BUSINESS GROWTH
APRIL 2017 Mergers & Acquisitions
- Page 2: Contents Providing for valid hold h
- Page 6: Mergers & Acquisitions determinable
- Page 10: Mergers & Acquisitions this loophol
- Page 14: the Commercial Registry or registri
- Page 18: Mergers & Acquisitions Investing in
- Page 22: Mergers & Acquisitions SEC APPROVAL
- Page 26: Merger & Acqusitions concerns requi
- Page 30: Merger & Acqusitions What is Wrong
- Page 34: Merger & Acqusitions Mergers and Ac
APRIL 2017<br />
Mergers & Acquisitions
Contents<br />
Providing for valid hold harmless covenants in favor of directors in<br />
Italy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4<br />
Structuring European M&A activity: why Gibraltar? . . . . . . . . . . . . . . . . . . .7<br />
Aspects to Consider when Closing a Merger in Venezuela . . . . . . . . . . 12<br />
Injunctions in Canada Can Reach Far and Wide . . . . . . . . . . . . . . . . . . . . . 16<br />
Investing in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18<br />
Securities and Exchange Commission’s Approval: Is it a Sine Qua Non<br />
for every Asset(s) Acquisition Transaction? . . . . . . . . . . . . . . . . . . . . . . . . . 21<br />
In the second term of the Obama Administration . . . . . . . . . . . . . . . . . . 25<br />
Tax advisors in Israel are scrambling to find the best solution . . . . . . . 30<br />
M&A activity in Lebanon has been traditionally embryonic . . . . . . . . . 34
Mergers & Acquisitions<br />
Providing for valid hold harmless covenants in<br />
favor of directors in Italy.<br />
By Alberto Rittatore Vonwiller,<br />
Antonio Franchi<br />
In doing business are commonly set up hold harmless (or indemnity) covenants<br />
to protect directors against actions initiated by the company managed by them,<br />
company’s shareholders or any third party, in relation to the activities carried out<br />
by directors in their office. Such covenants are entered into at the beginning, in the<br />
meanwhile or at the end of a corporate management office or in connection with<br />
extraordinary operations (such as, by way of example, M&A transactions) as well. It<br />
As a consequence, a valid hold harmless covenant<br />
may be entered into in all cases in which a guarantor<br />
assumes damages or liabilities arising from negligent<br />
or grossly negligent actions of the guaranteed towards<br />
third parties.<br />
Nevertheless, it has to be considered that in case<br />
the indemnity covenant refers to the liability of the<br />
guaranteed for acts committed by itself against<br />
the guarantor such indemnity cannot cover grossly<br />
negligent actions, because the exemption in advance<br />
between creditor (guarantor) and debtor (guaranteed)<br />
from responsibility for grossly negligent actions (or<br />
for willful misconduct) is forbidden pursuant to article<br />
1229 of the Italian Civil Code.<br />
Given the above, it is necessary to check whether the<br />
above considerations may also apply as regards the<br />
hold harmless covenant to cover the consequences of<br />
criminal or administrative illegal actions.<br />
Regarding the violation of criminal laws, the above<br />
criteria apply, for which the indemnity is invalid only<br />
if the responsibility of the person indemnified was<br />
caused by his/her willful misconduct.<br />
To this regards it is worthy to mention that it is not<br />
of secondary legislation that regulates the insurance<br />
sector, it is not valid any form of indemnity to cover<br />
risks relating to the imposition of administrative fines.<br />
This is because such an indemnity agreement would<br />
deprive the power of reaction of the State towards the<br />
administrative offenses provided for by provisions for<br />
the protection of the public interest. Nevertheless, an<br />
exception to this principle is made by fiscal rules, by<br />
which for cases of infringement carried out without<br />
fraud or gross negligence, the individual, the company,<br />
the association or the entity may assume the debt of<br />
the person (director) responsible of the infringement<br />
(usually, the CEO or the director charged with the<br />
responsibility of Tax compliance) (see Article 11,<br />
section 6 of the legislative Decree December 18, 1997,<br />
no. 472, as subsequently amended).<br />
An important aspect for the purposes of setting up<br />
a valid hold harmless covenant is represented by<br />
providing for a determined or determinable object.<br />
In fact, it could be argued that a wide hold harmless<br />
covenant – with no indication of a specific event or<br />
behavior from which future liability might arise – may<br />
be held invalid for conflict with Article 1346 of the<br />
Under Italian law such covenants are not specifically<br />
envisaged in the Civil Code, nor in any other law or<br />
regulation, whilst they are qualified atypical guarantees<br />
to be considered valid in case interests worthy of<br />
protection are pursued pursuant to articles 1322<br />
(Freedom of contract), 1343 (Unlawful consideration)<br />
and 1418 (Causes of nullity of the contract) of the<br />
Italian Civil Code.<br />
Therefore, in the Italian system, it is firstly necessary to<br />
ascertain if limits of public policy exist to the eligibility<br />
of atypical guarantees (or atypical contracts / hold<br />
harmless covenants). To this regards, it is commonly<br />
accepted that it is contrary to the public policy only the<br />
covenant to indemnify a party from damages deriving<br />
from its willful misconduct (or damages related to<br />
intentional abuse).<br />
admissible a hold harmless covenant to protect the<br />
directors who committed the crime of false accounting<br />
as envisaged by article 2621 of the Italian Civil Code,<br />
which is by nature a fraudulent offense (see article<br />
2621 of the Italian Civil Code, as amended by Law May<br />
27, 2015, no. 69; see also Court of Cassation on June 16,<br />
2015, no. 33774).<br />
With respect, however, to the breach of administrative<br />
provisions of law, it has to be noted that, in application<br />
Italian Civil Code, by which the object of the contract<br />
has to be possible, lawful, determined or determinable.<br />
A valid and enforceable indemnity, therefore, requires<br />
that the facts from which the liability (or the debt or<br />
the damage) can arise are indicated and well-specified<br />
so that the potential extent of the risk can be defined<br />
economically.<br />
These facts can be represented by any act, fact or<br />
circumstance, to the extent they are determined or
Mergers & Acquisitions<br />
determinable: such as behaviors that are related to<br />
the duties of the person to be indemnified or activities<br />
carried out by the latter, breaches of any nature, facts<br />
or acts concerning specific sectors, provided they are<br />
not committed with fraudulent behavior (nor with<br />
gross negligence, in case the acts covered by the<br />
indemnity covenant are committed by the guaranteed<br />
towards the guarantor).<br />
An additional element to be necessary for the validity<br />
of the hold harmless covenant – except the cases<br />
(difficult to implement concretely) in which the<br />
liability or debt positions are well-specified and welllimited<br />
– is represented, then, by the determination<br />
or determinability of a maximum amount for the<br />
assumption of debt.<br />
To this regards, it is however necessary to keep in mind<br />
that, if responsibility, damages or debt positions could<br />
not be determined to certain economic extents, the<br />
provision of a cap that defines the boundaries of the<br />
economic value of the indemnity is to be considered<br />
necessary on the basis of the application of the<br />
principle of public policy, imperative, envisaged by<br />
Article 1938 of the Italian Civil Code on the guarantee<br />
related to future or conditional obligations, according<br />
Structuring European M&A activity: why<br />
Gibraltar?<br />
By Ian Felice,<br />
Tania Rahmany<br />
Alberto Rittatore Vonwiller<br />
Partner at Carnelutti Studio Legale Associato<br />
T: +39 02 65585 1<br />
Email: alrittatore@carnelutti.com<br />
Alberto Rittatore Vonwiller is a partner in Carnelutti Studio Legale Associato. He is a member of the firm’s corporate<br />
and M&A department, where his practice focuses on mergers and acquisitions and corporate finance work,<br />
Antonio Franchi<br />
Partner at Carnelutti Studio Legale Associato<br />
T: +39 02 65585 1<br />
Email: afranchi@carnelutti.com<br />
Antonio Franchi is a partner in Carnelutti Studio Legale Associato. He is a member of the corporate and M&A<br />
department, where his practice focuses on civil, commercial and corporate law. He advises Italian and foreign<br />
entities, including listed companies, in corporate and M&A matters, capital contributions in the form of transfers<br />
of businesses and shares, joint ventures, shareholders’ agreements, sale and purchase of real estate properties and<br />
The European M&A market saw record trends in 2015,<br />
with Q4 2015 being the highest ever quarter for deal<br />
value in Europe, exceeding €420billion 1 . A weakening<br />
euro resulted in strong US investment playing an<br />
important role, and amounting to over US$ 208 billion.<br />
This seems to have particularly fuelled European<br />
M&A, which saw deal values increase 40% in the first<br />
quarter of 2016, compared to the same period in 2015,<br />
despite uncertainty in Europe in the lead-up to the UK<br />
referendum on retention of its EU membership 2 .<br />
The increasingly international nature of transactions<br />
1 Deloitte“Impact of the EU referendum on M&A activity in the UK”<br />
accessed on 5th August 2016 on https://www2.deloitte.com/content/<br />
dam/Deloitte/uk/Documents/international-markets/deloitte-uk-impact-of-the-eu-referendum-on-ma-activity-in-the-uk.pdf<br />
2 Ibid<br />
is evidenced by the fact that cross-border M&A<br />
represents significant proportions of overall activity.<br />
The key challenge in structuring deals of this nature<br />
is to minimise costs for the purchaser, both in terms<br />
of professional fees and importantly, tax liabilities.<br />
Gibraltar provides unique attributes which make it an<br />
ideal international financial centre for structuring M&A<br />
transactions.<br />
The recent decision of the UK to leave the EU will affect<br />
Gibraltar, which depends on the UK’s EU status for its<br />
own membership. While this has inevitably created a<br />
period of uncertainty, the EU methodologies discussed<br />
in this article will certainly remain available until such
Mergers & Acquisitions<br />
time as Article 50 of The Lisbon Treaty is triggered by the<br />
company and a company registered anywhere in the<br />
number of shareholders a company can have,<br />
Stock Exchange. The fact that capital gains are not<br />
UK government and EU law ceases to be applicable to<br />
EU, and another between that company and the UK<br />
which enables a Gibraltar company to be funded<br />
taxed makes an IPO for institutional investors and<br />
the UK.<br />
company.<br />
easily with a large share capital, which would be<br />
private equity houses to be attractive.<br />
1. Membership of the EU<br />
Companies looking to enter into the European singlemarket<br />
can use Gibraltar as a gateway to Europe. In<br />
contrast with the other international financial centres,<br />
it is often compared to, such as Jersey or Guernsey,<br />
Gibraltar’s membership of the EU enables a Gibraltar<br />
company to passport services throughout Europe at low<br />
cost, with the support of a cooperative, easily accessible,<br />
responsive and business-focused regulator.<br />
These factors make Gibraltar an attractive location for<br />
inbound European M&A activity from the US and Asia.<br />
A Gibraltar vehicle could also be used for the structuring<br />
of deals involving other EU member state companies,<br />
which is facilitated by the fact that Gibraltar has<br />
transposed the Cross Border Merger Directive (“the<br />
CBMD”).<br />
The CBMD facilitates cross-border M&A activity for<br />
limited companies by providing a simple framework<br />
drawing largely on national laws applicable to domestic<br />
mergers. This avoids the sometimes prohibitively high<br />
costs of cross-border M&A deals, as well as avoiding the<br />
winding up of the target company. A Gibraltar company<br />
can merge with a company registered in any other EU<br />
member state. Interestingly, the CBMD does not operate<br />
between Gibraltar and the UK, which are not deemed to<br />
be the separate EU Member States for this purpose. The<br />
same result can be obtained, however, by undertaking<br />
two cross-border mergers, one between the Gibraltar<br />
Gibraltar’s EU membership and first class regulatory<br />
regime means that holding structures or special purpose<br />
vehicles in Gibraltar will be fully compliant with the<br />
standards expected by the European Commission<br />
and applicable tax laws. This, coupled with Gibraltar’s<br />
adoption of EU standards of administrative co-operation<br />
in the field of taxation and other tax information<br />
exchange regimes, resulted in Gibraltar scoring “largely<br />
compliant” in its review by the OECD. This reputation<br />
facilitates dealings with third parties, ensuring lack of<br />
transparency does not hinder the business.<br />
2. Flexible company law regime<br />
for modern-day transactions<br />
and business-focused tax laws<br />
• Corporate law and tax regime<br />
Gibraltar overhauled its Companies Act in 2014,<br />
to include some features which make Gibraltar<br />
companies attractive for structuring acquisition<br />
vehicles and facilitating M&A activity. Gibraltar<br />
corporate vehicles enjoy the flexibility of the<br />
English common law; a legal regime which is<br />
widely used and preferred by businesses around<br />
the world.<br />
A Gibraltar company only requires one director<br />
and one secretary (which can be corporate<br />
entities), with no requirements for agents or<br />
resident directors (although the location of<br />
management and control can determine the<br />
company’s tax residence). There is no limit on the<br />
subjected to a fixed capital duty of only £10. It is<br />
also possible to have different share classes, such<br />
as redeemable shares, or shares with preferential<br />
rights to dividend and/or a return of capital on a<br />
winding up.<br />
There are no minimum capital requirements and<br />
share capital can be denominated in any lawful<br />
currency. Shares can be issued per any value<br />
and at a premium. Nominee shareholdings are<br />
also permitted.The taxation of companies are<br />
relatively simple, and also facilitate business<br />
needs. All companies are chargeable on taxable<br />
profits accrued and derived in Gibraltar, at a fixed<br />
rate of 10%. Capital gains are not taxed, and<br />
no withholding tax is imposed on the payment<br />
of interest or dividends. Interest income is<br />
generally not taxable, unless it is inter-company<br />
loan interest that is received by or accrues to<br />
a company and is in excess of £100,000 p.a.<br />
Furthermore, the transfer of shares in a Gibraltar<br />
company is not subject to any tax or duty, unless<br />
the company whose shares are transferred holds<br />
Gibraltar real estate.<br />
• Gibco as an investment vehicle<br />
Gibraltar Private Limited companies are able<br />
to convert to public companies, as well as a<br />
number of different forms. The shares of Gibraltar<br />
companies have been listed on international<br />
recognised stock exchanges, such as the London<br />
It is also possible for Gibraltar companies to<br />
return capital to shareholders (e.g., by delivering<br />
redemption proceeds on a redemption of the<br />
shares) as opposed to distributing profits by<br />
way of dividend.The fund industry in Gibraltar<br />
has been growing at a rapid pace and continues<br />
to expand. There are many types of fund in<br />
Gibraltar, including private funds, Experienced<br />
Investor Funds (EIFs), Non-UCITS Retail funds and<br />
protected cell companies. This makes Gibraltar a<br />
serious option for basing investment funds.<br />
3. Mergers and schemes of<br />
arrangement<br />
Mergers are possible for public companies, and<br />
the Companies Act 2014 provides a framework<br />
for reconstructions and schemes of arrangement.<br />
The recent prohibition on cancellation schemes of<br />
arrangement in the UK (by virtue of the Companies Act<br />
(Amendment of Part 17) Regulations 2015) has resulted<br />
in stamp duty payments on the transfer of shares being<br />
an additional cost to a purchaser. Given that cancellation<br />
schemes were the overwhelmingly preferred structure<br />
for conducting high value acquisitions, the closure of
Mergers & Acquisitions<br />
this loophole has resulted in a significant increase in<br />
duty in the UK. In Gibraltar, no stamp duty is payable<br />
arrangement, who wish to take advantage of the<br />
redomiciling to Gibraltar to take advantage of the<br />
costs involved in an acquisition. While the rate of stamp<br />
on shares (unless the transaction involves real estate<br />
benefits structuring the acquisition in this way<br />
competitive and flexible taxation and legal regime.<br />
duty in the UK is currently only set at 0.5%, this can<br />
located in Gibraltar). In an increasingly cost-conscious<br />
can provide redomicile under the Companies Act<br />
Companies registered in any of the following<br />
market, this can amount to a significant saving for the<br />
2014. Once redomiciled to Gibraltar, the scheme of<br />
jurisdictions may redomicile into Gibraltar:<br />
purchaser.<br />
arrangement provisions under Gibraltar corporate<br />
Any of the EEA States, Anguilla, Bermuda, British<br />
The proposal is illustrated below:<br />
law can be utilised. Similarly, after completing an<br />
Antarctic Territory, British Indian Ocean Territory,<br />
1. Shares in UKCo cancelled, in consideration for the<br />
M&A transaction, the new business may consider<br />
Cayman Islands, Falkland Islands, Guernsey, Isle of<br />
issuing of shares in Gibraltar HoldCo<br />
Ian Felice<br />
2. BuyerCo purchases shares of Gibraltar HoldCo. No<br />
Partner at Hassans<br />
amount to a significant quantity in a high-value M&A<br />
deal. Purchasers of UK businesses may therefore consider<br />
whether the stamp duty saving could be retained by<br />
using Gibraltar to structure the deal.<br />
The UK prohibition on cancellation schemes does not<br />
prevent a cancellation scheme of arrangement from<br />
being used to insert a holding company over the target<br />
company. It is possible therefore, to insert a Gibraltar<br />
holding company over the UK target, by cancelling the<br />
shares in the UK company in consideration for issuing<br />
to the shareholders, new shares in a Gibraltar company<br />
which will hold shares in the target. A purchaser could<br />
then acquire the shares in the Gibraltar company by way<br />
of a share transfer.<br />
The shares of a Gibraltar company with a share register<br />
maintained outside the UK are not subject to stamp<br />
stamp duty is payable in the UK on shares in Gibraltar<br />
companies and no stamp duty on shares in Gibraltar.<br />
In addition, there would be no tax on the dividends<br />
received from the UK target to the Gibraltar HoldCo, and<br />
no withholding tax on dividends paid from Gibraltar<br />
HoldCo to the BuyerCo. Corporation tax would only be<br />
on profits accrued and derived in Gibraltar, at a flat rate<br />
of 10%.Furthermore, the lack of VAT provides significant<br />
savings on professional fees.<br />
4. Redomiciliation<br />
Gibraltar law permits redomiciliation of companies<br />
registered in a number of other countries to Gibraltar,<br />
as well as the redomiciliation of Gibraltar companies<br />
elsewhere. This can be vastly helpful in the context<br />
of M&A transactions. In the above example, for<br />
instance, companies incorporated and registered in<br />
jurisdictions which do not recognise the scheme of<br />
T: +350 200 79000<br />
Email: ian.felice@hassans.gi<br />
Ian Felice commenced work with Hassans in 1999 and is a Partner of the Corporate and<br />
Commercial Team. During his time at Hassans, Ian has become deeply involved in transactional<br />
work relating to the use of Gibraltar-based structures, principally for UK and European<br />
commercial property investments, and regularly advises on corporate restructuring and<br />
acquisition, Joint Venture work and on the floatation of Gibraltar companies on recognised<br />
Stock Exchanges.<br />
An LLB (Hons) Graduate from the University of Nottingham, Ian completed his Bar Vocational<br />
Course at the Inns of Court School of Law in London. A member of the Honorable Society of the<br />
Middle Temple, Ian was called to the Bar in England and in Gibraltar in 1999 and in the BVI in<br />
2010.<br />
Tania Rahmany<br />
Trainee Solicitor at Hassans<br />
Tania Rahmany joined Hassans as a Trainee Solicitor in October 2015 and is currently<br />
undertaking a seat in the firm’s Corporate & Commercial Team. She is an LLB graduate of Queen<br />
Mary College, University of London, and completed an LLM LPC in International Legal Practice<br />
at the University of Law, Guildford.
Aspects to Consider when Closing<br />
a Merger in Venezuela<br />
Miguel Velutini, Reinaldo Hellmund and Carlos Martínez<br />
the complexities of successfully completing a<br />
merger in Venezuela, where a number of filings<br />
must be made in order to perform the legal<br />
steps required to close a merger. In such regard,<br />
the process of completing a merger will require<br />
proper organization, planning and will typically<br />
last for approximately 6 months before it will be<br />
completed.<br />
From a legal standpoint, the decision to<br />
merge two companies shall be adopted in the<br />
shareholders’ meeting, a meeting that would<br />
discuss how both entities should be merged. The<br />
Articles of Incorporation of the companies often<br />
contain special quorum and voting requirements<br />
in order to approve a merger, but if the Articles<br />
that may be relevant. Even though the law does<br />
not specifically require it, commercial registries<br />
require that the merger agreement should be<br />
notarized. 2<br />
Financial statements of both companies dated<br />
on the date of the merger shall be prepared and<br />
presented to the commercial registry together<br />
with the notarized merger agreement and the<br />
shareholders meetings of both companies<br />
approving the merger.<br />
It is important to point out that the registration<br />
processes before the Commercial Registries<br />
are frequently delayed for many reasons,<br />
including the fact that Commercial Registries<br />
often request changes to be made on the<br />
Venezuela is currently<br />
going through a very<br />
complex situation in<br />
which the climate for<br />
doing business has become<br />
difficult for all parties<br />
involved in any part<br />
of the economic process.<br />
and processes in a vast amount of governmental<br />
entities, a fact that requires the commitment<br />
of a substantial amount of resources and time<br />
for each entity that exists and operates in the<br />
country. As a consequence of the foregoing,<br />
many businesses that were structured with<br />
various legal entities for different reasons,<br />
including tax and liability mitigation, have opted<br />
to downsize their operations by merging their<br />
of Incorporation are silent, the decision shall be<br />
adopted in a meeting where 75% of the shares<br />
representing the total capital is present and<br />
with the affirmative vote of at least, half of the<br />
shareholders attending the meeting 1 .<br />
The companies to be merged shall enter into a<br />
“merger agreement” which shall be executed<br />
by authorized representatives of both parties.<br />
The merger agreement must set forth the<br />
terms and conditions of the merger, such as<br />
documentation that has been presented, to the<br />
form in which documents are presented or in the<br />
supporting documents that shall be filed. These<br />
requirements changes from one Commercial<br />
Registry to another. Therefore, the timing of the<br />
merger is an important issue and so, it is very<br />
crucial to go beforehand to the Commercial<br />
Registry with much anticipation as possible, so<br />
as to understand the requirements established<br />
by the Commercial Registry in which the specific<br />
The regulatory burden for entities doing business<br />
subsidiaries into one or some few entities, in<br />
specifications that could lead to the survival of<br />
merger documentation will be registered.<br />
in the country is very high, and companies are<br />
order to have fewer structures to operate.<br />
the entity, and conditions that could cease the<br />
Once the shareholders meetings are registered in<br />
required to be registered, keep in place records<br />
The reality described above also permeates into<br />
entities’ existence, as well as any other matter<br />
1 Article 280 of the Venezuelan Code of Commerce.<br />
2 Based on an Article 23 of Resolution Number 19 of the Ministry<br />
of Interior, Justice and Peace dated January 13, 2014
the Commercial Registry or registries the merger<br />
agreement shall be published in an authorized<br />
legal publication. In practice, the shareholders<br />
meetings approving the merger are also<br />
published.<br />
The merger will not be effective until a<br />
3-month period which will be counted from<br />
the date on which the publication previously<br />
indicated has been made. The Commercial<br />
Code establishes that the merger may be closed<br />
before such period if evidence of payment<br />
of the company’s debts or the approval of all<br />
creditors is evidenced. However, this is very<br />
unusual since in practice, there are just too many<br />
potential creditors for any given company, and<br />
the 3-month period is seen in practice as almost<br />
mandatory without exception.<br />
During the 3-month period indicated before, any<br />
creditor can oppose the merger, which if done,<br />
will suspend the merger until the suspension is<br />
lifted through a definitive judicial decision.<br />
Once the 3-month period elapses without any<br />
opposition from the creditors of the merging<br />
companies, the merger may become effective<br />
and the surviving company shall assume all<br />
rights and liabilities of the company that ceases<br />
to exist. In such manner, most practitioners and<br />
authors assume the position that the surviving<br />
company is the universal successor of the<br />
company which ceases to exist.<br />
Once the merger becomes effective, many<br />
notices to all kind of governmental entities shall<br />
be made. In such regard, the Tax administration<br />
shall be notified of the merger within one month<br />
from the date the merger became effective.<br />
Also, an income tax return shall be filed for<br />
the “short” fiscal period of the entity that is<br />
extinguished and that will end on the date the<br />
entity ceases to exist.<br />
In addition, all governmental entities in which<br />
the company that ceases to exist is registered<br />
(such as the social security administration,<br />
Miguel Velutini<br />
T: +58 (212) 285 4944<br />
Email: mvelutini@romen.com<br />
Mr Velutini specialises in the areas of corporate law, oil and gas, project finance, mergers and acquisition, foreign investment,<br />
banking and secured transactions.<br />
Mr Velutini has participated as counsel to various companies in the restructuring and re-financing of their debt; as counsel to<br />
the lenders and sponsors in the structuring and implementation of various financing agreements in Venezuela in the oil and gas<br />
sector; as counsel to both buyers and sellers in the acquisition, sale and spin-off of various companies and divisions of companies in<br />
Venezuela; as counsel in the negotiation of various infrastructure joint venture agreements. In addition, Mr Velutini actively counsels<br />
Reinaldo Hellmund<br />
T: +58 (212) 285 4944<br />
Mr Hellmund specialises in the areas of corporate law, oil and gas, project finance, financing and lending transactions, secured<br />
transactions, merger and acquisition foreign investment.<br />
Mr Hellmund has represented several international oil companies in their business in Venezuela, including structuring of association<br />
agreements for extra heavy crude oil, gas, pipelines projects and operation agreements. Mr Hellmund has represented lenders,<br />
underwriters and project sponsors on several of the most important financing, oil & gas and project finance transactions seen in<br />
Venezuela.<br />
Mr Hellmund has participated as counsel to various companies in the restructuring and re-financing of their debt; as counsel to<br />
the lenders and sponsors in the structuring and implementation of various financing agreements in Venezuela in the oil and gas<br />
sector; as counsel to both buyers and sellers in the acquisition, sale and spin-off of various companies in Venezuela; as counsel in<br />
the negotiation of various infrastructure joint venture agreements. In addition, Mr Hellmund actively counsels various clients in
Mergers & Acquisitions<br />
IN A COMPETITIVE M&A MARKET, TRUST<br />
By Mary Walsh<br />
Merrill DataSite provides due diligence platforms for financial transactions<br />
worldwide, and as such is a leading indicator of trends and future trends<br />
across global deal markets. However, no one needs us to tell them that M&A<br />
markets are currently bullish; there’s no doubt about it. There has been a flurry<br />
of activity over recent months, and dealmakers in private equity, corporate<br />
From the latest Mergermarket M&A Insider reports<br />
sponsored by Merrill DataSite, we know global deal<br />
value was up 27% year on year from May 2014 to May<br />
surpassing their targets, including Silverfleet, Inflexion,<br />
Carlyle, Equistone and Bridgepoint. Added to that, debt<br />
is cheap, so when an acquisition situation comes along<br />
establishing a successful team that really forms the basis of<br />
good M&A deal-making, ultimately making the difference in<br />
a competitive situation.<br />
When relationships are established,<br />
generate success, and work for mutual<br />
benefit, why change them?<br />
This philosophy has been a long standing tenet of Merrill<br />
DataSite’s. We support expediting due diligence processes<br />
for our clients – old and new. Yes, we do that through<br />
technology, but largely we achieve this through the human<br />
element in our part of the transaction. Our Project Managers<br />
work 24 hours a day, seven days a week in dedicated<br />
teams to ensure there is always someone available and<br />
ready to answer the phone, to open the project, or to load<br />
documentation onto the due diligence platform. This builds<br />
trust with our clients that we can deliver, and that’s the<br />
differentiator.<br />
You have to deliver quality, of course, but you have to deliver<br />
it fast. It’s a universal truth when talking to professionals in<br />
M&A that there are time pressures. Time-squeeze is a fact of<br />
life, and processes that clients may previously have built a six<br />
month contingency for are now being demanded within two<br />
months or less.<br />
Clients want to complete a transaction or make decisions<br />
quickly in order to capitalise on the opportunities they<br />
are being presented with and to gain the winning edge. If<br />
they can seal the deal quicker than anyone else, establish<br />
a relationship with the seller and gain their trust, then it is<br />
less likely that the process will drag on or go to auction. For<br />
example: one large, global sponsor recently completed an<br />
acquisition after they told the target company that they<br />
could finish the process in five days.<br />
The law firms under the pressure of these ever compressed<br />
timelines advise buyers that due diligence processes have to<br />
be done as fast as possible, which means using a supporting<br />
cast of experts who can simplify the process. This is done by<br />
auto-enabling every document placed in a virtual data room<br />
so it becomes fully searchable within seconds, information<br />
can be found quickly and easily, smoothing the process, with<br />
project managers ready in the wings if needed.<br />
If an M&A client can steer their deal towards a swift<br />
conclusion, saving time and money in the process, they will<br />
be happy. If they can keep out the competition and prevent<br />
their asset from going to auction, that is all to the good. If<br />
they can invest their capital and have that generating profit,<br />
rather than languishing, waiting to be put to good use, all<br />
the better. And, if trusted partners and advisors can help<br />
2015, whereas deal volume was down 30.9% – proving<br />
competition for assets is growing fierce.<br />
One major issue related to this is that there is simply too<br />
much cash – both dry powder and on corporate balance<br />
sheets – chasing deals, which is raising competition to new<br />
heights, increasing some valuations to pre-financial crisis<br />
levels.<br />
Numerous new funds have closed in recent months,<br />
individuals want and need to be ready to move fast.<br />
Law firms and M&A lawyers know better than anyone the<br />
demands this can place on every layer of their organisation<br />
– from Partner to Associate. Everyone understands that<br />
when serving the client, delivering what they want (and fast)<br />
is paramount, because delivery engenders trust and trust<br />
engenders repeat business.<br />
It is gaining trust, building long-term relationships, and<br />
Mary Walsh<br />
Regional Director at Merrill DataSite<br />
T: +44 (0) 20 3031 6300<br />
Email: mary.walsh@merrillcorp.com<br />
Mary Walsh is regional director at Merrill DataSite, the world’s leading provider of virtual data room solutions for due diligence and<br />
document management. She joined the corporation in 2013 and is responsible for International Sales in the United Kingdom. Now<br />
based in the European Headquarters of Merrill Corporation, Mary was previously posted in New York and later Paris. She brings more<br />
than 10 years executive level sales experience, working with the world’s leading fund managers, consultancies and corporations.
Mergers & Acquisitions<br />
Investing in Italy<br />
By Gianfranco Puopolo<br />
According to recent data regarding the Italian M&A market, the 2008 financial crisis is<br />
over. Compared to the previous year, the Italian M&A market registered a significant<br />
increase of deals having an aggregate value of approximately 49 million euro. Out<br />
of over 500 transactions completed in 2014, more than 37% of the deals were crossboard<br />
transactions while Italian companies targeted domestic companies as well as<br />
investments abroad. 1 Just to name a few of the deals that took place in 2014, worthy<br />
of mention are the acquisition of Indesit by Whirlpool and Grom – a local ice-cream<br />
business – by the Unilever Group while Italian investments abroad targeted, for example,<br />
1 KPMG M&A Report 2014<br />
home country. As a member of the Monetary Union,<br />
Italy has a strong currency – the Euro – which has a<br />
significant impact on imports and exports and that is<br />
not subject to the loss of purchasing power, as may be<br />
the case for weaker currencies. Further, by investing in<br />
underdeveloped areas, such as Southern Italy, an entity<br />
may become eligible to apply for state grants and nonrefundable<br />
facilities.<br />
Moreover, it cannot be denied that Italian<br />
craftsmanship is without rivals and that Italy offers<br />
a combination of state-of-the-art technology and<br />
creativity that make Italian products unique worldwide.<br />
This is a rare blend that will be difficult to find<br />
elsewhere in Europe and the “Made in Italy” brand<br />
gives a product unquestionable added value.<br />
The awakened interest in the Italian market and the<br />
reprise of acquisitions by foreign as well as Italian<br />
investors have been triggered by a variety of factors<br />
such as monetary policies enacted by the European<br />
Central Bank and recent reforms of the Italian labour<br />
market.<br />
The quantitative easing plan approved by the ECB<br />
has injected a significant amount of cash into the<br />
market and the supply of liquidity to banks and<br />
credit institutes has promoted lending to enterprises.<br />
Businesses now find themselves having easy access to<br />
have been mitigated by recent reforms enacted by the<br />
government headed by Prime Minister Matteo Renzi.<br />
The primary piece of labour legislation passed by the<br />
Renzi Government, known as the “Jobs Act”, has deeply<br />
reformed the Italian labour market.<br />
While the Jobs Act in its entirety is still being<br />
implement, it provides for new types of employment<br />
contracts and has simplified the hiring and firing<br />
process, streamlining the entire employment<br />
relationship and making it easier to dismiss employees.<br />
With a view at promoting employment, the Jobs Act<br />
offers tax breaks to companies that hire personnel with<br />
permanent employment contract and has reorganized<br />
existing social shock-absorbers.<br />
Since the implementation of the Jobs Act, indicators<br />
show that the unemployment rate has gone down<br />
for the first time in years. Labour Unions, however,<br />
continue to be key players in employment negotiations<br />
processes and their role and influence should not be<br />
under estimated.<br />
The Challenges of Investing in<br />
Italy<br />
The reforms introduced by the Renzi Government<br />
accompanied by the BCE’s monetary policies have<br />
certainly generated greater stability in the overall<br />
Italian scenario. Nonetheless, there are still many<br />
Foreign investors have always displayed a special<br />
interest towards the Italian market. Italy is a gateway<br />
to the European Union. Investing in Italy means<br />
acquiring the possibility of taking advantages of the<br />
single market, including the freedom of establishment<br />
or the freedom to provide services thus overcoming<br />
the barriers that Non-EU entities are likely to face<br />
in order to do business in the EU directly from their<br />
funds that they are willing to invest in new projects,<br />
whether in Italy<br />
or abroad.<br />
Also, rigid labour laws that have always been of<br />
concern to foreign companies doing business in Italy<br />
challenges that foreign investors must address within<br />
the context of an M&A deal.<br />
Depending on the specific field of business, investors<br />
may unexpectedly find themselves tangled in red<br />
tape and authorization proceedings that sometimes
Mergers & Acquisitions<br />
discourage investors coming from jurisdictions that<br />
do not impose the same degree of government<br />
involvement.<br />
In this respect it is noteworthy to point out that while<br />
EU nationals – whether individuals or corporations –<br />
usually benefit from the same treatment reserved to<br />
Italians, non-EU nationals may be required to meet<br />
certain criteria of eligibility in order to be enabled to<br />
do business in Italy, for example they may be required<br />
to establish an Italian subsidiary. Also, foreign clients<br />
often approach the Italian market with a certain degree<br />
of mistrust that follows the many commonplaces on<br />
Italy.<br />
Foreign companies are often trapped in the meanders<br />
of Italian bureaucracy that Italian themselves have a<br />
hard time dealing with. Foreign investors that are used<br />
to streamline processes in their home countries will<br />
have to cope with more complex laws and sometimes<br />
unreasonable, albeit mandatory, courses of action.<br />
Gianfranco Puopolo<br />
Partner at PG Legal<br />
What is Our Role<br />
In the face of these challenges, in addition to providing<br />
highly professional and qualified legal services, our<br />
goal is to lead our clients through the various steps<br />
of any mandatory processes in order to overcome<br />
potential obstacles in completing a transaction,<br />
whether this obstacle consists in obtaining a license<br />
to operate a specific type of business or dealing with<br />
unions to renegotiate workers’ rights.<br />
We lead our clients through the red tape and explain to<br />
them the legal scenario within which they will operate.<br />
In this respect, we assist our clients by dealing directly<br />
with government officials and regulatory authorities<br />
with which we have established sound relations, and<br />
provided detailed guidelines on how to do business<br />
in Italy. We adopt a comprehensive approach that<br />
addresses all the potential issues related to an M&A<br />
transaction and specific type of business, from legal to<br />
tax to regulatory and suggest a range of solutions that<br />
Securities and Exchange Commission’s Approval: Is it a Sine Qua<br />
Non for every Asset(s) Acquisition Transaction?<br />
By Fidelis Adewole<br />
The Securities and Exchange Commission (“SEC”), established under<br />
the Investments and Securities Act, 2007 (“ISA”) is the body charged<br />
with the overall regulation of capital market activities in Nigeria.<br />
The SEC has also unwittingly become a competition regulator.<br />
Accordingly, the SEC has the responsibility of reviewing, approving<br />
and regulating mergers, acquisitions, takeovers and all forms of<br />
business combinations. (ISA, s. 13.)Thus, every merger, acquisition or<br />
T: +39 02 760 13359<br />
Email: g.puopolo@pglegal.it<br />
Gianfranco assists companies in complex transactions where he represents institutional investors, sellers or buyers.<br />
He represents Italian and foreign listed companies in acquisitions or reorganization of businesses. Highlights of his<br />
work include representing the leading Ukrainian conglomerate in the acquisition of steel mills in Italy and in other<br />
EU countries. Gianfranco assists insurance companies and financial institutions on corporate transactions and on<br />
the establishment of subsidiaries in Italy. Gianfranco sits on board of directors and advisory boards of companies<br />
investing in Italy. He appears as an expert in his field in major legal directories such as Chambers and Legal 500.<br />
There are two topical issues among practitioners<br />
relating to the requirement for SEC’s approval for<br />
asset acquisitions: (A) whether the SEC’s approval<br />
is required for an asset acquisition; and (B) if the<br />
SEC’s approval is required, whether there is or there<br />
should be a monetary threshold or asset value that<br />
would trigger the SEC approval requirement? The<br />
ISA is not altogether clear on these and the lack<br />
of clarity is due largely to the language used in<br />
the SEC Rules and Regulations, 2013[1] (the “SEC<br />
Rules”).
Mergers & Acquisitions<br />
SEC APPROVAL FOR ASSET<br />
ACQUISITIONS?<br />
restructuring if SEC finds that “such acquisition,<br />
whether directly or indirectly, of the whole or any<br />
It is settled law that in the interpretation of statutes,<br />
every clause of a statute must be construed with<br />
ensure that such asset acquisition will not cause<br />
substantial restraint of competition or tend to<br />
Rule 421(1) of the SEC Rules defines “acquisition” as<br />
part of the equity or other share capital or of the<br />
reference to other clauses/provisions of that statute<br />
create monopoly in that line of business enterprise.<br />
“the take-over by one company of sufficient shares<br />
assets of another company, is not likely to cause<br />
in order to have a consistent enactment.<br />
(SEC Rules, rule 423(2)(a).)<br />
in another company to give the acquiring company<br />
substantial restraint of competition to create<br />
Nigerian Ports Plc v Okoh (2006) All FWLR 1145<br />
Even where the SEC’s prior approval is not obtained<br />
control over that other company” (emphasis<br />
monopoly in any line of business” (emphasis<br />
at 1157H and Canada Sugar Refining Co. Ltd. v R<br />
for an asset acquisition, the SEC has the power<br />
supplied). Further, Rule 433 of the SEC Rules also<br />
supplied).<br />
(1898) AC 735.<br />
to break up such a company where it considers<br />
defines “acquisition” as “where a person or group<br />
One of the documents that is required to<br />
Second, assuming that the term “acquisition”<br />
that such an acquisition constitutes a restraint to<br />
of persons buys most (if not all) of a company’s<br />
accompany a letter of intent to be submitted by<br />
as defined in Rule 421(1) is limited to share<br />
competition or creates a monopoly in a particular<br />
ownership stake in order to assume control of a<br />
an applicant seeking approval from the SEC under<br />
acquisitions, asset acquisitions will still be subject<br />
industry. (SEC Rules, rule 432.)<br />
target company” (emphasis supplied). Rule 421(1)<br />
Rule 434 of the SEC Rules is a report of valuation<br />
to the SEC’s prior review and approval. This is<br />
A ground for the SEC to order a break-up of a<br />
is limited to shares acquisitions.<br />
of shares/assets to be acquired. (SEC Rules rule<br />
because asset(s) acquisition is unarguably a form of<br />
company is where the company enters into an<br />
Rule 433 suggests that for there to be an<br />
434(xvii).) Again, Rule 436 of the SEC Rules sets out<br />
business combination which falls within the SEC’s<br />
agreement or business undertaking which has<br />
“acquisition” the acquirer must assume control of<br />
the contents of Information Memorandum for an<br />
scope of regulation.<br />
the effect of preventing, restricting or distorting<br />
the acquiree after the acquisition. The assumption<br />
acquisition.<br />
By section 13(p) of ISA, one of the functions/<br />
competition in any part of the Nigerian market.<br />
of control of the acquiree does not necessarily<br />
Part of the background information to be<br />
powers of the SEC is to “review, approve, regulate<br />
(SEC Rules, rule 432(3)(a).)<br />
occur in asset acquisition transactions. It is fair<br />
contained in an Information Memorandum is the<br />
mergers, acquisitions, take-overs and all forms of<br />
It is, therefore, prudent (assuming it is not<br />
to say that both Rule 421(1) and Rule 433 do not<br />
“list of assets to be acquired and their value (where<br />
business combination and affected transactions<br />
mandatorily required) to seek the SEC’s approval<br />
contemplate SEC approval for asset acquisitions.<br />
applicable)”. (SEC Rules rule 436(1)(d). Moreover,<br />
of all companies” (emphasis supplied). Also, Rule<br />
before entering into any agreement for asset<br />
It is however arguable that the SEC’s approval is<br />
Rule 437 of the SEC Rules requires that an executed<br />
422(2) of the SEC Rules states specifically that the<br />
acquisition which may have the effect of<br />
required for asset acquisitions for at least three<br />
share/asset purchase agreement should be<br />
provisions of Part I (on take-overs, mergers and<br />
preventing, restricting or distorting competition in<br />
reasons. First, there are copious references to<br />
forwarded to the SEC post-acquisition.<br />
acquisition) of the SEC Rules shall apply to “every<br />
any part of the Nigerian market.<br />
“asset(s)” under Part I of the SEC Rules that deals<br />
The definitions of “acquisition” under the SEC Rules<br />
merger, acquisition or combination between or<br />
If the SEC reviews the transaction documentation<br />
with “take-overs”, “mergers” and “acquisition”.<br />
suggest that the scope of acquisition under the<br />
among companies, involving acquisition of shares<br />
and comes to the determination that its approval<br />
Rule 422 of the SEC Rules sets out the scope of<br />
SEC Rules is limited to shares and does not cover<br />
or assets of another company” (emphasis supplied).<br />
is not required, it [the SEC] would issue a “No<br />
SEC’s regulation under Part I of the SEC Rules to<br />
asset acquisitions, notwithstanding, numerous<br />
Thus, all take-overs, mergers, acquisitions,<br />
Objection” to the transaction.<br />
include “every merger, acquisition or combination<br />
between or among companies, involving<br />
acquisition of shares or assets of another company”<br />
references to “asset” under Part I (on take-overs,<br />
mergers and acquisition) of the SEC Rules which<br />
clearly show that the term “acquisition” as used in<br />
business combinations undertaken by companies,<br />
partnerships or agencies of the federal government<br />
are subject to the SEC’s approval.<br />
WHEN SHOULD THE SEC<br />
APPROVAL REQUIREMENT<br />
APPLY?<br />
(emphasis supplied).<br />
the SEC Rules also involves asset acquisition and<br />
Third, SEC’s competition regulator status makes it<br />
The writer is of the strong view that it is not every<br />
Further, Rule 423(2) of the SEC Rules states that the<br />
therefore subject to the SEC’s prior review and<br />
incumbent for the SEC to review and approve every<br />
asset acquisition transaction that requires the SEC’s<br />
SEC shall approve a merger, acquisition or external<br />
approval.<br />
asset acquisition between companies in order to<br />
approval. Otherwise, the SEC will be inundated
Mergers & Acquisitions<br />
with applications/requests for approval and the<br />
SEC will be unable to perform its other functions<br />
as the sale of a company’s asset, irrespective of the<br />
value, would require the SEC’s prior review and<br />
approval.<br />
There are at least three tests that could be adopted<br />
for determining when the SEC’s prior review and<br />
approval will be required for an asset(s) acquisition<br />
transaction. These tests are: (1) the asset value test;<br />
(2) the operating asset test; and (3) the competition<br />
test.<br />
Asset Value Test. This test involves setting a<br />
threshold in terms of the value of the assets to<br />
be sold/transferred. The SEC’s prior review and<br />
approval will be required where the value of such<br />
asset is above the set threshold.<br />
Operating Asset(s) Test. The SEC’s prior review<br />
and approval should be required in an asset(s)<br />
acquisition transaction where all or substantial<br />
part of the operating asset(s) (that is, asset(s)<br />
constituting the business of a company) of a<br />
company are to be sold or transferred to another<br />
entity.<br />
For example, the sale/transfer of all or substantial<br />
number of telecommunications masts/towers<br />
by a telecommunications company will require<br />
the SEC’s prior review and approval under this<br />
test as telecommunications masts/towers are the<br />
operating assets of telecommunication companies.<br />
Competition Test. As stated above, the SEC in<br />
reviewing approving acquisitions or any business<br />
combinations has the obligation to ensure that<br />
such transaction would not cause substantial<br />
restraint of competition or create a monopoly in a<br />
U.S. Agencies Take a Tough Approach to Merger<br />
Remedies<br />
by Ilene Knable Gotts<br />
In the second term of the Obama Administration, both the U.S. Federal Trade Commission<br />
(“FTC”) and the U.S. Department of Justice, Antitrust Division (“DOJ”)—the two<br />
Fidelis Adewole<br />
Senior Associate at G. Elias & Co<br />
T: +234 (1) 460 7890<br />
Email: gelias@gelias.com<br />
Fidelis Adewole is a senior associate with G. Elias & Co., one of Nigeria’s leading business law firms. He is a seasoned<br />
litigator and has advised on numerous mergers and acquisitions across various sectors of the economy. He recently<br />
advised Asset Management Corporation of Nigeria on the sale of Enterprise Bank Limited.<br />
Fidelis holds a Bachelor of Laws degree from Ambrose Alli University, Ekpoma and was called to the Nigerian bar in<br />
2005. He is a member of the Chartered Institute of Arbitrators (UK) and Chartered Institute of Taxation of Nigeria.<br />
To support these efforts, the FTC has also<br />
announced plans to conduct a “merger<br />
retrospective” to determine the effectiveness<br />
of remedies imposed in some of the prior<br />
mergers. 1<br />
In total, the FTC proposes studying 92 merger<br />
orders issued by the Commission between<br />
1 Press Release, Fed. Trade Comm’n, FTC Proposes to<br />
Study Merger Remedies (Jan. 9, 2015), available at https://<br />
www.ftc.gov/news-events/press-releases/2015/01/<br />
ftc-proposes-study-merger-remedies.<br />
2006 and 2012. The study will include<br />
interviews of the buyers of divested assets,<br />
significant competitors in each market, and<br />
customers.<br />
The current antitrust enforcement<br />
environment means that merger parties<br />
should be prepared for the potential of<br />
prolonged review and protracted consent<br />
negotiations in transactions that raise
Merger & Acqusitions<br />
concerns requiring relief.<br />
On June 17, 2011, the DOJ issued an updated<br />
policy guide to merger remedies. As indicated<br />
in the Guide:<br />
The touchstone principle for the Division in<br />
analyzing remedies is that a successful merger<br />
remedy must effectively preserve competition<br />
in the relevant market. . . .<br />
In horizontal merger matters, structural<br />
remedies often effectively preserve<br />
competition, including when used in<br />
conjunction with certain conduct provisions.<br />
Structural remedies may be appropriate in<br />
vertical merger matters as well, but conduct<br />
remedies often can effectively address<br />
anticompetitive issues raised by vertical<br />
mergers.<br />
In all cases, the key is finding a remedy<br />
that works, thereby effectively preserving<br />
competition in order to promote innovation<br />
and consumer welfare. 2<br />
Recent precedent includes the agencies<br />
imposing a variety of behavioral conditions<br />
to support a structural divestiture. Transition<br />
services arrangements and supply<br />
arrangements have been more routinely<br />
included, beyond the pharmaceutical industry<br />
where they were the norm. 3<br />
2 U.S. Dep’t of Justice, Antitrust Division, Antitrust<br />
Division Policy Guide to Merger Remedies (Aug. 19, 2010),<br />
available at http://www.justice.gov/atr/public/guidelines/<br />
hmg-2010.html<br />
3 See, e.g., Press Release, U.S. Dep’t of Justice, Justice<br />
Department Requires Divestitures in Order for Regal<br />
Beloit Corporation to Proceed with Its Acquisition of A.O.<br />
Smith Corporation’s Electric Motor Business (Aug. 17,<br />
Mandatory licensing provisions may also<br />
alleviate competitive concerns by enabling<br />
competitors access to a key input; 4 some<br />
of the consents, however, include not only<br />
a license for technology, but the right to<br />
purchase the technology or to transfer the<br />
license to a third party later. 5<br />
In addition, non-discrimination provisions<br />
have been included to incorporate the<br />
concepts of equal access, equal efforts, and<br />
equal terms.<br />
For instance, the FTC’s CoStar/Loopnet<br />
consent contained what the FTC characterized<br />
as “conduct relief that is unusual in a merger<br />
settlement.” 6<br />
In addition to requiring that the parties<br />
divest LoopNet’s Interest in Xceligent, a<br />
competing database that the FTC considered<br />
to be the “most similar competitor for<br />
information services” to CoStar, the consent<br />
also “imposes certain conduct requirements<br />
to assure the continued viability of Xceligent<br />
as a competitor to the merged firm and to<br />
2011), available at http://www.justice.gov/opa/pr/2011/<br />
August/11-at-1056.html; Hold Separate Order United<br />
States v. Bemis Co., Inc., No. 1:10-cv-00295 (D. DC Feb.<br />
28, 2010), available at http://www.justice.gov/atr/cases/<br />
f255700/255715.htm.<br />
4 See, e.g., Press Release, U.S. Dep’t of Justice, Justice<br />
Department Requires Google Inc. to Develop and License<br />
Travel Software in Order to Proceed with Its Acquisition<br />
of ITA Software Inc. (Apr. 8, 2011), available at http://<br />
www.justice.gov/opa/pr/2011/April/11-at-445.html; Press<br />
Release, U.S. Dep’t of Justice, Justice Department Allows<br />
Comcast-NBCU Joint Venture to Proceed with Conditions<br />
(Jan. 18, 2011), available at http://www.justice.gov/opa/<br />
pr/2011/January/11-at-061.html.<br />
5 See, e.g., United States v. Cameron Int’l Corp., No. 1:09-<br />
cv-02165 (D. D.C. Nov. 17, 2009), available at http://www.<br />
justice.gov/atr/cases/f252000/252080.htm.<br />
6 Press Release, Fed. Trade Comm’n, FTC Places Conditions<br />
on CoStar’s $860 Million Acquisition of LoopNet<br />
(Apr. 26, 2012), available at http://www.ftc.gov/<br />
opa/2012/04/costar.shtm.<br />
reduce barriers to competitive entry and<br />
expansion. These additional provisions will<br />
facilitate Xceligent’s geographic expansion<br />
and prevent foreclosure of [the parties’]<br />
established customer base.”<br />
The consent, for five years, (1) prohibits CoStar<br />
and Loopnet from restricting customers’<br />
ability to support Xceligent; (2) requires<br />
Co-Star and Loopnet to allow customers to<br />
terminate their existing contracts, without<br />
penalty, with one year’s prior notice; and<br />
(3) bars the merged firm from requiring<br />
customers to buy any of its products as a<br />
condition for receiving other products, and<br />
from requiring customers to subscribe to<br />
multiple geographic coverage areas to gain<br />
access to a single area in which they are<br />
interested.<br />
In addition, the consent requires, for three<br />
years, that CoStar and LoopNet continue<br />
to offer their customers core products on a<br />
stand-alone basis.<br />
A related provision prohibits the parties from<br />
limiting use of the REApplications product, a<br />
software tool for managing market research<br />
in connection with customers’ purchase,<br />
lease, or license of CRE database services from<br />
competitors.<br />
There have also been situations recently in<br />
which the agencies have required divestitures<br />
to include out-of-market assets (i.e., a<br />
divestiture package that goes beyond the<br />
assets in the relevant market). 7<br />
In Community Health Systems<br />
(“Community”)/Health Management<br />
Associates (“HMA”), 8 the FTC’s concerns<br />
were focused on general acute care hospital<br />
impatient services sold to commercial health<br />
plans in two geographic areas; the FTC,<br />
however, required that Community include in<br />
the divestiture package the hospital facilities<br />
and all outpatient services and operations<br />
that were affiliated with the hospital,<br />
regardless of whether those services were<br />
provided at the hospital.<br />
The FTC viewed the outpatient business as<br />
necessary for the buyer of each hospital to be<br />
as effective of a competitor as HMA had been<br />
prior to the transaction.<br />
In Sun Pharmaceutical/Ranbaxy, 9 the FTC<br />
although the expressed concerns that<br />
the combination would impact future<br />
competition for three strengths of generic<br />
minocycline tablets used to treat a variety of<br />
infections, the Commission required the firms<br />
7 For a discussion of remedies including out-of-market<br />
assets from the FTC’s perspective see Dan Ducore,<br />
Divestitures may include assets outside the market (Apr.<br />
24, 2015), available at https://www.ftc.gov/news-events/<br />
blogs/competition-matters/2015/04/divestitures-may-include-assets-outside-market.<br />
8 Press Release, Federal Trade Comm’n, FTC Requires<br />
Community Health Systems, Inc. to Divest Two Hospitals<br />
as a Condition of Acquiring Rival Hospital Operator<br />
(Jan. 22, 2014), available at http://www.ftc.gov/newsevents/press-releases/2014/01/ftc-requires-community-health-systems-inc-divest-two-hospitals.<br />
9 Press Release, Fed. Trade Comm’n, FTC Puts Conditions<br />
on Sun Pharmaceutical’s Proposed Acquisition of<br />
Ranbaxy (Jan. 30, 2015), available at https://www.ftc.<br />
gov/news-events/press-releases/2015/01/ftc-puts-conditions-sun-pharmaceuticals-proposed-acquisition.
Merger & Acqusitions<br />
to sell as well assets related to three dosages<br />
The agencies have also taken a more<br />
Both agencies have also increasingly required<br />
maintaining competition at the same level as<br />
of generic minocycline capsules.<br />
expansive stance, particularly in transactions<br />
that the parties identify an acceptable<br />
pre-transaction.<br />
The FTC’s rationale for including the capsules<br />
involving innovation and future generations<br />
“upfront buyer” before accepting divestiture<br />
The transaction parties, however, can face<br />
was that it would allow the upfront buyer to<br />
of products. For instance, the DOJ recently<br />
packages. 14 The “upfront buyer” requirement is<br />
substantial delay from the process: the need<br />
use a shorter FDA regulatory process because<br />
announced that Applied Materials Inc. and<br />
justified by the agencies as being necessary to<br />
to identify a divestiture buyer, negotiate a<br />
it would control both products and use the<br />
same ingredient (API) supplier.<br />
In Holcim/Lafarge, 10 the FTC conditioned<br />
clearance on the divestiture of plants and<br />
terminals, including a terminal in Alberta,<br />
Canada and cement plant in Ontario, Canada.<br />
Canadian assets that are named in the FTC<br />
consent decree were included by the FTC as<br />
necessary to remedy competitive concerns in<br />
Tokyo Electron Ltd. had abandoned their<br />
merger plans after the DOJ informed them<br />
that their remedy proposal failed to resolve<br />
the competitive concerns. 12<br />
Although the merger parties had reportedly<br />
offered to divest the overlapping etching and<br />
depositing business line of Tokyo Electron,<br />
the DOJ thought the package did not<br />
adequately address the future impact of the<br />
ensure that the divestiture will be effective in<br />
tions on Neilsen’s Proposed $126 Billion Acquisition of<br />
Arbitron (Sept. 20, 2013), available at http://www.ftc.gov/<br />
opa/2013/09/nielsen.shtm. Commissioner Wright dissented<br />
from the decision on the basis that the future market<br />
theory shall be subject to a higher evidentiary standard.<br />
See Dissenting Statement of Commissioner Joshua D.<br />
Wright, In the Matter of Nielsen Holdings N.V. and Arbitron<br />
Inc. FTC No. 131-0058 (Sept. 20, 2013), available at http://<br />
www.ftc.gov/os/caselist/1310058/130920nielsenarbitron-jdwstmt.pdf.<br />
14 The public attention on Advantage Rent A Car’s filing<br />
for bankruptcy four months after the FTC approved its<br />
divestiture to resolve concerns in the Hertz/Dollar Thrifty<br />
deal exemplifies the risk —though extremely rare—that<br />
can arise for an agency from accepting an antitrust<br />
remedy. See David McLaughlin, Mark Clothier, and Sara<br />
Gay Forden, Hertz Fix in Dollar Thrifty Deal Fails as Insider<br />
Warned, Bloomberg (Nov. 29, 2013), available at http://<br />
www.bloomberg.com/news/articles/2013-11-29/hertz-fixin-dollar-thrifty-deal-fails-as-insider-warned.<br />
divestiture agreement, and have that buyer<br />
and the package vetted by the agencies before<br />
the main transaction is permitted to proceed<br />
can literally add months to the review process.<br />
For transaction parties with overlapping<br />
products/services that are likely to raise<br />
antitrust concerns, the recent enforcement<br />
activities and trends raise the potential for<br />
prolonged investigations and protracted<br />
northern U.S. markets.<br />
deal on innovation in future generations of<br />
Finally, in ZF Friedrichshafen AG/TRW<br />
semiconductor equipment.<br />
Automotive Holdings Corp., 11 the FTC<br />
Similarly, in the Nielson/Arbitron transaction,<br />
conditioned approval of the $12.4 billion<br />
the FTC focused on protecting a future market<br />
merger that creates the world’s second-<br />
for syndicated audience cross-platform<br />
largest auto parts supplier with the divestiture<br />
measurement services.<br />
of TRW’s linkage and suspension business<br />
The consent conditioned that transaction’s<br />
in North America and Europe, even though<br />
approval on Nielsen’s obligation to:<br />
only suppliers that have production facilities<br />
1. continue its cross-platform project<br />
Ilene Knable Gotts<br />
in the United States, Canada, and Mexico<br />
were deemed capable of competing for U.S.<br />
business.<br />
10 Press Release, Fed. Trade Comm’n, FTC Requires<br />
Cement Manufacturers Holcim and Lafarge to Divest<br />
Assets as a Condition to Merger (May 4, 2015) available at<br />
http://www.ftc.gov/news-events/press-releases/2015/05/<br />
ftc-requires-cement-manufacturers-holcim-lafarge-divest-assets.<br />
11 Press Release, Fed. Trade Comm’n, FTC Puts Conditions<br />
on Merger of Auto Parts Suppliers ZF Friedrichshafen<br />
and TRW Automotive Holdings Corp. (May<br />
5, 2015) available at https://www.ftc.gov/news-events/<br />
press-releases/2015/05/ftc-puts-conditions-merger-autoparts-supplier-zf<br />
with ESPN Inc. and Comscore Inc.; and<br />
2. license Arbitron’s people meter and<br />
related data, as well as software and<br />
technology being used in the ESPN<br />
project, to an FTC-approved third<br />
party for up to eight years. 13<br />
12 Press Release, U.S. Dep’t of Justice, Applied Materials<br />
and Tokyo Electron Ltd. Abandon Merger Plans after Justice<br />
Department Rejected Their Proposed Remedy (Apr.<br />
27, 2015), available at http://www.justice.gov/atr/public/<br />
guidelines/hmg-2010.html.<br />
13 Press Release, Fed. Trade Comm’n, FTC Puts Condi-<br />
Partner at Wachtell, Lipton, Rosen & Katz<br />
T: +1 212 403 4357<br />
Email: IKGotts@wlrk.com<br />
Ilene focuses on mergers and acquisitions. She is regularly recognized as one of the world’s top antitrust<br />
lawyers, including in The International Who’s Who of Business Lawyers, Chambers Guides, and PLC Which Lawyer<br />
Yearbook. Mrs. Gotts has served as the Chair of the American Bar Association’s Section of Antitrust Law (2009-<br />
2010) and Chair of the New York State Bar Association’s Antitrust Section (2006-2007). She is a frequent guest<br />
speaker, has had approximately 200 articles published, and has edited several books.
Merger & Acqusitions<br />
What is Wrong with our Fiction? The Perceived<br />
Attack on Reverse Vesting<br />
by Janet Levy Pahima<br />
Tax advisors in Israel are scrambling to find the best solution to<br />
employment.<br />
But founders who set up a company own their<br />
shares from day one. When a few talented<br />
individuals get together to form a company,<br />
sometimes they worry about this from the<br />
beginning. They may set up a type of reverse<br />
vesting which is basically a call option. If one<br />
founder leaves the company, the others can buy<br />
his or her shares usually for par value.<br />
The concern that this may raise tax implications<br />
is subdued. The value of the company and its<br />
shares in those early days are often low, and so<br />
the risk of a taxable transaction is by correlation<br />
also low.<br />
The more popular use of reverse vesting<br />
addresses when our young company needs an<br />
investment of millions of dollars from a financial<br />
investor. Venture capital firms (“VC’s”) are well<br />
versed in understanding the crucial role founders<br />
may play in the chances of success for their<br />
working. This is codified in Israel’s Basic Law:<br />
Freedom of Occupation. 1<br />
They need another tool to safeguard their<br />
investment. A fine or penalty that the founders<br />
would have to pay if they leave the company?<br />
Not worth the wasted air expressing this out loud<br />
to a founder. It is the VC’s that are supposed to<br />
have the money, not the founders.<br />
Reverse vesting is the obvious choice. If a<br />
founder refuses to keep working for the crucial<br />
first few years after the company has received a<br />
large investment, he or she should lose some of<br />
his or her shares and not benefit from the future<br />
success of the company.<br />
This is a penalty that sounds fair – it is in the<br />
control of the founder; it adjusts the equitable<br />
balance of ownership if the company is worth<br />
less because the founder left; and it does not<br />
impose an impossible financial burden on the<br />
founder.<br />
Why the current increased interest in the topic?<br />
Paranoia or calculated anticipation of the<br />
Israeli tax authorities (the “ITA”) attacking a well<br />
established principle?<br />
Reverse vesting is a commonly used technique<br />
to address the concerns that a founder of a<br />
company who is key to its success and owns<br />
shares of the company might simply walk away<br />
from the company causing damage to the<br />
enterprise’s prospects for success.<br />
Using equity as a retention tool is nothing new.<br />
When an employee is granted stock options that<br />
are subject to a three or four year vesting period,<br />
the theory is that the employee is incentivized to<br />
stay at work for the full vesting period to receive<br />
the full benefit of the employee’s options.<br />
The shareholders are willing to share equity<br />
with the employees to align interests between<br />
the company and the employees, joining the<br />
level of the employees’ compensation with<br />
the success of the company and keeping the<br />
employee motivated during his or her period of<br />
fragile investments.<br />
The venture capitalists could space out their<br />
investments to correspond to milestones<br />
including the continuation of the employment<br />
of the founders, but that is not popular and often<br />
not practical; they may not be putting in nearly<br />
enough funds to keep the company going for the<br />
full period they wish the founders to commit and<br />
the funds invested up to the point of departure<br />
of a founder can be tremendous.<br />
The investors can’t force the founders to keep<br />
So far, so good. So why are tax advisors in Israel<br />
wary of the ITA spoiling this wonderful solution<br />
that is so common in the global high tech world?<br />
While there is no evidence that the ITA is about to<br />
challenge the arrangement, the ITA, obviously is<br />
1 The Basic Law: Freedom of Occupation (1994). The Law was<br />
passed by the Knesset on 9th March, 1994 and published in<br />
the Book of Laws No. 1454 of 10th March, 1994. It provides in<br />
part:<br />
a. Fundamental human rights in Israel are founded upon<br />
recognition of the value of the human being, the sanctity<br />
of human life, and the principle that all persons are free;<br />
these rights shall be upheld in the spirit of the principles<br />
set forth in the Declaration of the Establishment of the<br />
State of Israel.<br />
b. The purpose of this Basic Law if to protect freedom of<br />
occupation, in order to establish in a Basic Law the values<br />
of the State of Israel as a Jewish and democratic state.<br />
c. Every Israel national or resident has the right to engage in<br />
any occupation, profession or trade.
Merger & Acqusitions<br />
not bound by the treatment of reverse vesting in<br />
For example, we don’t draft Reverse Vesting<br />
than just the founders no longer working.<br />
It is yet to be seen if this obvious new ploy can<br />
the Silicon Valley for example 2 ; some lawyers and<br />
Agreements but rather Repurchase Agreements.<br />
To the extent the founders have paid some cash<br />
trick the ITA into believing that the additional<br />
tax advisors fear that the ITA may look at shares<br />
We don’t state anywhere in the agreement that<br />
for their shares and the price to be paid upon<br />
shares received by the investors from the<br />
subject to reverse vesting as being deemed<br />
the rights to the founders’ shares vest over time<br />
exercise of the reverse vesting returns their<br />
company are not the same as the additional<br />
given in exchange for work and therefore could<br />
but rather that the other shareholders will have<br />
capital, the shares look less like ordinary income<br />
shares the investors would have gotten if they<br />
categorize the shares as work related income,<br />
the right to buy back some of the founders<br />
to the founders.<br />
were entitled to buy shares from the founders all<br />
taxable as ordinary income and not as capital<br />
shares in decreasing amounts over time and for<br />
A more recent creative idea is to grant other<br />
with the same trigger and lack of price tag.<br />
gains.<br />
very little money if the founders stop working.<br />
shareholders anti dilution rights triggered if<br />
In addition, if there is more than one founder, this<br />
The ITA could take the position that when the<br />
Not that there seems to be evidence of the topic<br />
a founder leaves the company. To implement<br />
smacks of collective punishment. If one leaves, all<br />
founders eventually sell their shares in an exit<br />
heating up at the ITA, but nonetheless, lately<br />
this concept, the other shareholders would be<br />
founders would be diluted including those that<br />
event (a merger or acquisition), the income<br />
there has been much discussion in Israel, or at<br />
issued new shares or the conversion ratio of<br />
loyally stayed with the company.<br />
earned on the shares should be treated as<br />
least in the hallways of Tel Aviv tax departments<br />
preferred shares would be adjusted to give the<br />
Morally it would be more appropriate to use this<br />
ordinary income, even though this seems like a<br />
and law firms, of the risk that all reverse vesting<br />
holders of preferred shares a larger percentage<br />
approach, if at all, if there is only one founder<br />
real stretch of the imagination.<br />
clauses in high tech companies could be in<br />
of the outstanding shares of the company; the<br />
subject to reverse vesting so that other founders<br />
If a founder can lose shares of a company if he or<br />
jeopardy. That adds up to a lot of clauses in a lot<br />
founders’ shares of the capital of the company on<br />
do not have to serve as guarantors of each<br />
she quits working for the company, the ITA could<br />
of companies in a country dominated by its high<br />
a percentage basis would decrease.<br />
other’s commitment to the company. But with<br />
look at those shares as not really belonging to<br />
tech and start up culture.<br />
the founder until the reverse vesting lifts, as if the<br />
Good advice is to distance the shares from<br />
founders are actually receiving shares over time,<br />
employment. Make sure the founders’ shares in<br />
in which case they should be taxed periodically<br />
at the time the shares were deemed to have<br />
been received; this translates into the dates that<br />
the shares are released from the threat of reverse<br />
vesting rather than the date of incorporation<br />
of the company when the company value was<br />
lower if not insignificant.<br />
To protect from this troublesome threat, reverse<br />
vesting is dressed up in colorful non-ordinary<br />
income terminology.<br />
2 See for example Rev. Rul. 2007-49 from Internal Revenue<br />
Bulletin: 2007-31 dated July 30, 2007 specifying that Section<br />
83 of the Internal Revenue Code does not apply to reverse<br />
vesting imposed by investors (changing “substantially vested<br />
stock” to “substantially nonvested stock”).<br />
an exit event are not worth more than any other<br />
shareholders’ shares. Include language that the<br />
purpose of the reverse vesting is to avoid the<br />
damage and harm that would be caused to the<br />
company if the founder quit rather than any type<br />
of compensation to the founder for staying.<br />
Make sure it is shareholders who have the<br />
right to buy the shares of the founders if their<br />
employment terminates and not the company<br />
itself. Do not include death or disability as<br />
grounds to trigger repurchase so that it is<br />
punishment to the founders for quitting rather<br />
Janet Levy Pahima<br />
Partner at Herzog, Fox & Neeman<br />
T: +972 3 692 2097<br />
Email: pahima@hfn.co.il<br />
Janet is an International Mergers & Acquisitions partner at Herzog, Fox & Neeman, Israel’s leading international<br />
law firm. In addition to M&A, Janet specializes in joint ventures, investment funds, international trade, and<br />
advises in the general corporate field.<br />
Janet represents multinational corporations including General Electric, Microsoft, BMC Software and SunGard<br />
Data Systems, including in their acquisitions in Israel; venture capital funds such as Carmel Ventures in early and<br />
late stage investments; and high-tech companies in their earliest stages of development. Janet is recommended<br />
in PLC Which Lawyer and Chambers and has been described as an “outstanding corporate lawyer” by the Legal<br />
500.<br />
Prior to moving to Israel, Janet was an associate at Shearman and Sterling in New York and Tokyo.
Merger & Acqusitions<br />
Mergers and Acquisitions Regulations in Lebanon<br />
by Christiane Ghneim<br />
M&A activity in Lebanon has been traditionally embryonic compared<br />
to its neighboring Gulf countries, considering the size of the<br />
Lebanese market which consists of SMEs and small family businesses,<br />
and that merger and acquisition transactions among such entities<br />
Nonetheless, the banking sector was subject<br />
to a special treatment, as it benefitted from<br />
a dedicated law aiming at encouraging the<br />
mergers and acquisitions among banks in<br />
Lebanon, under the strict supervision of the<br />
Lebanese Central Bank. The purpose of such<br />
laws and regulations was to address the<br />
situation of banks in difficulty that showed<br />
good management, to maintain the rights of<br />
depositors and employees, and to preserve<br />
the stability of the market through incentives<br />
and soft loans granted to the acquiring banks.<br />
Consequently, this law contributed to the<br />
improvement of the sustainability and reliability<br />
of the banking sector in Lebanon.<br />
In 1996, the Beirut Stock Exchange (BSE) relaunched<br />
the trading activity in its hall, following<br />
a thirteen-year compulsory suspension. The<br />
Committee of the BSE, which is responsible<br />
for managing, regulating and developing the<br />
markets, protecting the interests of the investors<br />
trading at the Stock Exchange, monitoring the<br />
activities of the issuing companies and providing<br />
information to the issuers and traders at the<br />
Stock Exchange on an equal footing, organized<br />
part of the M&A for listed companies.<br />
Recently, a new Financial Markets Law was<br />
enacted and a Capital Market Authority (CMA)<br />
was established accordingly in August 2011.<br />
The CMA is an independent and autonomous<br />
regulatory body that aims to regulate and<br />
supervise the activities of capital markets in<br />
Lebanon and to create the adequate legal<br />
framework for the development of the Lebanese<br />
Financial Markets, including the issuance of<br />
all regulations pertaining to mergers and<br />
acquisitions (M&A) for listed companies.<br />
M&A REGULATIONS IN LISTED<br />
COMPANIES<br />
REGULATORY FRAMEWORK<br />
Public M&A is regulated by the Lebanese<br />
Commercial Law (articles 210 to 213 of<br />
Legislative Decree 304 of December 24, 1942 and<br />
its modifications), and Decree 7667 of December<br />
16, 1995 regarding the implementation of the<br />
BSE by-laws.<br />
The CMA is the regulatory body and the<br />
enforcing authority in connection with<br />
acquisition of shares in public companies and the<br />
execution of M&A bids. Its control unit regulates<br />
the capital markets and its sanctions committee<br />
examines violation cases transmitted by the<br />
Board, investigates them and takes the necessary<br />
decisions further to proceedings involving all<br />
concerned parties, as specified in its rules of<br />
operation.<br />
STRUCTURAL CONSIDERATIONS<br />
Lebanese law does not mention structural<br />
differences between friendly acquisitions (in<br />
which the target is willing to be acquired) and<br />
hostile takeovers (where the target is opposed<br />
to the acquisition). An acquisition is structured<br />
as a tender offer by the bidder and regulated by<br />
article 161 of the decree 7667 /1995 which states<br />
that:<br />
“Any investor or group of investors […] wishing<br />
to own more than 10% of the voting rights in<br />
a company quoted in the official or secondary<br />
market, or wishing to acquire the absolute<br />
or specified majority in this company, should<br />
present a draft for a tender public offer or<br />
bartering via a financial broker.”<br />
The period of the offer in a bidding transaction<br />
should not take less than ten Stock Exchange<br />
sessions, and there are no limitation of initial
Merger & Acqusitions<br />
offer price limit. However, article 168 of decree<br />
Any subscription or transaction in the Lebanese<br />
final decision on the matter within the above-<br />
the merging bank from income tax for<br />
7667/1995 states:<br />
banks’ shares is subject to prior approval of the<br />
mentioned deadlines, the Central Bank shall be<br />
an amount equivalent to taxes due on<br />
“In the event an investor or another group<br />
Central Council of the Lebanese Central Bank as<br />
deemed to have taken an implicit decision of<br />
a portion of its profits, provided this<br />
of investors presents a counter-proposal, this<br />
follows:<br />
rejecting the merger request as submitted.<br />
portion does not exceed the cost of<br />
counter-proposal cannot be accepted unless the<br />
• if the subscriber acquires more than<br />
TAX INCENTIVES<br />
the merging operation and a ceiling of<br />
counter-price exceeds the price of the current<br />
5% of the bank’s shares or from the<br />
In order to encourage M&A activity within<br />
two billion Lebanese pounds. […] The<br />
offer by more than 5%”.<br />
voting rights related to these shares,<br />
the banking sector, the legislator granted the<br />
merged bank (s) shall also be exempted<br />
M&A REGULATIONS IN BANKS<br />
REGULATORY FRAMEWORK<br />
whichever is greater;<br />
• if the subscriber owns at the time of the<br />
subscription 5% or more of the bank’s<br />
banks with several tax incentives, including the<br />
following:<br />
• Article 7 of Law 192 of January 4, 1993<br />
from the tax stipulated in article 45<br />
of the Income Tax Code, in case of<br />
approval of the revaluation of its (their)<br />
M&A of banks are regulated by the Lebanese<br />
Code of Money and Credit (articles 132/b-d and<br />
133/b-d), the provisions of Law 192 of January<br />
4, 1993 and their amendments regarding the<br />
facilitation of banks’ M&A as well as Law 308 of<br />
April 3, 2001 organizing the issuance and trade<br />
of stocks and bonds and acquisition of real estate<br />
by banks.<br />
The regulatory body is the Central Council of the<br />
Lebanese Central Bank which set all regulations<br />
concerning purchases of shares in banks, and<br />
those concerning the banks’ M&A.<br />
The Central Council of the Lebanese Central<br />
Bank, after consultation with the Banking Control<br />
Commission, supervises all takeovers in the<br />
banking and financial services sector, ensures<br />
that all regulated entities comply with applicable<br />
laws and regulations, and has all discretionary<br />
powers to approve or reject any takeover within<br />
the banking and financial services sector.<br />
STRUCTURAL CONSIDERATIONS<br />
shares or from the voting rights related<br />
to these shares whichever is greater.<br />
Any merger that includes a bank or a financial<br />
institution shall be contingent upon the approval<br />
of the Central Council of the Lebanese Central<br />
Bank. Consequently, the deals are governed by<br />
the Central Council of the Lebanese Central Bank.<br />
The Central Council shall take, after consultation<br />
with the Banking Control Commission, a<br />
provisional decision approving or rejecting the<br />
merger within sixty days from the filing of the<br />
bank’s application and the attachments specified<br />
by the Law.<br />
In case of approval, the Central Council<br />
shall specify the conditions, deadlines and<br />
guarantees required for its final decision. The<br />
Central Council shall take a final decision on the<br />
merger within thirty days from the submission<br />
date of documents that prove the fulfillment<br />
of conditions and guarantees required by the<br />
Council.<br />
In case the Central Council has not taken a<br />
states that: “During the year that follows<br />
the year in which the Central Council<br />
took its final decision on approving<br />
the merger, the Council may exempt<br />
Christiane Ghneim<br />
Associate at Aziz Torbey Law Firm<br />
T: +961 1 616161<br />
Email: cghneim@torbeylaw.com<br />
fixed assets”.<br />
• Article 8 of Law 192 of January 4,<br />
1993 states that: “All formalities and<br />
procedures required by the merging<br />
Christiane Ghneim is an associate at the Eptalex Beirut office of Aziz Torbey Law Firm where she works in the<br />
banking and corporate practices. Her transactional experience includes several acquisitions where she was<br />
involved in the due diligence phases and the drafting of transaction agreements.<br />
Christiane also works on the in¬cor¬po¬ra¬tion and re¬lo¬ca¬tion of com¬pa¬nies as well as the dai¬ly<br />
operations of busi¬ness¬es. She is a law graduate from Saint-Joseph University (USJ) and holds a Master of<br />
Advanced Studies (DEA) in Internal and International Business Law from the Lebanese University- french section.