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Public M&

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Public M&AContributing editorAlan M Klein

2018© Law Business Research 2018

Public M&A 2018Contributing editor

Alan M Klein Simpson Thacher & Bartlett LLP

PublisherTom [email protected]

SubscriptionsJames [email protected]

Senior business development managers Adam [email protected]

Dan [email protected]

Published by Law Business Research Ltd87 Lancaster Road London, W11 1QQ, UKTel: +44 20 3780 4147Fax: +44 20 7229 6910

© Law Business Research Ltd 2018No photocopying without a CLA licence. First published 2018First editionISBN 978-1-78915-059-9

The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. The information provided was verified between February and May 2018. Be advised that this is a developing area.

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Reproduced with permission from Law Business Research Ltd This article was first published in June 2018

For further information please contact [email protected]

© Law Business Research 2018

CONTENTS

2 Getting the Deal Through – Public M&A 2018

Global overview 6Alan M Klein Simpson Thacher & Bartlett LLP

Cross-Border Mergers & Acquisitions: The View from Canada 7Ian MichaelBennett Jones LLP

Belgium 9Michel Bonne, Mattias Verbeeck, Hannelore Matthys and Sarah ArensVan Bael & Bellis

Bermuda 15Stephanie P Sanderson BeesMont Law Limited

Brazil 19Fernando Loeser, Enrique Tello Hadad, Lilian C Lang and Daniel VargaLoeser e Portela Advogados

Bulgaria 25Ivan Gergov and Dimitar ZwiatkowPavlov and Partners Law Firm in cooperation with CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH

Canada 29Linda Misetich Dann, Brent Kraus, John Piasta, Ian Michael, Chris Simard and Andrew DisipioBennett Jones LLP

China 36Caroline Berube and Ralf HoHJM Asia Law & Co LLC

Colombia 42Santiago Gutiérrez, Andrés Hidalgo, Juan Sebastián Peredo and Darío CadenaLloreda Camacho & Co

Denmark 49Thomas Weisbjerg, Anders Carstensen and Julie Høi-NielsenMazanti-Andersen Korsø Jensen Law Firm LLP

Dominican Republic 55Mariángela PelleranoPellerano & Herrera

England & Wales 58Michael Corbett Slaughter and May

France 68Yves Ardaillou and David FaravelonBersay & Associés

Germany 75Gerhard Wegen and Christian CascanteGleiss Lutz

Ghana 83Kimathi Kuenyehia Sr, Sarpong Odame and Phoebe Arde-Acquah Kimathi & Partners, Corporate Attorneys

India 88Rabindra Jhunjhunwala and Bharat AnandKhaitan & Co

Ireland 96Madeline McDonnell and Susan CarrollMatheson

Italy 106Fiorella Federica AlvinoUghi e Nunziante – Studio Legale

Japan 113Sho Awaya and Yushi HegawaNagashima Ohno & Tsunematsu

Korea 120Jong Koo Park and Joon KimKim & Chang

Latvia 126Gints Vilgerts and Vairis DmitrijevsVilgerts

Luxembourg 131Frédéric Lemoine and Chantal KeeremanBonn & Schmitt

Macedonia 136Emilija Kelesoska Sholjakovska and Ljupco CvetkovskiDebarliev, Dameski & Kelesoska Attorneys at Law

Malaysia 142Addy Herg and Quay Chew SoonSkrine

Mexico 148Julián J Garza C and Luciano Pérez GNader, Hayaux y Goebel, SC

Netherlands 152Allard Metzelaar and Willem BeekStibbe

Norway 158Ole Kristian Aabø-EvensenAabø-Evensen & Co Advokatfirma

Poland 169Dariusz Harbaty, Joanna Wajdzik and Anna NowodworskaWolf Theiss

Romania 176Anda Rojanschi, Alexandru Vlăsceanu and Alexandra VaidaD&B David şi Baias

Russia 184Vasilisa Strizh, Dina Kzylkhodjaeva, Philip Korotin, Valentina Semenikhina, Alexey Chertov and Dmitry DmitrievMorgan, Lewis & Bockius LLP

Singapore 190Mark Choy and Chan Sing YeeWongPartnership LLP


www.gettingthedealthrough.com 3

CONTENTS

South Africa 198Ian KirkmanBowmans

Spain 206Mireia BlanchBuigas

Switzerland 211Claude Lambert, Reto Heuberger and Andreas MüllerHomburger AG

Taiwan 218Yvonne Hsieh and Susan LoLee and Li, Attorneys-at-Law

Turkey 222Noyan Turunç and Kerem TurunçTURUNÇ

Ukraine 228Volodymyr Yakubovskyy and Tatiana Iurkovska Nobles

United States 234Alan M Klein Simpson Thacher & Bartlett LLP

Vietnam 239Tuan Nguyen, Phong Le, Quoc Tran and Sang Huynhbizconsult Law Firm

Zambia 246Sharon SakuwahaCorpus Legal Practitioners



PREFACE

Getting the Deal Through is delighted to publish the first edition of Public M&A, which is available in print, as an e-book and online at www.gettingthedealthrough.com.

Getting the Deal Through provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers.

Throughout this edition, and following the unique Getting the Deal Through format, the same key questions are answered by leading practitioners in each of the jurisdictions featured.

Getting the Deal Through titles are published annually in print. Please ensure you are referring to the latest edition or to the online version at www.gettingthedealthrough.com.

Every effort has been made to cover all matters of concern to readers. However, specific legal advice should always be sought from experienced local advisers.

Getting the Deal Through gratefully acknowledges the efforts of all the contributors to this volume, who were chosen for their recognised expertise. We also extend special thanks to the contributing editor, Alan M Klein of Simpson Thacher & Bartlett LLP, for his assistance in devising and editing this volume.

LondonMay 2018

PrefacePublic M&A 2018First edition


Bonn & Schmitt LUXEMBOURG


LuxembourgFrédéric Lemoine and Chantal KeeremanBonn & Schmitt

1 Types of transaction

How may publicly listed businesses combine?

Publicly listed businesses can combine through mergers and takeovers.

2 Statutes and regulations

What are the main laws and regulations governing business combinations and acquisitions of publicly listed companies?

The main Luxembourg laws and regulations that are applicable, or may, depending on the activities carried out by the publicly listed com-panies, be applicable are: • the Law of 10 August 1915 on commercial companies, as amended

(the Company Law);• the Law of 19 May 2006 transposing Directive 2004/25/EC of the

European Parliament and the Council of 21 April 2004 on takeover bids (the Takeover Law).

• the Law of 5 April 1993 on the financial sector, as amended;• the Law of 10 July 2005, as amended, on prospectuses for securi-

ties, as amended;• the Law of 23 December 2016 on market abuse (the Market

Abuse Law) and Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (the Market Abuse Regulation);

• the Law of 11 January 2008 on transparency requirements in rela-tion to information about issuers whose securities are admitted to trading on a regulated market, as amended (the Transparency Law);

• the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertak-ings, as amended;

• the Law of 24 May 2011 on the exercise of certain rights of share-holders in general meetings of listed companies, as amended;

• the Law of 21 July 2012 relating to squeeze-out and sell-out (the Squeeze-out Law);

• the Law of 12 July 2013 relating to the alternative investment fund managers, as amended (the AIFM Law);

• the Law of 18 December 2015 on the failure of credit institutions and certain investment firms, as amended, transposing Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolu-tion of credit institutions and investment firms (the BRRD Law);

• the Law of 6 April 2013 relating to dematerialised securities;• the Law of 28 July 2014 relating to the immobilisation of bearer

shares and the holding of the register of registered shares and of bearer shares (the Immobilisation Law);

• the Civil Code;• the rules and regulations of the Luxembourg Stock Exchange;• circulars of the Luxembourg financial sector supervisory authority

(CSSF); and• further laws and regulations in relation to tax, labour law and the

domiciliation of companies.

3 Transaction agreements

Are transaction agreements typically concluded when publicly listed companies are acquired? What law typically governs the agreements?

In principle, where both companies are situated in different jurisdic-tions, the law applicable to the target company or target asset also governs the transaction agreements. However, depending on the nationality of the parties and interests involved in a multi-jurisdic-tional business combination, the parties often take advantage of the freedom to subject the transaction agreements to a law other than Luxembourg law.

4 Filings and fees

Which government or stock exchange filings are necessary in connection with a business combination or acquisition of a public company? Are there stamp taxes or other government fees in connection with completing these transactions?

Generally, a business combination requires administrative filings and publications, such as:• registration with the Luxembourg Register of Commerce

and Companies (the RCSL) and publications in the Recueil Electronique des Sociétés et Associations (RESA);

• notifications to the CSSF or the Luxembourg Stock Exchange;• storage of information with the Luxembourg Stock Exchange

in its capacity as the officially appointed mechanism under the Transparency Law;

• declarations to the Direct Tax Administration;• declarations to the Joint Centre for Social Security; and• registrations with the relevant professional chambers.

For mergers, the common merger proposal and the minutes of the extraordinary general meeting of the company located in Luxembourg approving the merger have to be filed with the RCSL. They will also be published in the RESA.

In the context of a takeover falling within the ambit of the Takeover Law, the bidder must draw up an offer document to be sub-mitted to the CSSF within 10 working days from the day the bid was made public.

The Luxembourg Stock Exchange also requires the communi-cation to it in advance of events affecting those securities that are admitted to trading at the Luxembourg Stock Exchange and of other information useful for the protection of investors.

A business combination that affects the securities of an issuer, the shares of which are admitted to trading on a regulated market and for which Luxembourg is the home member state, can trigger notifi-cation requirements of the shareholders and the issuer to the CSSF. Notification requirements of shareholders in relation to the acquisi-tion or disposal of major holdings pursuant to the Transparency Law are set out in more detail in question 6. The alternative investment fund managers (AIFMs), when acquiring control over a listed company are subject to notification requirements with the CSSF pursuant to the AIFM Law as set out in more detail in question 6. Moreover, an issuer will have to disclose to the public, file with the CSSF and store with the Luxembourg stock exchange (OAM) the total number of voting rights


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and capital at the end of a calendar month if the business combination affected the total issued capital and voting rights. An issuer would also be subject to notification requirements in case of an acquisition of its own shares if such acquisition would result in it holding a proportion of its own shares that reaches or exceeds the thresholds of 5 per cent or 10 per cent of the voting rights.

Further filings with the CSSF and disclosures to the public may be necessary under the provisions of the Market Abuse Regulation.

As a principle, no stamp taxes or transfer duties are payable for the transfer of shares in Luxembourg.

5 Information to be disclosed

What information needs to be made public in a business combination or an acquisition of a public company? Does this depend on what type of structure is used?

The type of information to be made public largely depends on the type of structure used.

If the business combination results in a modification of the articles of association of a Luxembourg company, these amendments would have to be filed with the RCSL and published in the RESA. Moreover, all mergers, divisions and similar operations will require, in particu-lar owing to the corporate resolutions and actions that must be taken, among others, filings with the RCSL and publications in the RESA.

Disclosure requirements pursuant to the Market Abuse Law, the Market Abuse Regulation, the Transparency Law (only in the case of admission of the securities to a regulated market) and the rules and regulations of the Luxembourg Stock Exchange may apply.

In connection with a takeover bid, the offeror is obliged to dis-close, among other things, information such as:• the decision to launch an offer;• the approved offer document; • information in case of an extension of the offering period;• information on a squeeze-out or sell-out; and• forms of acceptance.

Moreover, the offeror and the offeree company must provide the offer document required to be drawn up under the Takeover Law to the representatives of the employees or the employees themselves of the offeror company and the offeree company.

6 Disclosure of substantial shareholdings

What are the disclosure requirements for owners of large shareholdings in a public company? Are the requirements affected if the company is a party to a business combination?

In accordance with article 8 of the Transparency Law, a shareholder who acquires or disposes of shares, including depositary receipts rep-resenting shares, of a company whose shares, including depositary receipts representing shares, are admitted to trading on a regulated market and for which Luxembourg is the home member state and to which voting rights are attached, shall notify the company of the proportion of voting rights of the company held by the shareholder as a result of the acquisition or disposal where that proportion reaches, exceeds or falls below the thresholds of 5, 10, 15, 20, 25, 33.3, 50 and 66.6 per cent. The shareholder shall at the same time notify the CSSF. The voting rights shall be calculated on the basis of all the shares, includ-ing depositary receipts representing shares, to which voting rights are attached, even if the exercise thereof is suspended. The notification obligations also apply to certain financial instruments referenced to shares and those financial instruments shall be aggregated with the shares for the purposes of determining the above thresholds.

Under the AIFM Law, if an alternative investment fund man-ager (AIFM) manages an alternative investment fund (AIF), which acquires, individually or jointly, control (which corresponds to holding more than 33 and one-third per cent of the voting rights of the relevant entity) over a company whose shares are traded on a regulated market, it shall (i) notify such acquisition to the listed company, the sharehold-ers of the listed company whose addresses and identities are available to the AIFM and the CSSF (the notified parties), and (ii) disclose to the notified parties the identity of the AIFM, its conflict of interest policy and the policy for external and internal communication relating to the controlled company.

As far as the Squeeze-out Law applies, the holder of the securities shall disclose to the company and the CSSF the information where it becomes a majority holder within the meaning of this law or it falls below the threshold of 95 per cent or where it is a majority shareholder and acquires additional securities of the relevant company.

7 Duties of directors and controlling shareholders

What duties do the directors or managers of a publicly traded company owe to the company’s shareholders, creditors and other stakeholders in connection with a business combination or sale? Do controlling shareholders have similar duties?

Directors or managers of a Luxembourg company have duties based on their mandates and they may be held liable for management mis-takes or violation of the Company Law or the articles of association of their company. On such basis they should take any necessary or use-ful action to perform the business combination within the limits of the law, the company’s corporate object and according to the company’s articles of association. In addition, directors or managers are under a general principle to act competently and in good faith.

They also have to act in the company’s corporate interest (which is generally considered as going beyond the sole interest of the share-holders of the company and also encompasses the interest of a larger group of stakeholders such as employees or even creditors).

As a result, the directors or managers should act in the best inter-ests of the company on a case-by-case basis in the context of the contemplated business combination and act as a careful manager or director would act, undertaking all the necessary steps and actions required in the context of business combinations, notably in the con-text of operations involving numerous actions to perform such as a takeover for shares or cross-border merger.

Controlling shareholders do not have similar duties.

8 Approval and appraisal rights

What approval rights do shareholders have over business combinations or sales of a public company? Do shareholders have appraisal or similar rights in these transactions?

The approval of an extraordinary general meeting of shareholders of a company is also required where a business combination entails a capi-tal increase.

In the context of a national merger and cross-border merger, the general meeting of shareholders of the absorbed company and the general meeting of shareholders of the absorbing company must normally approve the merger. However, in national and cross-border mergers there are generally no appraisal rights and there is no cash alternative for objecting shareholders. The Company Law does not provide for specific rights of minority shareholders to block a national and cross-border merger.

9 Hostile transactions

What are the special considerations for unsolicited transactions for public companies?

Takeover bids regarding a Luxembourg company whose shares are admitted to trading on a regulated market in Luxembourg are gov-erned by the Takeover Law and supervised by the CSSF. If the target’s board wants to block a hostile bid, it must obey one of the main princi-ples of the Takeover Law (ie, that the board must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the bid). However, Luxembourg used the possibility under the takeover Directive 2004/25/EC to make anti-takeover measures and the neutralisation of protection measures optional. Thus, only if the general meeting of shareholders of the tar-get ‘opted in’ may its board have to obtain prior authorisation of the shareholders at a general meeting before taking any defensive meas-ures (save for seeking alternative bids).

The offeror, in particular in a hostile takeover, must be aware of the following main principles: • all holders of the same class of securities of the offeree company

must be afforded equivalent treatment;




• the holders of the securities of the offeree company must have suf-ficient time and information to reach a properly informed decision on the bid;

• false markets must not be created in the securities of the offeree company, of the offeror company or of any company concerned in the bid;

• an offeror must announce a bid only after ensuring that it can fulfil in full any cash consideration; and

• an offeree company must not be hindered in the conduct of its affairs for longer than is reasonable by a takeover bid (maximum six months from the publication of the decision to make a takeover bid).

10 Break-up fees – frustration of additional bidders

Which types of break-up and reverse break-up fees are allowed? What are the limitations on a public company’s ability to protect deals from third-party bidders?

Break-up fees are legally and theoretically possible, but there has not been any development on doctrine or market price in Luxembourg yet.

When considering entering into a break-up fee arrangement, this has to be discussed in the context of the doctrine of corporate inter-est, as it might turn out as an advantage or disadvantage for the target company. The arrangement of break-up fees is solely a matter of nego-tiation with and judgement by the target company’s board.

11 Government influence

Other than through relevant competition (antitrust) regulations, or in specific industries in which business combinations or acquisitions are regulated, may government agencies influence or restrict the completion of such transactions, including for reasons of national security?

Generally, in non-regulated industries, there are no specific rules or competences given to the Luxembourg authorities to influence or to restrict any business mergers.

12 Conditional offers

What conditions to a tender offer, exchange offer, mergers, plans or schemes of arrangements or other form of business combination are allowed? In a cash transaction, may the financing be conditional? Can the commencement of a tender offer or exchange offer for a public company be subject to conditions?

In the context of a takeover, the offeror can impose certain conditions such as the acquisition of a certain threshold of capital and voting rights of the target or obtaining the approval of authorities. However, the financing cannot be conditional since the bid can be announced only after the offeror has ensured that it can fulfil in full any cash con-sideration, if offered.

13 Financing

If a buyer needs to obtain financing for a transaction involving a public company, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist in the buyer’s financing?

Under Luxembourg law, there are no express obligations from the seller to assist the buyer in its financing. However, there is a general rule that the parties to a contract must perform such contract in good faith. Thus, if the obtention of the financing is a condition precedent to the acquisition, the seller will be in the obligation to provide the buyer with assistance for the satisfaction of such condition. In addition, it could be possible for the parties to insert in the legal documentation specific covenants such as for instance the obligation for the seller to communicate to the buyer any information related to the target com-pany that may be necessary for obtaining the financing.

14 Minority squeeze-out

May minority stockholders of a public company be squeezed out? If so, what steps must be taken and what is the time frame for the process?

The right to squeeze out minority shareholders in Luxembourg is gov-erned by the Takeover Law and the Squeeze-out Law.

The right to squeeze out minority shareholders can be exercised following a takeover bid pursuant to the Takeover Law. The offeror in a takeover holding at least 95 per cent of the capital carrying voting rights and 95 per cent of the voting rights of the target company can require all remaining shareholders to sell to it the remaining securities at a fair price. Where the target issues several classes of securities, the squeeze-out right may only be exercised in relation to those classes of securities where the 95 per cent thresholds have been met, provided, however, that the 95 per cent thresholds have also been reached for all the securi-ties issued, irrespective of the class.

The offeror must exercise its squeeze-out right within three months from the end of the offer acceptance period during which the holders of securities, to which the public offer has been addressed, have been able to decide to accept or refuse the offer. The offer acceptance period can-not be less than two weeks nor more than 10 weeks from the date of the publication of the offer document by the offeror, unless the 10-week period is extended further.

The decision to squeeze out must be disclosed as soon as it is taken by the offeror (ie, if it is made at the same time as the takeover bid, it must be included in the published offer document) and the CSSF should be informed in advance.

The Squeeze-out Law provides that the majority shareholder, when it acquires or disposes of securities resulting in attaining, falling below or exceeding a previously attained threshold of 95 per cent, must notify the company and the CSSF of it as soon as possible and no later than four days thereafter. In the case of a squeeze-out, the majority share-holder must appoint a qualified independent expert who will draw up a report in order to determine the fair price to be paid to the minority shareholder within a month of the notification to the CSSF of its inten-tion to effect a squeeze-out. Similarly, where a minority shareholder requests that the majority shareholder purchases its securities at a fair price, the majority shareholder is to appoint a qualified independent expert to determine the fair price to be paid to the minority shareholder. In the event of an opposition in situations of both squeeze-out and sell-out the CSSF shall decide, on the basis of a second report, the price to be paid within three months of the expiry of the opposition deadline.

The squeeze-out and sell-out mechanism is still unavailable where the Luxembourg company has never been listed.

15 Cross-border transactions

How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?

As a principle, cross-border mergers with foreign companies are allowed in Luxembourg on the condition that they are not prohibited by the provisions of the applicable foreign law.

Luxembourg has transposed the European Directives relating to cross-border mergers, notably Directives 2005/56/EC and 2007/63/EC. Cross-border mergers are subject to the Company Law. On 3 August 2011, the Luxembourg parliament amended the Company Law completing the transposition of Directive 2009/109/EC concerning the reporting and documentation requirements in the event of mergers and divisions.

A cross-border merger can be realised through a merger by absorp-tion or by incorporation of a new entity, a merger by migration to Luxembourg or by migration from Luxembourg to another jurisdiction or through an upstream merger or a reversed merger.

16 Waiting or notification periods

Other than as set forth in the competition laws, what are the relevant waiting or notification periods for completing business combinations or acquisitions involving public companies?

As far as the Takeover Law applies, an offeror shall communicate the offer document to the CSSF for its approval, which shall be received


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by the CSSF within 10 working days from the day on which the bid has been made public. The CSSF notifies its approval to the offeror within 30 working days following the submission. However, if the document was incomplete or additional information is necessary, the time delay only runs from the date on which the offeror provides the requested information.

The time period for the acceptance of a bid may not be less than two weeks and not more than 10 weeks from the date of publication of the offer document. However, the 10-week period may be extended under certain conditions.

However, the target company shall not be hindered in the conduct of its affairs for longer than is reasonable by a takeover. The time period shall not exceed six months from the date on which the decision to make the bid was made public.

For cross-border mergers, there is a waiting period of at least one month between the day of the publication of the common merger pro-posal in the RESA and the date of the shareholders’ meeting approving the proposal to merge.

17 Sector-specific rules

Are companies in specific industries subject to additional regulations and statutes?

Credit institutions, other professionals of the financial sector, insur-ance companies and investment funds are subject to specific regula-tions and specific approval rules by a supervisory authority.

18 Tax issues

What are the basic tax issues involved in business combinations or acquisitions involving public companies?

From a tax point of view there are three different main kinds of business combinations in Luxembourg (ie, merger, division and contribution of assets). Generally speaking the tax law facilitates such combinations by granting neutrality or exemption treatment in a wide array of cases.

Regarding the shareholders of the transferor company, the exchange of shares should be considered as a sale followed by an acqui-sition (article 22(5) of the Luxembourg Income Tax Law (the LITL)) and capital gains realised by the shareholders upon the sale are taxable.

However, shareholders rewarded by new shares should be tax-exempt from the realisation upon the transfer of the shares (rollover relief, under certain conditions) but they are tax liable upon disposal of shares received in exchange (article 22-bis LITL).

In the context of mergers and divisions, any operation that results in the transfer of the entire assets and liabilities of a company to another person is treated as a liquidation for tax purposes and, thus, taxable at the level of the transferring company according to article 169 LITL.

However, the profit arising from the transfer of assets and liabili-ties of a Luxembourg-resident company to a Luxembourg-resident

fully taxable company or a company resident in another EU member state should be tax-exempt provided that the receiving company issues shares with a balancing payment in cash not exceeding 10 per cent of the shares’ value to the shareholders of the transferring company or the shares held by the receiving entity in the transferring company are can-celled, and provided that the exempt profit is transferred under such conditions that its future taxation remains possible in Luxembourg where such profits would not have been otherwise exempted.

A shareholder transferring his or her entire participation is viewed as liquidating the investment held before the cancellation (ie, the par-ticipated company is partially liquidated). Note that no dividend with-holding tax applies in cases of full or partial liquidation of Luxembourg companies. According to the current administrative practice, the same should apply to the deemed partial liquidation (ie, classes of shares).

In relation to the contribution of assets, there should be a tax- neutral exchange for the transferor if the contribution is at book value and to the extent that the contributed assets comprise a business unit or an autonomous part of business and the transferor and the transferee are resident companies fully taxable or the transferee is located within the EU or European Economic Area.

The Luxembourg Income Tax Law also contains a favourable tax regime for cross-border divisions.

19 Labour and employee benefits

What is the basic regulatory framework governing labour and employee benefits in a business combination or acquisition involving a public company?

The rights and responsibilities of employers and employees are primar-ily governed by the Luxembourg Civil Code and the Labour Code. For a transfer of an undertaking or business or part of an undertaking or busi-ness located in Luxembourg as a result of a business combination, arti-cle L.127 et seq of the Labour Code applies. The transferor’s rights and obligations arising from a contract of employment or from an employ-ment relationship existing on the date of a transfer are transferred to the transferee. Thus, the Labour Code effects an automatic transfer of the employment contracts that bind the transferor, the transferee and the employees. Luxembourg legislation does not provide for any right of objection by which an employee may prevent the transfer of his or her employment. An employee refusing the transfer is generally con-sidered by the court as a resigning employee. On the other hand, the transfer itself cannot constitute grounds for dismissal by the transferor or the transferee.

20 Restructuring, bankruptcy or receivership

What are the special considerations for business combinations or acquisitions involving a target company that is in bankruptcy or receivership or engaged in a similar restructuring?

The Company Law allows the merger with a company incorporated in Luxembourg subject to restructuring or bankruptcy. This provision applies when the company subject to restructuring or bankruptcy is incorporated in Luxembourg and the absorbing company is a foreign company. However, the Luxembourg legal provisions do not exclude the application of this provision to a foreign company that is subject to restructuring or bankruptcy if the foreign laws are not opposed.

The entering into a business combination with a company subject to insolvency or bankruptcy in Luxembourg during its suspect period, defined as starting at the date of its cessation of payment until the date of the judgment, should be closely analysed as it could be challenged regarding the definition of the cessation of payment.

21 Anti-corruption and sanctions

What are the anti-corruption, anti-bribery and economic sanctions considerations in connection with business combinations with, or acquisitions of, a public company?

Companies and persons operating in Luxembourg, particularly those operating in the financial sector including AIFMs, are subject to the provisions of the Criminal Code and the Laws of 12 November 2004 and 27 October 2010, as amended, concerning the fight against money laundering and terrorism financing.

Update and trends

2016 was an important year in terms of development of the regula-tory or statutory framework governing the M&A sector or the finan-cial sector in Luxembourg. Thus, for instance, the law of 10 August 1915 on commercial companies has been substantially amended (the Companies Law Reform).

We saw the benefit of this Companies Law Reform in 2017. Indeed, many clients took the opportunity of the new tools offered by the Companies Law Reform to operate some changes in their current existing structures creating an increase of the workload.

Luxembourg continues to work to strengthen its position as a recognised financial centre for private equity houses.

Furthermore, in light of the Brexit, several investors are thinking of relocating to Luxembourg to maintain access to all the advantages of the European Union market.

All the above factors are creating an environment favourable to local or cross-border M&A transactions. Thus, in the com-ing months we should see a regain of activity in the M&A sector especially with private equity houses disposing of major financial resources resulting from successful fundraising ready to invest.

Even if current legislative proposals affecting the M&A sector are limited, it is worth noting that a bill aiming at modernising the Luxembourg bankruptcy law is under discussion.




To further strengthen the means for the fight against corrup-tion, Luxembourg legislation adopted a law of 13 February 2011, which amended the Labour Code, the Criminal Code and other laws. Corruption can be penalised by a prison sentence and a fine of up to €250,000 depending on the function of the person having committed the offence.

For passive and active bribery committed by or against directors or managers of companies, the Criminal Code provides for imprison-ment of one month to five years and a fine of €251 to €30,000. Legal entities are liable for the offence, including extortion, bribery (public or commercial), trading influence and corruption offences, and may be punished by one or more of the following penalties, in addition to the compensation of damage to the person who has suffered owing to the fraudulent act:

• a fine, in the conditions and modalities provided for in article 36 of the Criminal Code;

• specific confiscation;• disqualification from public tenders; and• dissolution, in the conditions and modalities provided for by article

38 of the Criminal Code.

In case of takeovers, an administrative sanction in the form of a fine between €125 and €12,500 may be imposed in the case of an infringe-ment of the Takeover Law, which is likely to breach the general prin-ciples set out in article 3(a) to (e) of the Takeover Law. Further, the omission of notifications or provision of information to the CSSF or to the representatives of the employees can in certain cases result even in criminal sanctions.

Frédéric Lemoine [email protected] Chantal Keereman [email protected]

148 Avenue de la FaïencerieL-1511 Luxembourg

Tel: +352 27 855Fax: +352 27 855 855www.bonnschmitt.net


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Public M&

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Acquisition Finance Advertising & Marketing AgribusinessAir Transport Anti-Corruption Regulation Anti-Money Laundering AppealsArbitration Art LawAsset RecoveryAutomotiveAviation Finance & Leasing Aviation Liability Banking Regulation Cartel Regulation Class ActionsCloud Computing Commercial ContractsCompetition ComplianceComplex Commercial LitigationConstruction Copyright Corporate Governance Corporate Immigration Corporate Reorganisations CybersecurityData Protection & PrivacyDebt Capital MarketsDispute ResolutionDistribution & AgencyDomains & Domain Names Dominance e-CommerceElectricity RegulationEnergy Disputes

Enforcement of Foreign Judgments Environment & Climate RegulationEquity DerivativesExecutive Compensation & Employee BenefitsFinancial Services ComplianceFinancial Services LitigationFintechForeign Investment Review Franchise Fund ManagementGas Regulation Government InvestigationsGovernment RelationsHealthcare Enforcement & LitigationHigh-Yield DebtInitial Public OfferingsInsurance & Reinsurance Insurance LitigationIntellectual Property & Antitrust Investment Treaty Arbitration Islamic Finance & Markets Joint VenturesLabour & EmploymentLegal Privilege & Professional SecrecyLicensing Life Sciences Loans & Secured FinancingMediation Merger Control MiningOil Regulation Outsourcing Patents Pensions & Retirement Plans Pharmaceutical Antitrust

Ports & TerminalsPrivate Antitrust LitigationPrivate Banking & Wealth Management Private Client Private Equity Private M&AProduct Liability Product Recall Project Finance Public M&APublic-Private Partnerships Public Procurement Real Estate Real Estate M&ARenewable EnergyRestructuring & Insolvency Right of Publicity Risk & Compliance ManagementSecurities Finance Securities LitigationShareholder Activism & EngagementShip FinanceShipbuilding Shipping State Aid Structured Finance & SecuritisationTax Controversy Tax on Inbound Investment Telecoms & Media Trade & Customs Trademarks Transfer PricingVertical Agreements

ISBN 978-1-78915-059-9

Getting the Deal Through

Also available digitally

Onlinewww.gettingthedealthrough.com


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