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The Mergers & Acquisitions Review
sixth edition
Reproduced with permission from Law Business Research Ltd.
This article was first published in The Mergers & Acquisitions Review, 6th edition(published in August 2012 – editor simon Robinson).
For further information please [email protected]
Contents
4
The Law Reviews
the MeRgeRs And Acquisitions Review
the RestRuctuRing Review
the PRivAte coMPetition enFoRceMent Review
the disPute ResoLution Review
the eMPLoyMent LAw Review
the PuBLic coMPetition enFoRceMent Review
the BAnking ReguLAtion Review
the inteRnAtionAL ARBitRAtion Review
the MeRgeR contRoL Review
the technoLogy, MediA And teLecoMMunicAtions Review
the inwARd investMent And inteRnAtionAL tAxAtion Review
the coRPoRAte goveRnAnce Review
the coRPoRAte iMMigRAtion Review
the inteRnAtionAL investigAtions Review
the PRojects And constRuction Review
the inteRnAtionAL cAPitAL MARkets Review
the ReAL estAte LAw Review
the PRivAte equity Review
the eneRgy ReguLAtion And MARkets Review
the inteLLectuAL PRoPeRty Review
www.TheLawReviews.co.uk
Contents
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PuBLisheR gideon Roberton
Business deveLoPMent MAnAgeR Adam sargent
MARketing MAnAgeRs nick Barette, katherine jablonowska, Alexandra wan
PuBLishing AssistAnt Lucy Brewer
editoRiAL AssistAnt Lydia gerges
PRoduction MAnAgeR Adam Myers
PRoduction editoR joanne Morley
suBeditoR caroline Rawson
editoR-in-chieF callum campbell
MAnAging diRectoR Richard davey
Published in the united kingdom by Law Business Research Ltd, London
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no photocopying: copyright licences do not apply.The information provided in this publication is general and may not apply in a specific
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i
AcknowLEdgEMEnTS
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
AABø-evensen & co AdvokAtFiRMA
ABduLAZiZ ALgAsiM LAw FiRM in association with ALLen & oveRy LLP
AdvokAAdiBÜRoo gLiMstedt oÜ
ÆLex
AguiLAR cAstiLLo Love
AndeRson MŌRi & toMotsune
ARiAs, FáBRegA & FáBRegA
Beiten BuRkhARdt RechtsAnwALtsgeseLLschAFt MBh
BeRnotAs & doMinAs gLiMstedt
BowMAn giLFiLLAn inc
BoyAnov & co
BRedin PRAt
BRigARd & uRRutiA ABogAdos sA
BuLBoAcA & AsociAtii scA
cRAvAth, swAine & MooRe LLP
deBevoise & PLiMPton LLP
dF AdvocAtes
ii
dittMAR & indRenius
dRyLLeRAkis & AssociAtes
eLİg AttoRneys-At-LAw
euBeLius
F cAsteLo BRAnco & AssociAdos
Fontes, tARso RiBeiRo AdvogAdos
gLiMstedt & PARtneRs
goRRissen FedeRsPieL
hARneys ARistodeMou LoiZides yioLitis LLc
hARney, westwood & RiegeLs
hengeLeR MueLLeR
jiMÉneZ de ARÉchAgA, viAnA & BRAuse
kBh kAAnuun
keMPhoogstAd, s.R.o.
kiM & chAng
king & wood MALLesons
kinsteLLAR s.R.o., Advokátní kAnceLář
MAkes & PARtneRs LAw FiRM
MAnnheiMeR swARtLing AdvokAtByRÅ
MARvAL, o’FARReLL & MAiRAL
MAtheson oRMsBy PRentice
Mnks
MoRAvČeviĆ vojnoviĆ ZdRAvkoviĆ in cooperation with schÖnheRR
nAgy És tRÓcsányi ÜgyvÉdi iRodA
Acknowledgements
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Acknowledgements
noeRR ooo
osLeR, hoskin & hARcouRt LLP
PiRoLA Pennuto Zei & AssociAti
RuBio LeguíA noRMAnd
RuŽiČkA csekes, s.R.o.
s hoRowitZ & co
sALAns
sAntAMARinA y stetA, s.c.
scheLLenBeRg wittMeR
schÖnheRR RechtsAnwÄLte gMBh
sheARMAn & steRLing LLP
sLAughteR And MAy
stAMFoRd LAw coRPoRAtion
toRRes, PLAZ & ARAujo
uRíA MenÉndeZ
vAn dooRne
vAsiL kisiL & PARtneRs
wiLson sonsini goodRich & RosAti
young conAwAy stARgAtt & tAyLoR, LLP
Contents
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Editor’s Preface .................................................................................................xiSimon Robinson
Chapter 1 euRoPeAn oveRview ..................................................... 1Simon Robinson
Chapter 2 euRoPeAn coMPetition............................................ 15Götz Drauz and Michael Rosenthal
Chapter 3 euRoPeAn PRivAte equity ........................................ 22Thomas Sacher, Steffen Schniepp and Guido Ruegenberg
Chapter 4 us AntitRust .................................................................. 33Scott A Sher, Christopher A Williams and Bradley T Tennis
Chapter 5 us eneRgy tRAnsActions ......................................... 46Sarah A W Fitts
Chapter 6 shARehoLdeRs And BoARds oF diRectoRs in us MeRgeRs & Acquisitions .............................. 61
George A Casey and Cody L Wright
Chapter 7 ARgentinA........................................................................ 75Ricardo W Beller and Agustina M Ranieri
Chapter 8 AustRALiA ......................................................................... 90Nicola Wakefield Evans and Lee Horan
Chapter 9 AustRiA ............................................................................ 101Christian Herbst
Chapter 10 BAhRAin ........................................................................... 113Haifa Khunji, Jessica Lang Roth and Sumana Abdelkarim
Chapter 11 BeLgiuM ........................................................................... 129Koen Geens and Marieke Wyckaert
conTEnTS
Contents
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Chapter 12 BRAZiL ............................................................................... 137Marcus Fontes, Max Fontes, Paulo de Tarso Ribeiro and Julia Elmôr
Chapter 13 BRitish viRgin isLAnds ............................................ 150Leonard A Birmingham and Simon Hudd
Chapter 14 BuLgARiA ......................................................................... 158Yordan Naydenov and Nikolay Kolev
Chapter 15 cAnAdA ............................................................................ 168Robert Yalden, Ward Sellers and Emmanuel Pressman
Chapter 16 cAyMAn isLAnds .......................................................... 183Wendy L Lee
Chapter 17 coLoMBiA ....................................................................... 203Sergio Michelsen Jaramillo
Chapter 18 costA RicA...................................................................... 217John Aguilar Jr and Alvaro Quesada
Chapter 19 cyPRus .............................................................................. 224Nancy Ch Erotocritou
Chapter 20 cZech RePuBLic ........................................................... 229Lukáš Ševčík, Jitka Logesová and Bohdana Pražská
Chapter 21 denMARk ......................................................................... 237Henrik Thouber and Anders Ørjan Jensen
Chapter 22 estoniA ............................................................................ 247Anne Veerpalu
Chapter 23 FinLAnd ........................................................................... 259Jan Ollila, Anders Carlberg and Wilhelm Eklund
Chapter 24 FRAnce ............................................................................. 269Didier Martin
Chapter 25 geRMAny ......................................................................... 282Heinrich Knepper
Contents
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Chapter 26 gReece ............................................................................. 294Cleomenis G Yannikas, Vassilis-Thomas G Karantounias and Sophia K Grigoriadou
Chapter 27 hong kong ................................................................... 305Jason Webber
Chapter 28 hungARy ......................................................................... 314Péter Berethalmi and Balázs Karsai
Chapter 29 indonesiA ...................................................................... 322Yozua Makes
Chapter 30 iReLAnd ........................................................................... 335Fergus Bolster
Chapter 31 isRAeL ................................................................................ 343Clifford Davis and Keith Shaw
Chapter 32 itALy .................................................................................. 353Maurizio Bernardi, Roberta di Vieto and Luca Occhetta
Chapter 33 jAPAn ................................................................................. 366Hiroki Kodate and Kenichiro Tsuda
Chapter 34 koReA ................................................................................ 374Sang Hyuk Park and Gene (Gene-Oh) Kim
Chapter 35 LAtviA ............................................................................... 386Baiba Vaivade and Sabīne Andzena
Chapter 36 LithuAniA ....................................................................... 395Audrius Žvybas
Chapter 37 LuxeMBouRg ................................................................. 404Marie-Béatrice Noble and Stéphanie Antoine
Chapter 38 MALtA ................................................................................ 417Jean C Farrugia and Bradley Gatt
Chapter 39 Mexico ............................................................................. 427Aarón Levet V and Alberto Solís M
Contents
Contents
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Chapter 40 MontenegRo ............................................................... 437Slaven Moravčević and Jovan Barović
Chapter 41 netheRLAnds ............................................................... 447Onno Boerstra and Guus Kemperink
Chapter 42 nigeRiA ............................................................................ 465L Fubara Anga
Chapter 43 noRwAy ............................................................................ 470Ole K Aabø-Evensen
Chapter 44 PAnAMA ............................................................................ 495Julianne Canavaggio
Chapter 45 PeRu ................................................................................... 503Emil Ruppert and Sergio Amiel
Chapter 46 PoLAnd ............................................................................ 514Paweł Grabowski, Gabriel Olearnik and Rafał Celej
Chapter 47 PoRtugAL ....................................................................... 525Rodrigo Almeida Dias
Chapter 48 RoMAniA .......................................................................... 535Corina G Ionescu and Costin Teodorovici
Chapter 49 RussiA ............................................................................... 545Evgeny Maslennikov and Björn Paulsen
Chapter 50 sAudi ARABiA .................................................................. 553Johannes Bruski and Zeyad Khoshaim
Chapter 51 seRBiA ................................................................................ 566Matija Vojnović and Vojimir Kurtić
Chapter 52 singAPoRe ...................................................................... 576Lee Suet-Fern and Elizabeth Kong Sau-Wai
Chapter 53 sLovAkiA .......................................................................... 587Petra Starková
Chapter 54 south AFRicA ................................................................ 595Ezra Davids and Ashleigh Hale
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Chapter 55 sPAin .................................................................................. 607Christian Hoedl and Javier Ruiz-Cámara
Chapter 56 sweden ............................................................................ 622Biörn Riese, Eva Hägg and Cecilia Björkwall
Chapter 57 switZeRLAnd ................................................................ 631Lorenzo Olgiati, Martin Weber, Jean Jacques Ah Choon, Harun Can and David Mamane
Chapter 58 tuRkey ............................................................................. 642Tunç Lokmanhekim and Nazlı Nil Yukaruç
Chapter 59 ukRAine ........................................................................... 651Anna Babych and Artem Gryadushchyy
Chapter 60 united ARAB eMiRAtes ............................................. 664DK Singh and Laena Rahim
Chapter 61 united kingdoM ........................................................ 675Simon Robinson
Chapter 62 united stAtes .............................................................. 701Richard Hall and Mark Greene
Chapter 63 united stAtes: deLAwARe ....................................... 730Rolin P Bissell and Elena C Norman
Chapter 64 uRuguAy .......................................................................... 743Fernando Jiménez de Aréchaga (Jr), Ignacio Menéndez and Ignacio Mendiola
Chapter 65 veneZueLA ..................................................................... 753Guillermo de la Rosa, Juan D Alfonzo, Nelson Borjas and Adriana Bello
Appendix 1 ABout the AuthoRs ................................................. 767
Appendix 2 contRiButing LAw FiRMs’ contAct detAiLs ... 811
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Editor’s PrEfacE
Deal-making has remained on the agenda in the past year, although the first half of 2011 showed a stronger performance than the second half, which saw a significant fall in transactional activity. In the wake of continuing economic uncertainty, opportunities for acquisitions remain limited to companies and institutions on a stable financial footing. At the same time, corporates are beginning to focus on their core business and looking for ways to return value. Valuations remain favourably low for purchasers, and the prospect of striking a bargain makes cross-border M&A attractive for those who can afford it. While access to the loan market has remained difficult, cash-rich corporations have begun to swing the balance in their favour. Shareholder participation and a desire for control and accountability are on the rise, and an atmosphere of increased regulation, reform and austerity is building. We remain in a state of geopolitical flux, and these factors continue to complicate the global economic scenario. The period of widespread unrest in the Middle East and North Africa seems to be reaching a settled conclusion, although the situation in Syria (and possibly Mali and Sudan) is still volatile. A number of countries have seen fresh elections and a transition of leadership, including France and Russia, and a change of leadership in China is expected following the 18th National People’s Congress this autumn, when the US presidential elections will also take place. The sovereign debt crisis and the ongoing uncertainty over the fate of the eurozone are further contributing to the lack of confidence in the markets.
All is not doom and gloom, however, and whereas the global picture remains difficult, there are signs of hope. The emerging markets have shown a persistent growth in outbound investment, spurred on by a desire to build a more prominent global presence and for the purpose of accessing new markets. European targets remain of interest to both US and Middle and Far-Eastern buyers. Inbound investment from the emerging markets into both Africa and Australia is on the rise, and this has strengthened activity in the energy, mining and utilities sector. The technology, media and telecoms sector has also shown signs of promise with some high-profile deals, and must be watched with interest in the coming year. There is hope that, as political and economic factors
Editor’s Preface
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stabilise, M&A activity will once more gather pace and momentum, and enter a new era of resurgence. We shall see.
Once again, I would like to thank the contributors for their continued support in producing this book. As you read the following chapters, one hopes the spectre of the years past will provide a basis for understanding, and the prospect of years to come will bring hope and optimism.
Simon RobinsonSlaughter and MayLondonAugust 2012
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Chapter 53
Slovakia
Petra Starková 1
I OVERVIEW OF M&A ACTIVITY
The market for mergers and acquisitions in Slovakia has been affected by the financial crisis and political developments. The majority of M&A transactions have involved intra-group mergers, the driver of which is the achievement of efficiencies and cost-cutting.
II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A
The Slovak legal regulation of M&A significantly follows by the EU rules. M&A transactions are mainly governed by Act No. 513/1991 (‘the Commercial Code’) and by Act No. 566/2001 on Securities and Investment Services, as amended (‘the Securities Act’).
Basic data regarding corporations are registered in the commercial registers kept by the competent courts, which enable public access to this information. The most basic data is available on the website of the Ministry of Justice free of charge.2 The scope of this data, as well as the requirements regarding specific documents to be included in the commercial register, is regulated in the Commercial Code and in more detail by Act No. 530/2003, as amended (‘the Commercial Register Act’) and by implementing regulations.
The Commercial Code defines the legal framework for establishing and corporate governance of corporations, as well as the reorganisation of companies including mergers or demergers. It also stipulates the rules for transfers of interest in corporations, and partly provides rules for acquiring shares, while further details on the transfer of securities, including shares, are governed by the Securities Act.
1 Petra Starková is a senior associate at Ružička Csekes, s.r.o.2 www.orsr.sk.
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The corporate forms most frequently used in Slovakia are limited liability companies and joint stock companies. Limited liability companies are a very popular legal form due to their simple organisational structure and lower level of regulation, which allows more flexibility and less bureaucracy in operating the company. The minimum registered capital of limited liability companies is €5,000.
Joint stock companies are more complex but provide more guarantees to shareholders who do not want to participate in the day-to-day activity of companies. The minimum capital of joint stock companies is €25,000. Joint stock companies issue a paper form shares or shares in book-entered form.
The Central Depository of Securities is an institution that keeps the registries of all book-entered securities, and through which the transfers of book-entered securities are carried out.
Slovak public joint stock companies are usually listed on the Bratislava Stock Exchange, which is relatively small, but through which some shares have been recently issued to the public. Listing and trading at the stock exchange is governed by its rules, which are available on the website of the stock exchange. The securities market in Slovakia is supervised by the National Bank of Slovakia.
Takeover bids for companies the shares of which are traded on the stock exchange are governed by the Securities Act and Stock Exchange Act. The legal provisions provide an underlying legal framework for takeover bids, their transparency, the duties of bidders and target companies in terms of information provision and employees of target companies, the takeover bid procedure and mandatory takeover bids, bid withdrawal and bidding results. The Securities Act also defines squeeze-outs, but the regulation is so strict that such regulation has effectively not made it possible to fully squeeze out shareholders in companies, therefore it has not often been applied in practice. The Securities Act and the Stock Exchange Act also regulate the terms of the initial public offering of shares, as well as transparency requirements for listed companies.
III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT
In 2011 and 2012 although there have been no significant amendments to the legal regulations in relation to M&A transactions, certain changes have been introduced to the Commercial Code in connection with mergers.
The simplification of mergers is provided by allowing all shareholders of all companies participating in the merger to waive their rights to receive the interim financial statements of the companies, as well as the special reports of the boards of directors that describe the legal and economic aspects of the merger and its reasons. It is not necessary to prepare interim financial statements in the case of public joint stock companies, which publish semi-annual financial statements.
Further documents in relation to the merger can be published on the company websites, which facilitates access by shareholders of the participating companies to the respective documentation.
In the case of an increase of the registered capital by a non-cash contribution in a merger, an expert opinion must be prepared to evaluate the value of the such
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contribution. This is a new requirement, as non-cash contributions made in connection with mergers had previously not required such appraisal.
An amendment to the Commercial Code has introduced, with effect from 1 January 2013, a so-called registry of financial statements. While currently the financial statements of companies are collected by the commercial registry, from 2013 a special register of financial statements will be kept by the Ministry of Finance of the Slovak Republic (Datacentrum). The aim of this new system is to improve the availability and quality of economic and other information about business entities and institutions in Slovakia. The new register will form the repository in which all financial statements must be filed in accordance with various legal acts.
In July 2011 a fully electronic Commercial Gazette has been introduced. The Commercial Gazette is an official platform on which the publication of legal information about companies is provided. This information usually becomes effective for third parties on the date of the publication of such information in the Commercial Gazette. The Commercial Gazette will now only be published in electronic format.
IV FOREIGN INVOLVEMENT IN M&A TRANSACTIONS
The number of investments in 2011 in Slovakia was four times higher than the previous year, and most transactions were in less developed regions with higher unemployment. The investments were targeted in particular at the automotive, electrical and metal-working businesses.3
Foreign investors that successfully began projects in 2011 were from the United States, Korea, Germany, Sweden, Denmark, Spain, Italy, the United Kingdom and Belgium.
In 2011 the trend of cross-border mergers continued. Such trend followed mainly from the need of supranational business groups to increase their efficiencies and defences against financial crises.
V SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES
Some recent transactions include PosAm becoming a part of Slovak Telekom, which in turn merged with T-Mobile in the summer of 2010, and the Czech company Skanska acquiring construction company Skybau.
The energy sector dominated in 2011, when the privatisation of several heating companies began, but the privatisations were stopped due to the collapse of the Slovak coalition government. The acquisition of Grafobal Group Energy (GGE) by the Czech company Tenergo Brno went ahead, as did the acquisition of the west-Slovakian heating company Comeron SPS by heating company Cofely, a member of the major international energy group GDF Suez.
3 Source: SARIO.
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The top 10 deals by value in 2011 were mainly in the services, and media and entertainment sectors. Kempinski Hotel River Park and Grand Hotel Kempinski High Tatras were bought by Best Hotel Properties; the deals were valued at €66 million and €31 million respectively. The Luxembourg M7 Group bought all the shares in Skylink in Slovakia (€31 million), Cinema City International acquired 100 per cent of the shares in Palace Cinemas Slovak Republic (€4 million), and Time Warner Inc purchased a minority stake in Central European Media Enterprises in Slovakia (€6 million).
Other significant deals included the 100 percent acquisition of Československa obchodna banka dochodkova a spravcovska spoločnosť by Poštova banka in Slovakia (€15 million), and the purchase of a minority stake in construction company Prigan Holding by the European Bank for Reconstruction and development (€9 million). Slovak Penta Investments bought a minority stake in Dexia banka Slovensko (€5 million).4
With a new government in March 2012, the expectations of significant deals from the potential privatisations of state-owned companies have disappeared, as the new government has called a halt to the privatisation process.
On the other hand, in 2012 middle-market deals will continue. The acquisition of targets with local subsidiaries for reasonable prices with the potential for new businesses for buyers are visible in Slovakia.
VI FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS
Bank financing is the most common form of financing M&A transactions. On the other hand, due to the crisis banks tend to provide financing under stricter terms and are ready to provide fewer proceeds than had been the case.
Generally, large projects resort to syndicated loans or financing through international investment funds, which are not used as financing per se, but rather to complement bank financing. To cover their M&A financing needs, companies use, though to a lesser extent, the issuance of new shares of stock or bonds; however, regarding the ‘uncertainty’ as to whether there will be interest in the bonds or stock and the relatively low amount of financing raised, it is considered a complementary financing option that forms part of any private equity.
Especially with the mergers and divisions of companies, financing is provided for in several ways, of which the exchange of shares of stock of shareholders of all companies involved in the newly created company (‘share-to-share transaction’) is among the most common. Companies also use bank financing (or financing through other financial institutions) or opt for a solution combining the two methods, where some shareholders or partners do not receive shares of stock or interest in the new company, but instead are paid a compensatory share; however, all shareholders or partners must agree to the payment of the compensatory share.
4 Emerging Europe: M&A Report 2011, CMS and DealWatch.
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VII EMPLOYMENT LAW
The Slovak Labour Code is the key piece of legislation governing employment issues. Revolutionary amendments of the Labour Code became effective in 2011, aiming at more flexibility for employers and hence increasing employment rates in Slovakia.
One of the main changes is making the termination of employment by an employer less difficult. The parallel application of notice period and severance payments has been eliminated in principle. Notice periods in the case of employment terminations have been redefined: the shorter the duration of employment the shorter the notice period. The costs of invalid termination of employment have been reduced by reducing compensation to nine months’ average earnings of an employee.
There is a change in applying mass lay-off rules. The application of such rules depends on the number of employees, whereas before, the total number of employees did not play a significant role.
The option of longer probation periods for managers has been introduced. While a standard probationary period is three months, in the case of managerial employees it can be six or even nine months if so agreed in a collective agreement.
Other changes include enabling more flexible working time, changes related to overtime work, rest periods, night work and the regulation of holidays.
The non-competition clause after the termination of employment that had so far been considered invalid under Slovak law has now been defined in the Labour Code.
With a new government in March 2012, a new amendment of the Labour Code has been tabled. It is expected that some of the recent progressive changes will be reversed.
VIII TAX LAW
The tax implications of M&A transactions are governed by several statutory provisions (particularly Act No. 431/2002 on accounting and Act No. 595/2003 on income tax), which generally define the scope of tax treatment and the accounting of business entities. European legislation has been fully incorporated into local tax laws governing M&A processes.
The tax and accounting assessment of the mergers or division of companies is connected with the relevant provisions of the Commercial Code. Act No. 431/2002 states that a wound-up company must keep accounts until the day preceding the determining day (for these purposes, the determining day cannot be later than the day the mergers or division becomes effective). The assets and liabilities of a wound-up company are transferred to the successor company as of the date of the determining day. A wound-up business unit is then obliged to close its accounting books and prepare special financial statements up to the day preceding the determining day. Accounts are then kept by the successor’s accounting department from the determining day. Where the date of merger or division is set on the last day of the accounting period, only the ordinary financial statements of the wound-up company are prepared.
Since 1 January 2010, Slovakian tax legislation has included a legal regulation relating to the tax aspects of the merger or division of companies. The regulation introduces the option of choosing the valuation method for the assets acquired by the merger or division: valuation at fair value or valuation at acquisition price. The
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tax treatment of provisions, adjustments, depreciation and amortisation, inclusion of goodwill or negative goodwill, and adjustment differences into the tax base will depend on the valuation method chosen.
Any valuation differences established after the valuation of assets and liabilities at fair value will be included on a non-recurring basis into the tax base of the legal successor company. The taxpaying entity can decide to include valuation differences into the tax basis over no more than seven subsequent taxation periods, but only after the statutory conditions have been met. In the event of assets being valued at acquisition prices, the legal successor takes over the assets and liabilities at acquisition prices, which consequently means no differences in valuation.
As of the determining day, the successor company takes over individual items of assets and liabilities of the wound-up company and transfers such into its own accounting records. Shares of the wound-up company are swapped for the shares of the successor company, provided that the shareholders of the wound-up company agreed with the merger and did not refuse to become shareholders in the successor company. The securities swap and the determination of the exchange rate must be certified by an independent expert.
Taxpayers can deduct tax losses from tax basis over a period of no more than seven consecutive accounting periods. For the purpose of mergers, this rule is specified so that the successor company may deduct any tax loss posted by the wound-up company provided that the purpose of the merger was other than the intentional reduction of the tax base of the legal successor.
The start of the taxation period for the wound-up company coincides with the start of a regular taxation period, and ends when the company is wound up without liquidation. The tax return of the wound-up company must be submitted by its legal successor within three months of the winding-up. The same period applies to the payment of outstanding tax. The taxation period of the legal successor remains unchanged and lasts a full 12 months. The successor company must pay advances on income tax in the amount calculated as the sum total of the successor company’s tax liability, and that of the dissolved company posted for the taxation period preceding the merger.
In terms of value added tax (‘VAT’), the merger is not considered taxable if the successor company becomes a registered VAT taxpayer by the date the merger or the division is effectively signed into the commercial register.
During the takeover of a target company, it is necessary to deal with the tax aspects of the questions arising from relations existing between affiliated companies and the limitations of financing by the affiliated companies. Each person holding either a direct or indirect ownership interest in the assets, control or management of a Slovakian entity greater than 25 per cent, is considered a foreign affiliated person. Relations between affiliated persons must comply with the arm’s-length principle, which is based on the comparison of prices and mutual relations, and it is impossible for transactions realised between affiliated persons to differ from the transactions between unaffiliated persons. If a company realises transactions between affiliated persons, it must keep documentation for the purpose of transfer pricing. The contents of the documentation are determined in a special guideline from the Finance Ministry. The tax base of an affiliated company can include the difference between the prices applied in business relations between affiliated persons, including prices for services, loans and facilities, and the prices applied between
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unaffiliated persons in comparable business relations. The undercapitalisation rule does not apply in Slovakia.
Any income from the transfer of capital assets is subject to 19 per cent income tax, and this income is calculated within the scope of calculating the general income tax base, with the decisive moment being the sale of interest or stock to be transferred. Except for administrative fees, no other taxes are payable on the acquisition or sale of interest or stock of a corporation. Losses from the sale of ownership interests, shares of stock, bonds, notes and similar financial instruments held until maturity are not considered tax expenses, except for securities freely marketable on the capital market subject to a 10 per cent deviation from the rate quoted by the stock exchange.
IX COMPETITION LAW
Acquisitions and mergers represent ‘concentrations’ for the purposes of Slovak competition law.
The Act on Competition Protection defines as a ‘concentration’ the process of the economic amalgamation of entities in the form of a merger of business entities (while preserving their legal independence), the acquisition of direct or indirect control by one entity over the other, or a joint venture creation. The supervision of concentrations is carried out by the Antimonopoly Office of Slovak Republic (‘the Office’).
The years of practice of the Office led it to the initiative to prepare the amendment of rules governing competition, the aim of which was to simplify the process of assessment, while also making it more focused on material issues. Significant changes have been adopted to the competition law in 2011. A formal approach is replaced by an economic approach, and the search for new, more efficient instruments for handling competition failures and achievement of higher procedural effectiveness has been undertaken. In the year under review, the Office opened public consultations to the concepts of commitments and settlement, and published the procedure of their application on its website.5
The criteria determining whether a concentration is subject to control by the Office were redefined. The main change was new thresholds for turnovers that trigger the obligation to notify the Office of the concentration; higher turnovers now need to be achieved in Slovakia than under the previous legislation. Such change will ensure that the Office does not need to assess concentrations that have an insignificant impact on the Slovak market.
A new, two-phase process for the assessment of concentrations has been introduced. Low-risk concentrations are assessed in the first phase, and the period for their assessment will be reduced to 25 working days. The decision on this type of concentration will be issued in a simplified form in the majority of cases. In the case of a more complicated concentration, the assessment will proceed into the second phase with a period of 90 working days for a decision. This change will accelerate and increase the effectiveness of the assessment of concentrations process.
5 Source: Antimonopoly Office of the Slovak Republic.
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The SIEC test,6 used by the European Commission within the meaning of the Regulation on the Control of Concentrations between Undertakings, has been introduced into the assessment of concentrations process by the Office.
In 2011, the Office decided 33 concentration cases, and all such cases have been decided by the first-instance body of the Office.7
X OUTLOOK
In the near future a significant increase in M&A transactions in Slovakia is not expected. The majority of transactions will represent restructurings within groups.
However, there is positive news in that the legal rules applicable to M&A have stabilised. Although their application is still subject to many legal discussions, legal practitioners can provide standard solutions to their clients in relation to transactions.
6 Significant impediment of effective competition.7 Id.
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Appendix 1
About the Authors
PETRA STARKOVÁRužička Csekes, s.r.o.Petra Starková began her career in legal services in 2000 when she joined the CVD partnership as a trainee. In 2005 she left CVD to work as an in-house lawyer for the largest petrochemical company in the Slovak Republic. She is a member of the Slovak Bar Association.
Ms Starková joined Ružička Csekes in 2010. She specialises in corporate law and corporate transactions, particularly those with an international and EU law element. She has extensive experience advising companies floated on the stock market, advising on corporate structures, organisational and everyday corporate management issues. A regular participant in transactional projects, she advises on the transfer of shares to companies or individuals and acts in negotiations related to shareholders’ agreements.
She is an experienced adviser on a wide range of commercial law matters, securities law and energy industry regulations, including the relevant EU law and regulations. She has advised on many significant projects for Slovak and foreign clients.
Recently Ms Starková advised the leading Slovak telecoms company on the potential acquisition of leading Czech and Slovak satellite TV and internet platform and a major Slovak book retailer in an acquisition of several European publishing businesses.
She speaks English, Slovak and Hungarian.
About the Authors
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RUŽIČKA CSEKES, S.R.O.Vysoká 2/B811 06 BratislavaSlovak RepublicTel: +421 2 32 333 444Fax: +421 2 32 333 [email protected]