiations) and not specific performance. eMploYees Consultation requirements Shares and businesses In companies with 50 employees or more, there is an obligation to inform and consult the works council, ie the works council must give its opinion (avis) before any definitive decision is made, in particular before any preliminary agreements and the acquisition agreement are signed. This obligation applies to both the seller and the buyer (and, where applicable, the target company). If there is no works council, the staff delegates must be informed and consulted instead. In companies with fewer than 50 employees, there is no obligation to inform and consult the staff delegates.

Specific information and consultation provisions apply, including a specific information and consultation calendar, in the case of a takeover bid, to take into account confidentiality requirements. Depending on the complexity of the contemplated acquisition, and on whether it will have any consequences on employment conditions (in particular, any plan to safeguard employment – ie any social plan), the information and consultation processes can in practice last between three weeks and six months, sometimes more. Although the works council cannot in theory prevent the acquisition from taking place, it can apply for an order from the court for more time or information before giving its opinion, which may in practice delay the acquisition process. In addition, the Supreme Court has held that where an employer had not consulted the works council before making a decision that would have warranted such consultation, the implementation of the employer’s decision was to be suspended. In this regard, in the case of a domestic acquisition, the French court would have the ability to prevent the transfer of the shares in the share transfer ledger. The party concerned is under no obligation to take account of the works council’s view, be it positive or negative, but it must answer any questions raised by the works council.

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If the seller, buyer or target company fails to inform and consult its works council with regard to a proposed acquisition, prior to such acquisition, both it and the officers of the relevant company could be held guilty of the criminal offence of obstruction (délit d’entrave). Business transfers
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previous activity and justifies a change of the CBA. In such a case, specific transitional provisions will apply. Acquisition docuMents Any provisions incorporated by statute/law? Provisions in an acquisition agreement may refer to the French Commercial, Civil and Labour Codes, which set out the general principles of commercial transactions under French law. However, the parties may expressly override certain applicable rules, provided this is not contrary to public order. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, however mandatory provisions of French law would continue to apply (eg obligations to inform and consult the works council and formalities in relation to transfers of shares). finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? As a general rule, financial assistance is prohibited under French law. Accordingly, no funds may be advanced, and no loan or security may be granted, by the target company or any direct or indirect subsidiary of the target

Do employees automatically transfer? If so, what liabilities pass? Yes. All pre-transfer liabilities under the employment contracts of transferred employees will pass to the buyer, with the exception of criminal liabilities of the seller and liabilities under occupational pension schemes. Restrictions on post-transfer reorganisations? Changes cannot be made to individual employment contracts as a consequence of the transfer without the consent of affected employees. Where employees refuse to accept the changes proposed, the employees may be lawfully dismissed only if such dismissals are justified on economic grounds. The acquisition itself or a desire to save money will not be enough to justify reasonable grounds for dismissal. The terms and conditions of any collective bargaining agreement (CBA) cannot be changed, except where the activity of the resulting entity is different from the

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company to finance the acquisition or to secure the acquisition debt. Furthermore, no whitewash procedure exists under French law and there are no specific exceptions to the prohibition. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? A transfer of a business as a going concern fonds de commerce automatically entails the transfer of:
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Assignment of burden of contract? With the exception of the four categories of contract described above in relation to the sale of a business as a going concern, contracts are not automatically transferred and can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations. coMpletion forMAlities Notarisation? Shares A notarisation is not required. Businesses A notarial deed is required for any transfers of real property, mortgages and (in certain situations) releases of charges over business assets. The involvement of a notary will have an impact on the timing of the acquisition.

the employment contracts of all employees working in the target business (see above); any lease of business premises (without landlord’s consent); certain insurance policies (with a right on the part of the insurer to terminate the insurance policy within three months following the request by the buyer for the transfer of the insurance to its own name); and publishing contracts.

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Environmental liabilities will pass to the buyer in its capacity as the new operator of the transferred business.

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gerMAnY

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of 30 percent or more of all shares in a public company that is quoted on a regulated stock exchange. Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under German law. Restrictions on share or business transfers? Shares Shares in a stock corporation (AG) or in a private company (GmbH) are, in principle, freely transferable unless the company’s articles of association provide otherwise (eg by providing for pre-emption rights or the need for shareholder approval).

preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that this is the intention of the parties and the wording of the document makes this clear. If a letter of intent in connection with the acquisition of shares in a GmbH is intended to be legally binding, it needs to be executed before a notary. Duty to negotiate in good faith? The conduct of the parties may crystallise their intentions and lead to a binding obligation or create a justified expectation for one party that the acquisition will take place. If this expectation is not met, damages may be payable. eMploYees Consultation requirements Shares None. However, if the seller has an economic committee (Wirtschaftsausschuss), it must be informed. Businesses Although no approval of the employees’ representatives is required for the mere transfer, the seller and the buyer may be required to inform and consult with the employees’ representatives as follows:

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■

the seller and the buyer must inform their respective economic committees (if any), in advance of the transfer, of the date or proposed date of the transfer, the reasons for the transfer, the legal, economic and social implications of the transfer on the employees, and any measures envisaged in relation to the employees. Breach of this obligation may result in a fine of up to EUR 10,000; in the event of an operational change (eg a change of the operational structure, closure of a part of an undertaking or business, collective dismissals – all of which might take place on a sale of a business), the seller must comprehensively negotiate with the works council (if any) on whether, how and when changes should be implemented prior to the relevant operational change being effected. A transfer of a part of an undertaking or business is generally considered as a change of the operational structure requiring such negotiations if a works council exists. Failure to comply with the obligation to negotiate may result in the works council applying for an injunction to stop the operational change (ie the transfer), the seller incurring a fine of up to EUR 10,000 and/or the employees affected by the operational change claiming compensation for any disadvantage suffered. The seller must also set up a social plan to compensate the

employees for any financial disadvantages resulting from the operational change; and
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where the seller or buyer plans collective dismissals (eg dismissals affecting more than five percent of the workforce) before or after a transfer, it must properly notify the competent employment office. Otherwise, any termination of employment is invalid.

Business transfers
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Do employees automatically transfer? If so, what liabilities pass? Yes. However, the employees may, within a period of one month after having been notified in writing of the business transfer, individually object to the transfer, in which case they will remain with the seller. The seller will then usually be entitled to dismiss these employees for operational reasons (redundancy). Although the buyer assumes all liabilities vis-à-vis the transferred employees, the seller remains (jointly and severally with the buyer) liable for all obligations under the employment relationship if and to the extent they have been created prior to the transfer and fall due within one year from the date of the transfer. This joint and several liability may be modified by the seller and the buyer in the acquisition agreement, but such agreement shall only have effect between themselves.

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Restrictions on post-transfer reorganisations? Employers and employees are generally free to agree changes to terms and conditions of employment, even in the context of a business transfer. However, if an employee claims later that such changes are effectively a consequence of the business transfer, there is a risk that such changes will be considered null and void, despite the employee’s previous consent. If the buyer cannot obtain an employee’s consent, it can make the change unilaterally by issuing a notification of change, provided it has socially justified reasons. This is difficult to implement in practice. If a collective bargaining agreement (CBA) is applicable to the seller, it will essentially remain in force with the buyer on a collective basis if the business falls within its purview after the transfer and a bilateral commitment to the CBA has been made by the employees and the buyer as the new employer. If a CBA with similar provisions is already in force with the buyer it can, under certain conditions, replace the CBA with the seller that had been in force up to the transfer. If no CBA is applicable to the buyer on a collective basis, the provisions of the CBA applicable to the seller will be deemed to be transformed into provisions of the individual employment agreements and continue to have effect on that basis.

Acquisition docuMents Any provisions incorporated by statute/law? As various terms and conditions are implied by law, long form acquisition documentation is not needed. However, in cross-border acquisitions, long form (US/UK-style) acquisition agreements are increasingly common. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, but the actual transfer of shares must fulfil the formal requirements prescribed by German law. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? An AG may not provide any form of financial benefit to its shareholders other than dividends. An AG is also prohibited from granting financial assistance to a third party for the purpose of acquiring shares in the AG. A GmbH may generally give financial assistance unless to do so would result in a reduction of the total value of the GmbH’s net assets below its stated share capital.

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). In some cases, the buyer may be jointly liable with the seller for real property and other business taxes, as well as social contributions. Environmental liabilities may pass to the buyer, although (subject to certain exceptions) the parties may determine between themselves who shall be liable. Note, however, that such an agreement between the parties is not binding on the relevant environmental authorities. Otherwise, liabilities remain with the seller unless expressly assumed by the buyer with the consent of the creditors. However, if the business continues to trade under the same name after the acquisition, the buyer becomes jointly liable with the seller to all creditors of the business, even where liabilities have not been transferred, unless the transfer of liabilities has been expressly excluded in the acquisition agreement and a disclaimer is published in the commercial register.

Assignment of burden of contract? Contracts as a whole or individual contractual obligations can be transferred only with the consent of the other contracting party; an individual contractual claim may, by law, be assigned without the other party’s consent. coMpletion forMAlities Notarisation? Shares The acquisition of shares in a GmbH (other than in an AG) requires notarisation. This applies to the entire acquisition, including preliminary and ancillary agreements if legally binding. If notarisation is not obtained, the acquisition is void. Businesses The acquisition agreement only needs to be notarised if the assets to be transferred include any real property or shares in a GmbH.

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HungArY

deAl structure Public company – formal offer required? A formal offer procedure must be followed in relation to a public company on the (direct or indirect, sole or joint) acquisition of more than 33 percent of its voting rights (25 percent where no other shareholder holds over 10 percent). Note that parties co-operating on the basis of an agreement in order to acquire influence in the target company, or to acquire control over the target company, or to frustrate a takeover bid, will be considered “parties acting in concert” and their individual stakes will be aggregated for the purpose of the mandatory bid threshold. Members of a group of companies are automatically deemed “parties acting in concert.” Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under Hungarian law.

Restrictions on share or business transfers? Shares/quotas Transfers of quota interests in a private limited liability company (Kft) are subject to preemption rights for the benefit of existing members, third parties designated by the existing members and the company itself (in that order, unless such pre-emption rights are excluded in the articles of association). The articles of association may also subject quota transfers to approval by the company. Transfers of shares in a private company limited by shares (Zrt) may be restricted by the company’s articles of association. Further, the Zrt’s articles of association may stipulate that the transfer of shares is subject to the consent of the company. Transfers of shares in public companies limited by shares (Nyrt) may not be restricted by the company’s articles of association. However, such restrictions may be set out in a shareholders’ agreement. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that this is the intention of the parties and the wording of the document makes this clear.

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Duty to negotiate in good faith? The Civil Code prescribes a general duty of cooperation, fairness and good faith. Bad faith behaviour could give rise to a claim for damages. In extreme circumstances, it is possible that the conduct of a party may create a justified expectation regarding the completion of the acquisition, overriding the express terms of the letter of intent, in which case failure to conclude the acquisition may give rise to claims by the other party for costs incurred and damages sustained in expectation of the execution of the acquisition agreement. eMploYees Consultation requirements Shares Generally, the employer must seek the opinion of the works council prior to taking any decisions that affect a large group of employees. However, the employer is not obliged to accept their opinion. Failure by the employer to comply with the consultation requirements results in the acquisition being deemed void. Businesses On the transfer of a business, the seller and the buyer must, not later than 15 days prior to the date of the acquisition, inform and consult with the trade union branch operating at the target business. If there is no such branch, they must

consult with the works council operating at the target business or, if there is no works council, the committee representing the employees. If an employer breaches its information and consultation obligations, the works council or the trade union affected may seek judicial remedy and the acquisition can be declared void. Business transfers
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Do employees automatically transfer? If so, what liabilities pass? Yes. All pre-transfer liabilities under the employment contracts of transferred employees will pass from the predecessor company (seller) to the successor (buyer) (although the seller will be jointly and severally liable for the buyer’s nonperformance for a period of one year from the date of the transfer). Further, if the seller dissolves by the succession, all pre-transfer liabilities under employment contracts terminated prior to the succession also transfer to the buyer. There are also rules as to the joint and several liability of the buyer and the seller for post-transfer dismissals where the buyer and the seller are affiliated entities.

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Restrictions on post-transfer reorganisations? In general, the buyer may not change the employment contracts unilaterally.

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The buyer is not prohibited from changing employment contracts by mutual agreement, although an employee may challenge the new agreement on the grounds of coercion or misrepresentation. The buyer is obliged to observe the collective bargaining agreement (CBA) applicable to the seller until it expires, a new CBA is concluded with the buyer or, if earlier, until the expiry of one year after the transfer. If the buyer is bound by a CBA which is more favourable to the employees than that of the seller, the buyer’s CBA must be applied to the transferred employees after the transfer. Acquisition docuMents Any provisions incorporated by statute/law? In more complex acquisitions, long form (US/ UK-style) acquisition agreements are used. Acquisition agreements may override/replace statutory rules except those mandatory provisions of, for example, employment law, tax law and securities regulations. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, provided there is a foreign element (eg a foreign contracting party) involved in the acquisition.

Certain mandatory rules of Hungarian law override any conflicting contractual arrangement (eg actual transfer of title, rules regarding the registration of a change in ownership, registration of a mortgage/charge). finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Zrts and Nyrts are prohibited from repaying their financial obligations prematurely and from making any loan to facilitate or from granting any security interest for the purpose of the acquisition of their shares. A carve-out is provided for certain employee share schemes and certain bank operations. Agreements tainted by prohibited financial assistance are void. Although there are no express financial assistance rules in the case of Kfts, the above actions may qualify as a prohibited share capital distribution when their beneficiary becomes a shareholder of the lender/guarantor, if the benefit is not provided on an arm’s-length basis.

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Whilst tax liabilities generally remain with the seller, the buyer will be jointly liable (as guarantor) with the seller for VAT where any part of the purchase price remains outstanding, or where it has been satisfied by way of set-off. Charges and encumbrances attaching to the assets transferred will usually be transferred with the assets unless discharged/cancelled with the consent of the beneficiary. If any real properties are to be purchased or used by the buyer after completion, environmental liability for a polluting activity will be shared between the buyer and the seller on a joint and several basis unless provided otherwise. Assignment of burden of contract? Transfers of obligations may take place only with the consent of the relevant creditor. Creditors are usually required to send their written consent to the transfer in a form set out in the acquisition agreement.

coMpletion forMAlities Notarisation? Shares In certain cases, notarial deeds are mandated by law (eg an agreement to create a fixed charge over movable property), and in other cases it may be beneficial to include agreements in a notarial document (as such documents can be directly enforced without having to commence a suit to prove the existence and maturity of a claim). Businesses Not mandatory.

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itAlY

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a public company that is listed on the stock exchange when a person acquires financial instruments in the company which entitle it to 30 percent or more of the voting rights that are eligible when voting on the appointment or removal of directors or members of the supervisory board. Can a foreign company acquire by merger? Yes. Both domestic and cross-border mergers are permitted. Restrictions on share or business transfers? Shares Shares in an S.p.A. are, in principle, freely transferable. Restrictions (eg pre-emption rights, put and call options and veto rights) may be contained in the company’s by-laws (articles) or in a privately negotiated shareholders’ agreement. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that this is the intention of the parties and the wording of the document makes this clear.

Duty to negotiate in good faith? Parties are under a duty to conduct negotiations in accordance with the general principle of good faith (eg the parties are not entitled unreasonably to interrupt negotiations or to change the terms of the letter of intent, even though it may be expressed to be non-binding). If a party unreasonably withdraws from negotiations, it may be deemed to have breached the duty of good faith and, accordingly, may be obliged to indemnify the other party for its loss. The amount of the indemnification awarded by the courts takes into account the stage reached, the loss of business opportunity and expenses incurred during the negotiations. eMploYees Consultation requirements Shares Generally, none. However, if the acquisition is effected by merger, there are consultation requirements. Businesses An obligation to inform and consult trade union representatives arises whenever a business acquisition is proposed (including if the acquisition is of only part of a business), provided the seller of the business being transferred has in total more than 15 employees. Such consultation has to be undertaken at least 25 days before the completion date. | 39

Mergers & Acquisitions in Europe: Some Key Issues

Both the seller and the buyer must consult with their respective internal trade union representatives. If none exists, then they must inform and consult the local trade union. The trade union may apply to the Labour Court for a restraining order which effectively freezes the transfer until proper consultation has taken place. It is a criminal offence for the directors of the seller/buyer to fail to comply with a court order to inform and consult the trade unions. However, the failure to inform or the failure to reach an agreement with unions does not affect the validity of the business acquisition. Business transfers
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Restrictions on post-transfer reorganisations? Changes made to individual employment contracts as a consequence of the transfer require the express consent of the employee or a re-negotiation of the appropriate collective bargaining agreement (CBA). The buyer must maintain the terms of any CBA by which the seller was bound, although the buyer can replace benefits under the seller’s CBA with benefits under any CBA by which the buyer is bound, provided such benefits are equivalent to or better than those provided under the seller’s CBA. In any event, if an employee is able to prove that his work conditions have been modified during the three months following the acquisition, he can resign for just cause.

Do employees automatically transfer? If so, what liabilities pass? Yes. The seller and the buyer are jointly liable for debts due to employees which arise prior to the execution of the acquisition agreement and which relate to the business transferred, whether or not the buyer is aware of the debts or the debts are recorded in the accounts of the business. However, the employees can expressly agree to release the seller from the relevant liabilities.

Acquisition docuMents Any provisions incorporated by statute/law? Generally, the precise wording of the specific contractual provisions governs. The parties can override provisions of the Italian Civil Code except those mandatory provisions of the Code that are directly applicable to the acquisition agreement and are implied into it even when not expressly referred to.

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Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, and is typical in multi-jurisdiction “umbrella” agreements. Endorsements of share certificates and transfers of quotas must, however, comply with applicable Italian provisions. The same applies to mandatory and public policy provisions. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Italian law prevents a company from giving loans or granting guarantees for the acquisition of, or subscription for, its own shares as well as from accepting, even through a fiduciary company or an intermediary, its own shares as security. However, a “merger leveraged buyout” is permitted when the aim of the transaction is the merging of the buyer with the target company.

Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). The buyer of a going concern is jointly liable with the seller for all liabilities that are recorded in the accounts of the business, unless creditors have expressly agreed to release the seller from the relevant liabilities. The buyer is jointly liable (up to the value of the business transferred) with the seller for all pre-transfer tax liabilities of the target business arising in the fiscal year of the transfer and in the two previous years. The buyer can limit its liability to the amount stated on a certificate that the buyer can request from the tax authorities. Environmental liabilities may pass to the buyer in certain circumstances. Otherwise, liabilities remain with the seller unless expressly assumed by the buyer. All credits and non-personal contracts automatically transfer to the buyer, unless otherwise agreed between the parties.

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Assignment of burden of contract? As regards personal contracts, the consent of other contracting parties will be required in order to assign the contracts to the buyer. It is also advisable to seek the consent of the other contracting parties to major non-personal contracts (which generally automatically transfer), as Italian law provides that following an assignment such other parties may, unless their contracts provide otherwise, withdraw for just cause from their contracts within three months of being notified of the transfer.

coMpletion forMAlities Notarisation? Shares (S.p.A.) An acquisition of shares in an S.p.A. can be achieved by simple contract and does not need to be notarised, provided the share certificates are duly endorsed and authenticated by a notary public. Quotas (S.r.l.) A notarial deed must be executed. The notary public will complete the transfer by submitting it for registration with the competent Companies’ Register. Businesses The acquisition agreement must be drawn up in the form of a public deed before a notary public and registered with the competent Companies’ Register and tax registration office.

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netHerlAnds

deAl structure Public company – formal offer required? Not in relation to an unlisted public company (NV) or a private limited company (BV). A formal mandatory offer procedure must be followed on the acquisition of 30 percent of the voting rights in a listed public company, the shares in which are admitted to a regulated market in the European Union. Can a foreign company acquire by merger? Generally, Dutch law recognises the concept of a legal merger, but only where all entities involved are Dutch. However, certain cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company, and mergers between a Dutch public company (NV) or a Dutch private limited company (BV) and a limited liability company established in a different EEA member state are possible pursant to the national legislation implementing the CrossBorder Mergers Directive. (See further page 2). Restrictions on share or business transfers? Shares A BV is required by law to include one or more of the following restrictions in its articles of association on a transfer of its shares:

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the prior approval of the managing board or supervisory board, the shareholders or certain priority shareholders; and/or pre-emption rights in favour of other shareholders.

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Tighter restrictions can be imposed, but transfer prohibitions found too strict by a court may be unenforceable. Shares in an NV are, in principle, freely transferable. Restrictions (eg pre-emption rights and veto rights) may be contained in the company’s articles of association and there may also be other anti-takeover devices. Businesses The approval of the supervisory board and shareholders in general meeting may be required pursuant to the provisions of the articles of association and/or the size of the acquisition. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that this is the intention of the parties and the wording of the document makes this clear. Some provisions will, in any event, be intended to be enforceable (eg confidentiality and lockout/exclusivity) and this should be clearly expressed.

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Duty to negotiate in good faith? If parties enter into negotiations, their relationship from the outset will be governed by the principles of fairness and reasonableness (good faith). As a consequence, each party must take into account the reasonable interests of the others during negotiations and when disclosing information. When negotiations reach a certain stage, neither party can terminate them without being obliged to compensate the other party for its costs. It may even be possible in certain circumstances to obtain an injunction requiring the other party to negotiate further. eMploYees Consultation requirements Shares and businesses Where at least one of the parties involved in the acquisition employs 50 or more people, prior notice must be given to the Social Economic Council and the relevant trade unions. If the trade unions so desire, consultation must take place prior to reaching agreement on the principal terms of the acquisition. The works councils of both the seller and the buyer must be consulted on a share acquisition, a business acquisition and a statutory merger. Dutch law obliges companies to establish a works council if they have at least 50 employees. Consultation must take place at a stage when the works councils’ advice can have a material effect on the intended decision to be taken by the parties involved. 44 |

If the works council is opposed to the decision, management will have to observe a one-month waiting period during which the works council may lodge an appeal with the court. The Enterprise Division may then order the company to reverse its decision if, after consideration of all the relevant interests, the decision to proceed with the acquisition is one which management should not reasonably have made. Additionally, on a business transfer, employee consultation obligations exist even if the seller or the buyer does not have a works council. Business transfers
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Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees for a period of one year from the date of transfer. Whether the rights and obligations under occupational pension schemes automatically transfer to the buyer on completion depends on the pension schemes in place prior to completion.

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Restrictions on post-transfer reorganisations? In principle, the conditions of employment do not change on transfer.

Mergers & Acquisitions in Europe: Some Key Issues

The buyer may (with the consent of the individual employees and, in most cases, also with the consent of the works council) change the terms and conditions of contracts of employment. In addition, the buyer may unilaterally change the terms and conditions for reasons of important interest to the buyer. However, proposed changes that are detrimental to the employee(s) will be subject to a requirement of reasonableness and the content of any relevant collective bargaining agreement (CBA). Any existing CBA will remain effective until a new CBA is entered into or until the terms of the existing CBA expire. Acquisition docuMents Any provisions incorporated by statute/law? Mandatory provisions of law (eg that shares may only be transferred by a notarial deed of transfer) can never be overridden by express provisions. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, but Dutch law will always apply to the transfer of shares by notarial deed. Certain mandatory provisions of Dutch law will continue to apply where a choice of a foreign governing law is made (eg transfer requirements for shares, legislation in relation to employees and data protection).

finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Dutch law prohibits financial assistance by a BV or an NV by way of providing collateral, guaranteeing the price, acting as surety or otherwise binding itself jointly and severally with or for third parties for the purpose of the third parties subscribing or acquiring shares or depositary receipts representing shares in the BV’s/NV’s capital. This prohibition also extends to a BV’s/NV’s subsidiaries. Loans, however, may be granted by a BV to a third party to acquire its shares to the extent of its distributable reserves and to the extent permitted by its articles of association. The BV has to maintain a non-distributable reserve for the outstanding amount of the loan. For NVs, exemptions exist for the transfer of shares to employees of the company or of a group company.

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Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Environmental liabilities may pass to the buyer in certain circumstances. Otherwise, liabilities remain with the seller unless expressly assumed by the buyer. Assignment of burden of contract? Contracts can only be assigned with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations.

coMpletion forMAlities Notarisation? Shares The transfer of shares in a BV requires a notarial deed of transfer to be executed before a notary public in the Netherlands. Other documents that must be executed before a notary public include the creation of a pledge over shares in a BV. Businesses A notarial deed of transfer must be executed before a notary public in the Netherlands if the acquisition includes a transfer of real property.

Note: A legislative bill regarding private limited liability companies (BVs), which is expected to be implemented during August 2009, will introduce a simpler and more flexible regime for private limited companies, for example in relation to restrictions on share transfers and the financial assistance prohibition.

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norwAY

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a listed company or where the offer is directed towards more than 100 shareholders and involves an amount in excess of EUR 100,000. Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under Norwegian law. Restrictions on share or business transfers? Shares For companies incorporated on or after 1 January 1999, unless otherwise provided for in the articles of association, existing shareholders have a statutory pre-emption right in relation to certain transfers of shares, and the transfer also requires the consent of the company’s board of directors, which cannot be unreasonably withheld. For companies incorporated before 1 January 1999, there are no such statutory rights in favour of shareholders, although restrictions (eg pre-

emption rights and/or a requirement for board consent) may be contained in the company’s articles of association. preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding (other than specific provisions relating to issues such as confidentiality and lockout/exclusivity). It must be made expressly clear in the letter itself that the main terms of the acquisition agreement are not finally agreed, as agreement on such terms may constitute a binding agreement. Duty to negotiate in good faith? Even where a letter of intent is expressed to be non-binding, each party may have a duty to negotiate in good faith to conclude a binding agreement. Whether such duty to negotiate exists or not will depend on, for example, the wording of the letter of intent. If the letter of intent imposes a duty on the parties to negotiate, and a party neglects such duty, this may constitute a breach. The potential liability is likely to be limited to the “reliance interest” of the wronged party, ie the losses incurred because the wronged party relied on the other party’s contractual promise. The wronged party is entitled to be put in the position it would have been in had it not entered into the letter of intent.

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eMploYees Consultation requirements Shares In the case of target companies which regularly employ at least 50 employees, the target company must both inform employees about issues of importance for the employees’ working conditions and consult with elected representatives of the employees. Collective bargaining agreements (CBAs) may also include information and consultation obligations. Businesses The buyer and the seller are obliged to inform and consult with employees and their elected representatives in relation to the proposed acquisition as soon as possible. CBAs may also include information and consultation obligations. Fines are the most common sanction for non-compliance with law. CBAs will usually contain specific regulations regarding breach of their terms. Business transfers
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All pre-transfer liabilities under the employment contracts of transferred employees will pass to the buyer, although the buyer may elect to make its existing pension schemes applicable to the transferred employees (in place of the seller’s schemes).
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Restrictions on post-transfer reorganisations? Changes made to individual employment contracts as a consequence of the transfer will constitute a breach of contract by the buyer. Transfer of an undertaking does not in itself constitute grounds for dismissal, and dismissal on such grounds will be deemed invalid. However, the buyer may dismiss employees after the transfer if such dismissal is justifiable as a rationalisation measure. In principle, the buyer is obliged to observe any CBA applicable to the seller until it expires, unless the buyer declares in writing that it does not accept to be bound by it. However, such declaration only releases the buyer from any collective rights which the employees may have under the CBA; the buyer is still bound to comply with any provisions of the CBA which form part of the individual employees’ employment contracts.

Do employees automatically transfer? If so, what liabilities pass? Yes, but an employee may object to the transfer of his employment to the buyer. In some special cases (eg where the employees’ situation will be changed dramatically because of the transfer) the employees may have the right to choose to remain with the former employer (ie the seller). |

Acquisition docuMents Any provisions incorporated by statute/law? Certain provisions may be mandatory or non-mandatory. Statutory provisions are

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Mergers & Acquisitions in Europe: Some Key Issues

commonly replaced or expanded by express provisions in the acquisition agreement. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, but relevant Norwegian mandatory provisions will prevail. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Norwegian company law prohibits financial assistance by a company in connection with the acquisition of shares (or rights to acquire shares) in itself or in its parent company. “Financial assistance” is broadly interpreted, and includes, amongst other things, granting of loans and security, as well as providing funds, assets, resources, etc to aid an acquisition. Seller credit is exempted, ie a seller may give credit in connection with the disposal of a subsidiary. It is possible to apply to the Ministry of Trade and Industry for an individual exemption from the prohibition. The granting of such exemption can only be obtained if the financial assistance does not conflict with the objectives intended to be covered by the prohibition. Certain exemptions from the prohibition exist in relation to the acquisition of real estate SPVs and regarding employee’s acquisition of shares.

Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Otherwise, liabilities remain with the seller unless they are expressly assumed by the buyer with the consent of the creditor. Environmental liabilities may pass to the buyer, although (subject to certain exceptions) the parties may determine between themselves who is to be liable. Note, however, that such an agreement between the parties is not binding on the relevant environmental authorities. Assignment of burden of contract? Contracts can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations. coMpletion forMAlities Notarisation? Shares and businesses Notaries are not required to be involved.

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roMAniA

deAl structure Public company – formal offer required? A mandatory takeover offer must be initiated by a shareholder that has acquired alone, or together with persons it acts in concert with, more than 33 percent of the voting rights in the target. Such an offer must be addressed to all shareholders for all their holdings and has to be initiated no later than two months from the moment the threshold is reached. There are certain exceptions to the obligation to make a mandatory takeover offer (eg acquisitions between affiliates or members of the same group of companies). Can a foreign company acquire by merger? Mergers between companies established in different EEA member states are possible pursuant to the provisions of the Romanian Company Law, which implemented the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Restrictions on share or business transfers? Shares Shares in a joint stock company (S.A.) are, in principle, freely transferable unless the company’s articles of association provide otherwise. The transfer takes place by way of a declaration signed

by the transferor and transferee in the shareholders’ register. The transfer of shares in a limited liability company (S.R.L.) requires the approval of the shareholders holding at least three-quarters of the company’s share capital and has to be registered with the shareholders’ register kept by the company and with the competent trade register. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that this is the intention of the parties and the wording of the document makes this clear. However, if the letter is silent with respect to the binding effect, a court may decide that the letter constitutes a preliminary binding agreement between the parties if it contains the essential elements of the envisaged transaction. Duty to negotiate in good faith? The parties are under a general obligation to negotiate in good faith in all contractual negotiations. Breach of this obligation may give rise to liabilities. It is however possible to exclude or limit this liability through express contractual provisions.

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eMploYees Consultation requirements Shares In case the transfer of shares may substantially affect the rights and interests of the employees, consultations with the employees’ representatives are mandatory. Consultation requirements also apply in the case of mergers. Businesses Both the seller and the buyer have an obligation to consult, prior to the transfer being made, the labour union or the employees’ representatives, as the case may be, in respect of the legal, economic and social implications of such a business transfer, as far as it affects the employees. Business transfers
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Restrictions on post-transfer reorganisations? The transfer of the business (or part thereof) may not constitute by itself, under any circumstance, a reason for an individual or collective dismissal of employees, either by the seller or by the buyer.

Acquisition docuMents Any provisions incorporated by statute/law? Provisions in an acquisition agreement may refer to the Romanian Commercial, Civil and Labour Codes or to the Romanian Company Law, which set out the general principles of commercial transactions under Romanian law. However, the parties may expressly override certain applicable rules, provided that this is not contrary to public order. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to mandatory provisions of Romanian law. For example, the actual transfer of shares has to be performed in compliance with the mandatory rules of the Romanian Company Law.

Do employees automatically transfer? If so, what liabilities pass? Yes. If a business (or a part thereof) is being transferred to another natural or legal person the employment contracts of the employees working for the business will also be automatically transferred. All the rights (arising under the employment relation that existed up to the day of such transfer) of the employees whose employment contracts are being transferred will survive the transfer and the buyer shall assume, as of the day of such transfer, all the liabilities and obligations (unchanged in form or extent) arising under the transferring contract.

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finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Romanian Company Law prohibits joint stock companies from advancing funds, granting loans or creating guarantees or security interests to assist in the acquisition of their own shares by a third party. Such a prohibition also applies to the acquisition of shares in their holding companies. Exceptions to this are transactions concluded by credit institutions and other financial institutions in the normal course of their business, and acquisitions of shares by employees. In both cases, the net assets of the company must not be decreased below the subscribed share capital and the non-distributable reserves. The prohibition on financial assistance is set out in the section regulating joint stock companies. It should not, therefore, apply to limited liability companies because, under the general interpretation rules, prohibitions should be restrictively construed. However, there have been decisions in the Romanian courts in which rules specifically applicable to joint stock companies have been applied to limited liability companies based on similarity grounds. Consequently, the application of the financial assistance prohibition to limited liability companies is uncertain.

Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Environmental liabilities may pass to the buyer in certain circumstances, as well as certain tax liabilities. Otherwise, liabilities remain with the seller unless expressly assumed by the buyer. Assignment of burden of contract? A transfer of a contractual liability requires the consent of the other contracting party. coMpletion forMAlities Notarisation? Shares Notarisation is not required. Businesses A notarial deed is required for any transfer of real property and mortgages.

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russiA

deAl structure Public company – formal offer required? Where the number of shares to be acquired in an open joint stock company (OAO), exceeds 30 percent, 50 percent or 75 percent thresholds, a mandatory offer must be made for the remaining shares. Can a foreign company acquire by merger? No. Russian law recognises the concept of a legal merger, but only where all the entities involved are Russian. Restrictions on share or business transfers? Shares Except for the pre-emption rights of other shareholders, which are provided for in Russian company law, shares are, in principle, freely transferable. Additional restrictions (eg preemption rights of the target company over its own shares, approval requirements) may be contained in the charter. Transfer limitations contained in shareholder agreements, and not in the charter, are not generally considered to be valid. Pre-emption rights do not apply to open joint stock companies. Businesses There are no general limitations on transfers of businesses. Generally, transfers of businesses and not shares are viewed as less tax effective. Shares and businesses Regulatory (anti-monopoly) approvals apply above certain thresholds.

preliMinArY AgreeMents Legally binding? Preliminary agreements have a binding effect provided that the “material terms and conditions” of the acquisition are defined. In the case of a share purchase, this includes the object of the acquisition but not the price. If the preliminary agreement does not include a specific deadline, the acquisition must be completed within one year. Duty to negotiate in good faith? Russian law does not currently recognise the concept of bad faith breach of negotiations. In the event of a breach of negotiations, it would be for the other side to demonstrate that it had existing rights, that these rights were breached and that damages were suffered that are subject to compensation. eMploYees Consultation requirements Shares None. Businesses None.

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Business transfers
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Do employees automatically transfer? If so, what liabilities pass? No. Employees will only transfer provided an agreement is reached by the buyer (acting on behalf of the target company) with each relevant employee. Restrictions on post-transfer reorganisations? None.

finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Yes. There is no limitation on the ability of a Russian company to extend financial assistance to a buyer of its shares. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? A “sale of enterprise” is a transaction under which all assets and liabilities of the business pass from the seller to the buyer. Such transactions require special formalities, including state registration. One key feature is that creditors are entitled to accelerate performance and in certain cases to reverse the whole transaction. “Sales of enterprise” are not frequently used. Assignment of burden of contract? The burden of a contract normally passes in a “sale of enterprise”. As noted above, “sales of enterprise” are not frequently used.

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Acquisition docuMents Any provisions incorporated by statute/law? Acquisition documents have a binding effect provided that the “material conditions” of the acquisition are defined. In the case of a share purchase, this includes the object of the acquisition but not the price. Is foreign governing law permissible? Any overriding national law? Most large acquisitions of Russian companies are effected via holding companies set up in foreign jurisdictions (eg Cyprus, Luxembourg, the Netherlands). Cyprus is most frequently chosen as the holding company jurisdiction because of its tax treaty with Russia and attractive company law regime (it is a common law country). English law is the most frequent choice of governing law for acquisitions with a foreign element. 54 |

Mergers & Acquisitions in Europe: Some Key Issues

coMpletion forMAlities Notarisation? Shares No notarisation of the acquisition documents is required (except in the case of a limited liability company, when its charter provides otherwise). For shares in a limited liability company, its constitutional documents must be amended and re-registered. Other registrations may also be required in the case of both joint stock companies and limited liability companies where there is a change in the management of the company. The signature on the application for such registrations must be notarised. Businesses No notarisation is generally required. However, the transfer of title to certain assets and in some cases the transfer agreements themselves have to be registered and therefore notarisation of a limited number of documents (eg powers of attorney) may be required in certain cases.

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serbiA

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of shares in a publicly listed company if the shares represent more than 25 percent of the voting rights. Can a foreign company acquire by merger? No. Restrictions on share or business transfers? Shares Shares in a limited liability company (d.o.o.): mandatory pre-emption rights exist in favour of the company and the shareholders, but, if the company or shareholders do not use them, shares may be transferred to third parties. Businesses Restrictions (eg pre-emption rights, approval requirements) may apply to certain assets (eg real property). Shares and businesses If certain assets are involved (eg the acquisition of real property or the acquisition of a company which owns real property), the acquisition may require the approval of public authorities. preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding, unless the parties have clearly 56 |

expressed that certain provisions are to be legally binding (eg those relating to confidentiality, lockout/exclusivity, exclusion of damages for terminating negotiations without cause). Duty to negotiate in good faith? The conduct of a party (eg in continuing with negotiations) may create a justified expectation of another party that the acquisition will take place. If such expectation is not met without good cause, damages may be payable, unless agreed otherwise (eg in the letter of intent). eMploYees Consultation requirements Shares None. Businesses None. In practice, however, both the seller and the buyer will aim to obtain the support of the employees in order to prevent reactions by the employees that could potentially harm the economic interests of the target business. Business transfers
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Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees.

Mergers & Acquisitions in Europe: Some Key Issues

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Restrictions on post-transfer reorganisations? In general, the buyer may not change employment contracts unilaterally. Even changes made with the employee’s consent may be challenged by the employee on the grounds of coercion. It is not possible to make any contractual change which would contradict any applicable collective bargaining agreements (CBAs). In some cases, the buyer may be obliged to observe the CBA applicable to the seller, particularly if there is no similar agreement applicable to the buyer.

finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Generally, financial assistance (eg loans, security or any advance payment) granted by a target company for the purpose of purchasing shares in the target company or its parent is prohibited. An exception applies to loans granted by credit institutions within their usual scope of business. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Claims are transferred automatically, subject to the relevant third party being notified. The transfer of a liability is subject to the approval of the relevant third party. Irrespective of the above, the buyer of a business is jointly and severally liable with the seller for any business-related debts (including arrears of taxes and social security contributions). This liability is limited to the value of the assets acquired. Employment liabilities (see above).

Acquisition docuMents Any provisions incorporated by statute/law? Certain provisions (eg statutory warranties regarding the quality of the assets being transferred, statute of limitations) will apply by statute/law unless the parties agree otherwise. However, the precise wording of the specific contractual provisions governs. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to certain mandatory statutory rules. The actual transfer of shares must be governed by Serbian law.

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Environmental liabilities for contaminated land may pass to the buyer, who could become liable to both the environmental authorities and private parties. Assignment of burden of contract? Generally, contracts can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations.

coMpletion forMAlities Notarisation? Shares All agreements relating to the transfer or proposed transfer of shares in a d.o.o. must be in the form of a notarial deed. Otherwise, the agreement regarding the transfer is not valid. Where a notarial deed is to be executed by a person acting under power of attorney, such power of attorney needs to be officially certified. Businesses Execution of a business transfer agreement does not require specific formalities. However, the transfer of certain assets (eg real property, intellectual property rights, such as trademarks, patents, etc) will need to be registered with the appropriate public registry and, as such, the execution of any document effecting such transfer (whether the business transfer agreement or, more commonly, a separate transfer) will need to be officially certified.

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sloVAk republic

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a “controlling interest” in a listed joint stock company. A controlling interest is defined as at least a 33 percent share of the voting rights of the company. Can a foreign company acquire by merger? Mergers between corporate entities (including limited liability companies and joint stock companies) established in different EEA member states are possible pursuant to the national legislation implementing the CrossBorder Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under Slovak law. Restrictions on share or business transfers? Shares The transfer of a business interest in a limited liability company (s.r.o.) to another existing shareholder is subject to general meeting approval unless the memorandum of association provides otherwise. The transfer of a business interest to a non-shareholder may only take

place if the memorandum of association so permits; again, the memorandum of association may provide that the transfer requires general meeting approval. Further transfer restrictions (eg pre-emption rights) may also be contained in the memorandum of association. The transfer of registered shares in a joint stock company (a.s.) may be subject to restrictions (eg the articles of association may provide that the transfer of registered shares is subject to prior approval by the company (unless provided otherwise, the board of directors of the company will be entitled to grant/refuse to grant consent to the transfer).) Businesses In certain circumstances, a creditor may seek a court order stating that the transfer of its particular obligation is not effective as far as that particular creditor is concerned. preliMinArY AgreeMents Legally binding? A letter of intent may be interpreted as an “agreement to agree” (or an “agreement on future agreement”) (and, as such, may be legally binding on the parties) if it contains an obligation on one or both parties to conclude the acquisition agreement in the future, the subject

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matter of the acquisition agreement, and the agreed time period within which the acquisition agreement will be entered into. Duty to negotiate in good faith? There is no express duty to negotiate in good faith, however the parties have to comply with the principle of “fair commercial relations”. Further, the intentional provision of misleading information in the process of negotiations may result in the acquisition being invalid as made “in error”. eMploYees Consultation requirements Shares Generally, Slovak Labour Code grants the employees (or their representatives) the right to be informed about the economical and financial situation of the employer and about the status and development of its business activity. There is no express consultation requirement on the transfer of shares, although the terms of any applicable collective bargaining agreements (CBAs) should be checked for any special provisions in this respect. Businesses The seller is obliged to inform the employees’ representatives (or, if no representatives have been appointed, the employees affected by the

business transfer), in writing at least one month prior to the transfer, of the date or proposed date of the transfer, the reasons for the transfer, the labour, economical and social implications of the transfer, and any measures to be adopted in relation to the transfer applicable to the employees. Further, the seller is obliged to consult with the employees’ representatives on any measures to be adopted in relation to the transfer applicable to the employees with a view to reaching an agreement on such measures. The same obligation also applies to the buyer. Failure to comply with the requirements to inform and consult may trigger a penalty of SKK 1,000,000 (approximately EUR 33,194). Business transfers
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Do employees automatically transfer? If so, what liabilities pass? Yes. All pre-transfer liabilities arising from the seller’s employment relations with transferred employees will pass to the buyer. Restrictions on post-transfer reorganisations? Employers and employees are generally free to agree to changes to the terms and conditions of employment contained in individual employment contracts, even where this is done in the context of a business transfer. The terms and conditions of any applicable CBA cannot be changed unilaterally.

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Acquisition docuMents Any provisions incorporated by statute/law? As various terms and conditions are implied by law, long form acquisition documentation is not needed. However, the parties are free to include other provisions unless contrary to the mandatory provisions of Slovak law. In a more complex acquisition, long form (US/UK-style) acquisition agreements are increasingly common. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, provided there is a “foreign element” (entity or asset) involved in the acquisition. However, certain mandatory provisions of Slovak law must be complied with (eg provisions relating to the essentials of the acquisition agreement). finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Generally, financial assistance (eg loans, security or any advance payment) granted by a target company for the purpose of purchasing shares in the target company or its parent is prohibited. Exceptions apply to loans granted by credit institutions within their ordinary course of business and, subject to certain conditions, to acquisitions of shares by employees of the target company.

The financial assistance rules only apply to joint stock companies. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? All rights and liabilities connected with the target business are transferred to the buyer by operation of law. The consent of creditors is not required for the transfer of obligations, although, in certain circumstances, a creditor may seek a court order stating that the transfer is not effective as far as that creditor is concerned. However, the seller remains jointly liable with the buyer for fulfilment of transferred obligations. Industrial property rights and other intellectual property rights automatically pass to the buyer, unless such transfer would be contrary to the particular licence agreement. The title to movables automatically passes to the buyer on completion of the acquisition agreement; the title to real property passes to the buyer on the registration of the buyer as the new owner with the respective cadastre register. In an asset acquisition (purchase of individual assets), rights arising out of the lease agreements, easements and pledges are transferred together with the purchased asset (this is particularly relevant in respect of real property).

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Employment liabilities (see above). Environmental liabilities may pass to the buyer in certain circumstances. Assignment of burden of contract? Contracts can be assigned without the consent of the other contracting party, but the buyer must inform all creditors about the transfer of the seller’s obligations to the buyer, and the seller must inform all debtors about the transfer of claims to the buyer.

coMpletion forMAlities Notarisation? Shares Business interest agreements must be in writing and the signatures of the parties must be notarised (and apostilled, or superlegalised, if required). Share purchase agreements regarding the transfer of share certificates must also be in writing; this requirement does not apply to share purchase agreements regarding the transfer of title to dematerialised shares. Businesses The agreement on the transfer of an ongoing business must be in writing and the signatures of the seller and the buyer must be notarised (and apostilled, or superlegalised, if required).

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spAin

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a listed public company. Can a foreign company acquire by merger? Generally no. Spanish law recognises the concept of legal merger, but only where all the entities involved are Spanish. However, certain cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company, and mergers between limited liability companies established in different EEA member states will be possible once the national legislation implementing the Cross-Border Mergers Directive is adopted (expected during the last quarter of 2008). (See further page 2). Restrictions on share or business transfers? Shares Shares in a joint stock company (sociedad anónima) are, in principle, freely transferable. Restrictions may be contained in the company’s by-laws (articles of association). The shares in a limited liability company (sociedad de responsabilidad limitada) are not generally freely transferable. For transfers of

such shares, unless provided otherwise in the articles of association, the company has a right of first refusal and must give its consent prior to any transfer of shares. The company may present an alternative buyer, provided that all other conditions (including the purchase price) remain unchanged. Businesses If the buyer is a joint stock company and the acquisition is completed within two years of the formation of the buyer (SA) and the value of the acquisition exceeds 10 percent of the buyer’s share capital, prior approval of the buyer’s shareholders is needed. preliMinArY AgreeMents Legally binding? It is possible to ensure that letters of intent are not legally binding, provided that the wording of the document makes this clear. Duty to negotiate in good faith? Spanish law recognises a general duty to negotiate in good faith. Letters of intent may expressly enhance the general good faith provisions (eg by imposing certain information duties on the parties during the negotiation process).

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eMploYees Consultation requirements Shares and businesses A proposed acquisition must be notified to the employees’ representatives before the acquisition takes place. Lack of compliance with the information requirements will not affect the validity of the acquisition, but may result in disciplinary proceedings being brought under labour law. Business transfers
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Unless otherwise agreed between the buyer and the employees’ representatives, the buyer is obliged to observe the collective bargaining agreement applicable to the business at the time of the transfer. Acquisition docuMents Any provisions incorporated by statute/law? Generally, the precise wording of the specific contractual provisions governs. The parties can override provisions of the Spanish Civil Code except those mandatory provisions of the Code that are directly applicable to the acquisition agreement and are implied into it even when not expressly referred to. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible and is typical in multi-jurisdictional agreements. Endorsements of share certificates and transfers of quotas must, however, comply with applicable Spanish provisions. The same applies to mandatory and public policy provisions. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Neither joint stock or limited liability companies may give direct or indirect financial

Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees for a period of three years from the date of the transfer. Restrictions on post-transfer reorganisations? Changes made to individual employment contracts as a consequence of the transfer will constitute a breach of contract by the employer. In the event of “collective amendments to working conditions” (deemed to take place when the changes affect at least 10 employees), there must be a negotiation period of 15 days prior to the implementation of the changes.

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assistance in connection with the acquisition of their shares or those of their holding company. A company may not advance any payments, grant any loans or give any guarantees or any security whatsoever for these purposes. Notwithstanding this, financial assistance may be given by a joint stock company where the company is a bank or credit institution acting in its course of business, or in order to finance the acquisition of its shares by its employees. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). As a general rule, tax liabilities associated with the transferred assets pass to the buyer. Environmental liabilities may pass to the buyer in certain circumstances. Otherwise, liabilities remain with the seller unless they are expressly assumed by the buyer with the consent of the creditor. Assignment of burden of contract? Contracts can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations.

coMpletion forMAlities Notarisation? Shares Where the target company is a joint stock company, the transfer of bearer shares must be recorded in a public notarial deed, whilst the transfer of registered shares and shares not yet represented in titles can be transferred in a private document. However, in practice, it is usual that in all cases the transfer is executed by way of public notarial deed. The transfer of shares of limited liability companies must be executed by way of public notarial deed. The public notarial deed in each of the above cases can be granted before a foreign (nonSpanish) notary public, provided that such notarial deed is legalised. Businesses Recording the asset purchase agreement in a public notarial deed may be advisable (in particular, for employment and tax reasons) but it is not strictly necessary.

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sweden

deAl structure Public company – formal offer required? A formal procedure is required when a public offer is made to acquire shares in a company listed on a Swedish regulated market. Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under Swedish law. Restrictions on share or business transfers? Shares Shares are, in principle, freely transferable. Restrictions (eg pre-emption rights) may be contained in the company’s articles of association. Businesses Certain real property is subject to municipal pre-emption rights and an application must be made to check whether the municipality will exercise such rights (they rarely do so).

preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding (other than specific provisions relating to issues such as confidentiality and lockout/exclusivity), but the wording of the document should make this clear. Duty to negotiate in good faith? Generally, there is no duty to negotiate in good faith. However, liability can arise in some circumstances based on the doctrine of “culpa in contrahendo” (eg where negotiations have progressed so far that one party has incurred considerable expenditure in reliance on the acquisition going ahead). eMploYees Consultation requirements Shares Before an employer takes any decision regarding significant changes in its activities, it shall, on its own initiative, enter into negotiations with the employees’ organisation with which it is bound to negotiate pursuant to a collective bargaining agreement (CBA). A decision to acquire shares in another company is often likely to be considered as a “significant

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change” in the buyer. Correspondingly, a decision to sell shares in an affiliate is likely to be considered as a “significant change” in the seller. Businesses Before the acquisition takes place, the seller and buyer will generally be under an obligation to negotiate with any organisation of employees with which it is bound (or usually bound) by a CBA. In certain cases, there is also an obligation to inform the relevant trade union. If the employer is not bound or usually bound by a CBA, there is commonly a duty to negotiate with any trade union which has a member in the business being transferred. Shares and businesses If the employer does not fulfil its obligation to negotiate (and inform), damages are the main remedy. Damages rarely exceed SEK 300,000, but the level will depend on factors such as the number of employees affected by the acquisition. Business transfers
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Restrictions on post-transfer reorganisations? Consent from the individual employee must, as a general rule, be obtained in order to alter the terms and conditions of an employment contract post-transfer. Generally, the terms and conditions of a CBA cannot be changed unilaterally. They will remain in force until they expire.

Acquisition docuMents Any provisions incorporated by statute/law? Generally, the precise wording of the specific contractual provisions governs unless contrary to the mandatory provisions of applicable law. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible. finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Swedish company law prohibits advances, loans or security for the purposes of assisting in the acquisition of shares in the company providing assistance or a company in the same group of companies. Note, however, that:

Do employees automatically transfer? If so, what liabilities pass? Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees, with the exception of certain pension benefits.

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■

financial assistance in relation to the sale of a subsidiary is permitted – it is possible to sell subsidiaries in exchange for deferred consideration (and otherwise to financially assist a buyer of a subsidiary); and a “group” in a financial assistance context, means a group where the ultimate parent company is Swedish. Hence, it is possible for a Swedish subsidiary to provide financial assistance to a buyer of its parent company (eg by giving security over its assets to secure the acquisition debt) where the parent company which is being acquired is domiciled outside of Sweden.

Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Environmental liabilities for contaminated land may pass to the buyer if a business is acquired or real property is purchased, occupied or controlled by the buyer after completion. Otherwise, liabilities remain with the seller unless they are expressly assumed by the buyer with the consent of the creditor. Assignment of burden of contract? As a general rule, contracts may not be assigned without the other contracting party’s consent unless the contract states otherwise. coMpletion forMAlities Notarisation? Shares and businesses Notaries are not required to be involved.

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ukrAine

deAl structure Public company – formal offer required? The purchase of shares in a Ukrainian open joint stock company listed on a Ukrainian stock exchange must generally be effected through a licensed securities trader acting under a commission or agency agreement. However, on privatisation of such a company, a securities trader is not required and a formal offer (in an established form) is required. Can a foreign company acquire by merger? In theory yes, however it is not well regulated and may cause a lot of practical difficulties and problems. Restrictions on share or business transfers? Shares Except for pre-emption rights of other shareholders, which are provided for in Ukrainian company law, shares are, in principle, freely transferable. Additional restrictions (eg preemption rights of the target company over its own shares, approval requirements) may be contained in the charter. Transfer limitations contained in shareholder agreements, and not in the charter, are not generally considered to be valid. Pre-emption rights do not apply in open joint stock companies. Businesses There are no general limitations on transfers of businesses. Generally, transfers of businesses and not shares are viewed as less tax effective.

Shares and businesses Regulatory (anti-monopoly) approvals apply above certain thresholds. preliMinArY AgreeMents Legally binding? Preliminary agreements are legally binding to the extent that if one of the counterparties fails to enter into the principal agreement, the other party may claim its losses from the counterparty in default. Preliminary agreements have such a binding effect provided that the “essential conditions” of the principal agreement are defined. In the case of a share purchase, such conditions include the shares to be sold, the price to be paid and the term (period) of purchase. If a preliminary agreement does not include a specific deadline for the execution of the principal agreement, it must be executed within one year. Duty to negotiate in good faith? There is no duty to negotiate in good faith. eMploYees Consultation requirements Shares None. Businesses None.

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Business transfers
■

Do employees automatically transfer? If so, what liabilities pass? No automatic transfers, but prior consultation is required. Restrictions on post-transfer reorganisations? Generally, none.

joint stock company are sold to a foreign legal entity under an agreement governed by a non-Ukrainian law, such foreign entity would still have to use a licensed securities trader to effect such transaction). finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? Yes. The provision of a loan (interest bearing or interest free) is permitted. Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? No. Assignment of burden of contract? Contracts can only be transferred with the consent of the other contracting party. coMpletion forMAlities Notarisation? Shares/ownership interests None. Businesses Agreements for the sale and purchase of immovable property and land parcels must be notarised.

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Acquisition docuMents Any provisions incorporated by statute/law? Ukrainian law prescribes that the “material provisions” of an agreement for the sale and purchase of shares/ownership interest must include:
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parties; subject of the agreement; information about the shares/ownership interest, their quantity; price; and agreement’s validity term.

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In addition, where the acquisition requires the approval of the Antimonopoly Committee of Ukraine, the agreement must contain a condition precedent relating to the obtaining of such approval. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible, subject to certain mandatory Ukrainian legislation (laws and by-laws) (eg if the shares of a Ukrainian 70 |

Mergers & Acquisitions in Europe: Some Key Issues

united kingdoM

deAl structure Public company – formal offer required? A formal offer procedure must be followed on the acquisition of a public company and, in certain circumstances, a private company. Dispensation may be available from the relevant governing body, the Takeover Panel. Can a foreign company acquire by merger? Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company. (See further page 2). Other cross-border mergers are not permitted under UK law. Restrictions on share or business transfers? Shares Shares are, in principle, freely transferable. Restrictions (eg pre-emption rights) may be contained in the articles of association or in a privately negotiated shareholders’ agreement. Directors may have the discretion under the articles to refuse to register a transfer of shares, although this must be exercised in good faith.

Shares and businesses A quoted company that is a party to the acquisition may require shareholder consent depending on the size of the acquisition relative to that party. preliMinArY AgreeMents Legally binding? Letters of intent are not usually intended to be legally binding, unless the parties have clearly expressed that certain provisions are to be legally binding (eg those relating to confidentiality and lockout/exclusivity). Duty to negotiate in good faith? There is no duty to negotiate in good faith. eMploYees Consultation requirements Shares No information or consultation obligations arise on a share acquisition, although the terms of applicable collective bargaining agreements (CBAs) should be checked to confirm that there are no special provisions. Businesses The seller and the buyer must comply with statutory requirements to inform and consult with trade union representatives (or employee representatives if there is no recognised trade union) in respect of the employees affected. The seller must provide employee liability information to the buyer. | 71

Mergers & Acquisitions in Europe: Some Key Issues

If it is envisaged that measures will be taken in relation to the transferring employees, there is an obligation to consult with the representatives in good faith, with a view to seeking their agreement to the measures envisaged. Agreement does not have to be reached, but reasons must be stated for rejecting any representations made by the representatives. The buyer has an obligation to supply the seller with details of any measures it proposes to take in relation to the employees. In the event of failure to comply, a claim for compensation can be brought in the employment tribunal against the relevant party. The maximum financial penalty is up to 13 weeks’ gross pay per affected employee. The seller and the buyer will be jointly and severally liable for any compensation awarded in respect of the seller’s failure to consult. Business transfers
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Restrictions on post-transfer reorganisations? Changes made to individual employment contracts as a consequence of the transfer (which are not for an economic, technical or organisational reason) are normally ineffective, even where the employee has given consent. However, recent case law has suggested that changes made by the buyer which are favourable to the employee may be enforceable against the buyer. Changes unconnected with the transfer are permitted with the consent of the employee. The terms and conditions of any CBA entered into by the seller with a recognised trade union which are in force at the date of the transfer automatically transfer to the buyer and take effect as if the buyer had originally entered into the CBA.

Do employees automatically transfer? If so, what liabilities pass? Yes. All pre-transfer liabilities under the employment contracts of transferred employees will pass to the buyer, other than criminal liabilities of the seller in relation to the employees and certain rights arising in respect of old age or ill health retirement under occupational pension schemes. If the employees were eligible to participate in an occupational pension scheme pre-transfer, the buyer must provide the opportunity to participate in an occupational or stakeholder pension scheme, meeting specific statutory criteria, following the transfer. |

Acquisition docuMents Any provisions incorporated by statute/law? As a general rule, provisions are not incorporated into the acquisition agreement by reference to statute and/or law. The precise wording of the specific contractual provisions governs. Is foreign governing law permissible? Any overriding national law? Foreign governing law is permissible.

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Mergers & Acquisitions in Europe: Some Key Issues

finAnciAl AssistAnce (sHAre Acquisitions) Can a company give financial assistance to a buyer of its shares? English company law prohibits financial assistance, although there are some exceptions (eg a private company is permitted to give financial assistance in certain circumstances subject to strict compliance with detailed statutory requirements). Assets, liAbilities And creditors (business Acquisitions) Do any assets/liabilities automatically transfer to the buyer? Employment liabilities (see above). Environmental liabilities for contaminated land may pass to the buyer if real property is purchased, occupied or controlled by the buyer after completion. Generally, liabilities remain with the seller unless expressly assumed by the buyer.

Assignment of burden of contract? Contracts can only be transferred with the consent of the other contracting party. A transfer of a contractual liability requires the consent of the other contracting party in order to release the seller from its obligations. coMpletion forMAlities Notarisation? Shares and businesses Notaries are not involved unless the acquisition has an overseas element that requires certain documents to be notarised (eg a power of attorney may need to be notarised if it is to be used in a notarial completion meeting overseas).

Notes: 1 2 The Companies Act 2006, which is due to come into force during 2007/9, will introduce certain changes to company law which will impact on acquisitions for example on the financial assistance prohibition. Scotland is a separate legal jurisdiction to England and Wales. Accordingly, whenever undertaking the acquisition of a company incorporated in Scotland or a business with assets (in particular, real property) situated in Scotland, Scottish law advice should be sought.

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cee Max becker Partner t +43 1 531 78 1651 max.becker@dlapiper.com Andras posztl Partner t +36 1 487 7330 andras.posztl@dlapiper.com belgiuM caroline daout Partner t +32 (0)2 500 1624 caroline.daout@dlapiper.com frAnce fabrice rue Partner t +33 1 40 15 24 80 fabrice.rue@dlapiper.com gerMAnY

netHerlAnds barbara van Hussen Partner t +31 (0)20 541 9844 barbara.vanhussen@dlapiper.com norwAY Marius lysell Andresen Partner t +47 24 13 16 14 marius.lysell.andresen@dlapiper.com russiA denis sosedkin Partner t +7 812 448 7202 denis.sosedkin@dlapiper.com spAin Joaquin echanove Partner t +34 91 790 1654 joaquin.echanove@dlapiper.com sweden gustaf bodin Partner t +46 8701 7871 gustaf.bodin@dlanordic.se ukrAine Margarita karpenko Partner t +380 44 490 95 65 margarita.karpenko@dlapiper.com united kingdoM robert bishop Partner t +44 (0)20 7796 6631 robert.bishop@dlapiper.com

christoph papenheim
Partner t +49 (0) 69 271 33 260 christoph.papenheim@dlapiper.com klaus von gierke Partner t +49 (0)40 1 88 88 143 klaus.vongierke@dlapiper.com itAlY sergio Anania Partner t +39 02 80 61 81 sergio.anania@dlapiper.com

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DLA Piper is a global legal services organisation, the members of which are separate and distinct legal entities. For further information please refer to www.dlapiper.com/structure. A list of offices can be found at www.dlapiper.com. Copyright © 2008. All rights reserved. DLA Piper | 1674/OCT08


				
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