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The Mergers & Acquisitions
Review
Law Business Research
Seventh Edition
Editors
Simon Robinson and Mark Zerdin
The Mergers & Acquisitions Review
Reproduced with permission from Law Business Research Ltd.
This article was first published in The Mergers & Acquisitions Review, 7th edition(published in August 2013 – editors Simon Robinson and Mark Zerdin).
For further information please [email protected]
The Mergers & Acquisitions
Review
Seventh Edition
EditorsSimon Robinson and Mark Zerdin
Law Business Research Ltd
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 LAw Reviews
www.TheLawReviews.co.uk
ThE PRivaTE EquiTy REviEw
ThE EnERgy REguLaTion and MaRkETS REviEw
ThE inTELLEcTuaL PRoPERTy REviEw
ThE aSSET ManagEMEnT REviEw
ThE PRivaTE wEaLTh and PRivaTE cLiEnT REviEw
ThE Mining Law REviEw
ThE ExEcuTivE REMunERaTion REviEw
ThE anTi-BRiBERy and anTi-coRRuPTion REviEw
ThE caRTELS and LEniEncy REviEw
ThE Tax diSPuTES and LiTigaTion REviEw
ThE LifE SciEncES Law REviEw
ThE inSuRancE and REinSuRancE Law REviEw
ThE govERnMEnT PRocuREMEnT REviEw
ThE doMinancE and MonoPoLiES REviEw
ThE aviaTion Law REviEw
PuBLiShER gideon Roberton
BuSinESS dEvELoPMEnT ManagERS adam Sargent, nick Barette
MaRkETing ManagERS katherine jablonowska, Thomas Lee, james Spearing
PuBLiShing aSSiSTanT Lucy Brewer
PRoducTion cooRdinaToR Lydia gerges
hEad of EdiToRiaL PRoducTion adam Myers
PRoducTion EdiToR anna andreoli
SuBEdiToR Timothy Beaver
EdiToR-in-chiEf callum campbell
Managing diREcToR Richard davey
Published in the united kingdom by Law Business Research Ltd, London
87 Lancaster Road, London, w11 1qq, uk© 2013 Law Business Research Ltd
www.TheLawReviews.co.uk no photocopying: copyright licences do not apply.
The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients.
Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. although the information provided is accurate as of august 2013, be
advised that this is a developing area.Enquiries concerning reproduction should be sent to Law Business Research, at the
address above. Enquiries concerning editorial content should be directed to the Publisher – [email protected]
iSBn 978-1-907606-75-5
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pubLisheR's noTe
in presenting this seventh annual edition of The Mergers & Acquisitions Review, the publisher would like to extend warm and heartfelt thanks to editor Simon Robinson,
who has recently retired from Slaughter and May. Simon has held the position of editor of The Mergers & Acquisitions Review since its inauguration seven years ago, and Simon
and his partners at Slaughter and May have been instrumental in the success of The Law Reviews series. Thank you Simon.
The publisher would like to welcome Mark Zerdin, also a partner at Slaughter and May, as current and future editor of The Mergers & Acquisitions Review. we are
delighted to have Mark on board, and we look forward to future editions in Mark’s very capable editorial hands.
gideon RobertonPublisher, The Law Reviews
august 2013
i
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
AcknowLedgeMenTs
aaBØ-EvEnSEn & co advokaTfiRMa
ÆLEx
aguiLaR caSTiLLo LovE
andERSon MōRi & ToMoTSunE
aRiaS, fáBREga & fáBREga
aRiaS & MuñoZ
BEiTEn BuRkhaRdT REchTSanwaLTSgESELLSchafT MBh
BhaRucha & PaRTnERS
BnT aTToRnEyS-aT-Law
BowMan giLfiLLan
Boyanov & co
BREdin PRaT
BRigaRd & uRRuTia aBogadoS SaS
caMPoS fERREiRa, Sá caRnEiRo & aSSociadoS
couLSon haRnEy
cRavaTh, SwainE & MooRE LLP
dEBEvoiSE & PLiMPTon LLP
dEnTonS
Acknowledgements
ii
df advocaTES
diTTMaR & indREniuS
dRyLLERakiS & aSSociaTES
ELİg aTToRnEyS-aT-Law
fEnxun PaRTnERS
fonTES, TaRSo RiBEiRo advogadoS
haRnEyS
hEngELER MuELLER
iSoLaS
kBh kaanuun
kEMPhoogSTad, S.R.o.
kiM & chang
king & wood MaLLESonS
kinSTELLaR, S.R.o., advokáTní kancELář
MakES & PaRTnERS Law fiRM
MannhEiMER SwaRTLing advokaTByRå
MaThESon
MaTouk BaSSiouny
MnkS
MoRavČEviĆ vojnoviĆ i PaRTnERi in cooPERaTion wiTh SchÖnhERR
MoRgan, LEwiS & BockiuS LLP
MoTiEka & audZEviČiuS
noERR
Acknowledgements
iii
ogiER
oSLER, hoSkin & haRcouRT LLP
PéREZ BuSTaManTE & PoncE
PiRoLa PEnnuTo ZEi & aSSociaTi
PoPovici nițu & aSociații
RaidLa LEjinS & noRcouS
RuBio LEguía noRMand
S hoRowiTZ & co
SanTaMaRina y STETa, Sc
SchELLEnBERg wiTTMER LTd
SchÖnhERR REchTSanwäLTE gMBh
SEyfaRTh Shaw LLP
ShEaRMan & STERLing LLP
SkRinE
SLaughTER and May
STaMfoRd Law coRPoRaTion
STRELia
SyciP SaLaZaR hERnandEZ & gaTMaiTan
ToRRES, PLaZ & aRaujo
uRía MEnéndEZ
van dooRnE
vaSiL kiSiL & PaRTnERS
wEERawong, chinnavaT & PEangPanoR LTd
wiLSon SonSini goodRich & RoSaTi
v
Editor’s Preface ................................................................................................ xiii Mark Zerdin
Chapter 1 EuRoPEan ovERviEw ........................................................ 1Mark Zerdin
Chapter 2 EuRoPEan coMPETiTion ............................................... 13Götz Drauz and Michael Rosenthal
Chapter 3 EuRoPEan PRivaTE EquiTy ............................................ 20Thomas 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 ............................................. 53Sarah A W Fitts, Adam Hankiss and Christopher R Aung
Chapter 6 ShaREhoLdERS and BoaRdS of diREcToRS in uS MERgERS & acquiSiTionS .................................. 69
George A Casey and Cody L Wright
Chapter 7 cRoSS-BoRdER EMPLoyMEnT aSPEcTS of inTERnaTionaL M&a ................................................ 83
Marjorie Culver
Chapter 8 auSTRaLia ............................................................................ 93Nicola Wakefield Evans and Lee Horan
Chapter 9 auSTRia ............................................................................... 107Christian Herbst
conTenTs
vi
Contents
Chapter 10 BahRain ............................................................................. 120Haifa Khunji and Maryia Abdul Rahman
Chapter 11 BELgiuM ............................................................................. 135Olivier Clevenbergh, Gisèle Rosselle and Carl-Philip de Villegas
Chapter 12 BRaZiL.................................................................................. 144Marcus Fontes, Max Fontes, Paulo de Tarso Ribeiro and Juliana Huang
Chapter 13 BRiTiSh viRgin iSLandS ............................................... 155Jacqueline Daley-Aspinall and Murray Roberts
Chapter 14 BuLgaRia ............................................................................ 169Yordan Naydenov and Nikolay Kolev
Chapter 15 canada ............................................................................... 179Robert Yalden, Ward Sellers and Emmanuel Pressman
Chapter 16 cayMan iSLandS ............................................................. 196Wendy L Lee
Chapter 17 china .................................................................................. 219Fred Chang and Wang Xiaoxiao
Chapter 18 coLoMBia .......................................................................... 232Sergio Michelsen Jaramillo
Chapter 19 coSTa Rica ........................................................................ 247John Aguilar Jr and Alvaro Quesada
Chapter 20 cyPRuS ................................................................................ 255Nancy Ch Erotocritou
Chapter 21 cZEch REPuBLic .............................................................. 261Lukáš Ševčík, Jitka Logesová and Bohdana Pražská
vii
Contents
Chapter 22 EcuadoR ............................................................................ 269Diego Pérez-Ordóñez
Chapter 23 EgyPT ................................................................................... 279Omar S Bassiouny and Mohamed Oweis
Chapter 24 ESTonia .............................................................................. 287Sven Papp and Karl-Erich Trisberg
Chapter 25 finLand.............................................................................. 300Jan Ollila, Anders Carlberg and Wilhelm Eklund
Chapter 26 fRancE ................................................................................ 311Didier Martin
Chapter 27 gERMany ............................................................................ 326Heinrich Knepper
Chapter 28 giBRaLTaR .......................................................................... 338Steven Caetano
Chapter 29 gREEcE ................................................................................ 348Cleomenis G Yannikas, Vassilis-Thomas G Karantounias and Sophia K Grigoriadou
Chapter 30 guaTEMaLa ....................................................................... 361Jorge Luis Arenales and Luis Pedro Del Valle
Chapter 31 guERnSEy ........................................................................... 369Caroline Chan
Chapter 32 hong kong ...................................................................... 379Jason Webber
Chapter 33 hungaRy ............................................................................ 390Levente Szabó and Réka Vízi-Magyarosi
Contents
viii
Chapter 34 india .................................................................................... 405Justin Bharucha
Chapter 35 indonESia ......................................................................... 425Yozua Makes
Chapter 36 iRELand .............................................................................. 439Fergus Bolster
Chapter 37 iSRaEL .................................................................................. 447Clifford Davis and Keith Shaw
Chapter 38 iTaLy ..................................................................................... 456Maurizio Bernardi, Roberta Di Vieto and Luca Occhetta
Chapter 39 jaPan .................................................................................... 471Hiroki Kodate and Kenichiro Tsuda
Chapter 40 kaZakhSTan ..................................................................... 481Aset Shyngyssov and Klara Nurgaziyeva
Chapter 41 kEnya .................................................................................. 489Joyce Karanja-Ng’ang’a and Wathingira Muthang’ato
Chapter 42 koREa .................................................................................. 499Jong Koo Park, Bo Yong Ahn, Sung Uk Park and Sung Il Yoon
Chapter 43 LiThuania ......................................................................... 513Giedrius Kolesnikovas and Emil Radzihovsky
Chapter 44 LuxEMBouRg ................................................................... 523Marie-Béatrice Noble and Stéphanie Antoine
Chapter 45 MaLaySia ............................................................................ 537Janet Looi Lai Heng and Fariz Abdul Aziz
Contents
ix
Chapter 46 MaLTa .................................................................................. 548Jean C Farrugia and Bradley Gatt
Chapter 47 MExico ............................................................................... 558Aarón Levet V and Alberto Solís M
Chapter 48 MonTEnEgRo .................................................................. 567Slaven Moravčević and Nikola Babić
Chapter 49 nEThERLandS .................................................................. 577Onno Boerstra and Guus Kemperink
Chapter 50 nigERia ............................................................................... 596Lawrence Fubara Anga
Chapter 51 noRway .............................................................................. 601Ole K Aabø-Evensen
Chapter 52 PanaMa ............................................................................... 639Julianne Canavaggio
Chapter 53 PERu ..................................................................................... 649Emil Ruppert and Sergio Amiel
Chapter 54 PhiLiPPinES ........................................................................ 659Rafael A Morales, Philbert E Varona, Marie Corinne T Balbido and Hiyasmin H Lapitan
Chapter 55 PoLand ............................................................................... 669Paweł Grabowski, Rafał Celej and Agata Sokołowska
Chapter 56 PoRTugaL .......................................................................... 680Martim Morgado and João Galvão
Chapter 57 RoMania ............................................................................ 692Andreea Hulub, Alexandra Malea and Vlad Ambrozie
Contents
x
Chapter 58 RuSSia .................................................................................. 707Hannes Lubitzsch and Ekaterina Ponka
Chapter 59 SERBia .................................................................................. 715Matija Vojnović and Luka Lopičić
Chapter 60 SingaPoRE ......................................................................... 725Lee Suet-Fern and Elizabeth Kong Sau-Wai
Chapter 61 SouTh afRica .................................................................. 739Ezra Davids and Ashleigh Hale
Chapter 62 SPain .................................................................................... 752Christian Hoedl and Javier Ruiz-Cámara
Chapter 63 SwEdEn .............................................................................. 769Biörn Riese, Eva Hägg and Anna Brannemark
Chapter 64 SwiTZERLand ................................................................... 778Lorenzo Olgiati, Martin Weber, Jean Jacques Ah Choon, Harun Can and David Mamane
Chapter 65 ThaiLand .......................................................................... 790Troy Schooneman and Jeffrey Sok
Chapter 66 TuRkEy ................................................................................ 799Tunç Lokmanhekim and Nazlı Nil Yukaruç
Chapter 67 ukRainE .............................................................................. 808Anna Babych and Artem Gryadushchyy
Chapter 68 uniTEd kingdoM .......................................................... 819Mark Zerdin
Chapter 69 uniTEd STaTES ................................................................. 845Richard Hall and Mark Greene
Contents
xi
Chapter 70 vEnEZuELa ........................................................................ 882Guillermo de la Rosa, Juan D Alfonzo, Nelson Borjas and Adriana Bello R
Appendix 1 aBouT ThE auThoRS .................................................... 895
Appendix 2 conTRiBuTing Law fiRMS’ conTacT dETaiLS .... 941
xiii
ediToR’s pRefAce
This past year has seen some surprising twists and turns, not only in the mergers and acquisitions markets but also in the economic and political environments. november saw the re-election of Barack obama, although this had less of an impact on the markets than an announcement by Ben Bernanke in May that the uS federal Reserve would consider a slowdown in its programme of quantitative easing. on the other side of the Pacific, xi jinping has outlined a new communist doctrine – the ‘chinese dream’. The doctrine reflects the changing economic outlook in china where growth will be increasingly consumer rather than investment-led. a new political rhetoric has also emerged in japan as Shinzo abe, elected in a landslide december victory, seeks to reinvigorate the japanese economy. Both rebrandings flirt with nationalist sentiment and the attitude of these two countries towards one another will continue to bear on the region’s business environment.
in Europe, despite an awkward cypriot bailout, the sovereign debt crisis showed signs of stability and government bond yields are falling. Europe also improved its attractiveness in the eyes of investors and remains the largest destination for foreign direct investment. however, there has yet to be a return to growth. investors seem split fairly evenly between those who believe Europe will emerge from the crisis in the next three years, and those who believe it will take five years or more. in any event, a return to the boom years is unlikely in the near future, particularly as the emerging markets see a relative slowdown. The iMf data for 2012 shows that the combined growth rate of india and china is at its lowest in over 20 years while global growth fell below 2.5 per cent in the second half of 2012. This global slowdown continues to pull M&a figures down making 2012 the fifth consecutive year in which deal values fell globally.
There are reasons for optimism though, particularly in the uS market which has seen some substantial deals (the acquisitions of heinz and virgin Media being particular highlights). These deals have been made possible by the return of debt financing where the right deal can attract very favourable terms. Equities have also performed much more strongly over the past year. in May 2013 both the dow jones and the fTSE 100 hit record highs – validating to some extent the aggressive monetary policies pursued in
Editor’s Preface
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the uS and the uk. whether political will can start to lift the markets more broadly still remains to be seen.
i would like to thank the contributors for their support in producing the seventh edition of The Mergers & Acquisitions Review. i hope that the commentary in the following chapters will provide a richer understanding of the shape of the global markets, together with the challenges and opportunities facing market participants.
Mark ZerdinSlaughter and MayLondonaugust 2013
577
Chapter 49
netherlands
Onno Boerstra and Guus Kemperink1
I OVERVIEW OF M&A ACTIVITY
i Private equity
While the Dutch private equity industry remains an important driver of activity in mergers and acquisitions in the Netherlands, 2012 was a rather tough year for the Dutch private equity industry. Contrary to recent years the Dutch private equity market declined in 2012. The number of transactions has stayed relatively stable, but despite several exits there were hardly any large private equity deals in 2012. Dutch private equity investments decreased by almost 50 per cent to a total amount of €1.3 billion. At the year end, Dutch private equity firms had a total of around €20 billion under management (compared to €25 billion in 2011), which was invested in approximately 1,487 companies (most of which are Netherlands-based). Portfolio companies of private equity investors still had a combined turnover of €87 billion and together employed some 355,000 employees in the Netherlands. Private equity therefore remains a factor of significant importance in the Dutch business environment.
As the number of companies that attracted private equity decreased only slightly compared to 2011 (around 326), the conclusion is that in 2012 the average size of the investments decreased sharply for the first time in years (from €5.9 million in 2011 to €3.9 million in 2012).
The absence of large deals in 2012 is the primary reason for the drop in the average size of the investments. 2012 accounted only for three investments above €50 million (compared to nine in 2011). Small and medium-sized companies remain the
1 Onno Boerstra and Guus Kemperink are partners at Van Doorne. They would like to thank their partners Els de Wind, Stefan van Rossum, Ewout van Asbeck and Sarah Beeston for their contributions on employment law, financing law, tax law and competition law, and associate Sjoerd Kamerbeek for his market research.
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key investment targets of private equity with a total of 88 per cent of the private equity transactions having an equity value of €5 million or lower. While the number of seed investments increased significantly in 2011, 2012 marked a significant drop in seed investments (€2.2 million in 2012 versus €9.2 million in 2011). This is remarkable given the increased focus in government policy on innovation and entrepreneurship. Total venture capital investments dropped in 2012 from €186 million to €153 million.
In 2012 Dutch private equity firms raised a total of €1.3 billion, which is a significant lower amount compared to the €2.3 billion raised in 2011. The tough year private equity firms had in 2012 is further evidenced by the high value of write-offs of portfolio companies (€247 million in 2012 versus €22 million in 2011). The continued economic hardship has affected the value of portfolio companies. However, contrary to 2009 in which year write-offs were also high, there was a viable market with plenty of buy and exit possibilities for private equity firms in 2012.
As far as the industry sectors are concerned, the largest number of Dutch private equity investments were directed towards the consumer products, services and retail sector (27 per cent of the total amount invested in 2012). Business, and industrial goods and services remained second with 23.3 per cent of the total amount invested in 2012. Despite active government policy directed towards clean-tech, remarkably little was invested in clean-tech in 2012.
ii Other M&A activities
While expectations were positive for 2012, 2012 turned out to be a rather disappointing year with a further decline in M&A activity in the Netherlands. Deal-making during much of 2012 was affected by the continuing uncertainty around the future of the eurozone. The total number of deals increased slightly from 532 in 2011 to 534 in 2012, but the total deal value continued to decrease from €42 billion in 2011 to €23 billion in 2012. This is a new record low and an 88 per cent decrease compared to the record high in 2007. These numbers include the aforementioned private equity activities, which formed a considerable part of Dutch M&A activity.2
II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A
The legal framework for M&A transactions in the Netherlands is set out in the Dutch Civil Code. The Supreme Court of the Netherlands has ruled that complex commercial documentation, such as M&A transactions, must be interpreted literally (i.e., in accordance with the wording of the contract).3 This line in case law allows the parties in M&A transactions to define their legal position in a contract in detail, which will avoid
2 The main sources for the market information contained herein are the annual reviews by OverFusies.nl, MergerMarket, NVP (Netherlands Association of Participation Companies) and KPMG Advisory.
3 HR 19 January 2007, NJ 2007, 575 (PontMeyer).
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to a large extent the risk that the contractual terms will be varied or amended as a result of (potential) legal proceedings.
In the Netherlands, the following notification requirements will typically have to be met in M&A transactions: a the notification of the proposed transaction with the respective party’s works
council so as to take its advice, which advice must be taken into consideration by the respective parties to the transaction;
b the notification of the envisaged transaction with the relevant trade unions so as to obtain the views of the trade unions on the proposed transaction;
c the notification of the transaction with the Netherlands Competition Authority for obtaining merger clearance (to the extent the transaction is not subject to EU merger regulation).
As for public and M&A transactions it should be noted that the Netherlands has adopted the opt-out arrangements provided for in the EU Takeover Directive. In consequence, companies that are registered in the Netherlands may in principle apply defensive measures to ward off a takeover bid. In addition to the relevant provisions in the Civil Code, the rules to be observed in the context of a public bid are set out in the Decree on Public Bids and the Euronext Rulebook.
III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT
i The Dutch Corporate Governance Code 2008
The Dutch Corporate Governance Code (‘the Code’) was revised in 2008 and formally designated as a code of conduct by governmental decree as of 1 January 2010. The Code applies (in short) to all companies whose registered offices are in the Netherlands and whose shares or depositary receipts for shares have been admitted to listing on a stock exchange. The main amendments relate to risk management, executive pay, shareholder responsibility, diversity in the composition of the supervisory board and corporate social responsibility. The responsibilities of the supervisory board in relation to takeover bids have been further clarified. Furthermore, a response time of 180 days has been introduced to give the management board the opportunity to give due consideration to all interests when confronted with a shareholder proposing a different strategy.
ii Transparency obligations on shareholders
On 15 November 2012 the Act imposing further transparency obligations on shareholders took effect. This Act applies to listed companies and provides, inter alia, for:a a change in the disclosure obligations for shareholders regarding their voting or
capital interest (i.e., a decrease of the first threshold from 5 to 3 per cent); b the obligation for securities-issuing companies to post on the company’s website
information that is requested by an investor in anticipation of the company’s general meeting of shareholders; and
c an increase of the threshold for shareholders to place items on the agenda of the general meeting (from 1 to 3 per cent).
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iii Simplification of private company law
On 1 October 2012, the Bill on the simplification and flexibilisation of the law related to BV companies took effect. This Bill aims to create a simple and flexible legal framework for private companies with limited liability in the form of a BV. Accordingly, the Bill abolishes rules on the preservation of minimum equity and rules on mandatory transfer restrictions for shares. Furthermore, the Bill introduced:a the issue of shares that bear no voting rights and the issue of non-profit bearing
shares;b the possibility to impose contractual obligations on shareholders (of a certain
class); andc the possibility to grant a shareholder (of a certain class or distinction of shares) the
right to appoint and dismiss management board and supervisory board members.
iv The introduction of the one-tier board structure
On 1 January 2013 the Bill on management and supervision took effect. This Bill introduced a one-tier board structure (a single board comprising both executive and non-executive directors) as an alternative to the two-tier board structure where there is a management board and a separate supervisory board. The duty to supervise the board of directors is mandatorily entrusted to the non-executive directors.
The Bill also amends the statutory provisions on conflicts of interest of members of the management board. Whereas former law provided for a restriction of the power to represent the company externally, the current law is based on the principle that conflicts of interests have to be dealt with internally. Accordingly, a member of the management board may not participate in the deliberations and the subsequent adoption of resolutions if such member has a personal conflict of interest with the company. If all members of the management board have a personal conflict of interest, the respective resolution will be adopted by the supervisory board. If no supervisory board is installed, the resolution will have to be adopted by the general meeting of shareholders, unless the articles of association would provide otherwise.
v New rules for shareholders’ meetings of listed NV companies
On 1 July 2010, Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies was implemented in the Netherlands. This new legislation provides for detailed procedural requirements concerning the calling of shareholders’ meetings and the agenda for a shareholders’ meeting. Among other things, a mandatory minimum convocation period for all annual and extraordinary shareholders’ meetings of 42 days has been introduced (this used to be 15 days).
vi Amendments to right of inquiry
If there are sound reasons to believe that a Dutch company is mismanaged, the Enterprise Section of the Amsterdam Court of Appeal may order an inquiry into the policies and affairs of such company. On 1 January 2013, the act amending the rules on inquiry proceedings took effect. Pursuant to this new act, the thresholds for the holders of shares and depositary receipts to request for an inquiry are increased, to the extent the request relates to a company that has an issued capital in excess of €22.5 million. In addition, the
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law now provides that the company itself (represented thereto by the management board or by the board of supervisory directors) equally has the right to request an inquiry into its policies and affairs.
vii The decision of the Enterprise Section in the PCM case
In 2008 the Enterprise Section of the Amsterdam Court of Appeals (‘the Enterprise Section’) ruled that there had been mismanagement at the Dutch publishing company PCM in connection with a leveraged buyout involving the accession of private equity investor Apax. According to the Enterprise Section, the LBO required special attention of the managing board and the supervisory board, as well as of the acceding shareholder Apax,4 particularly in view of the substantial financial burden placed on the target company. Accordingly, this judgment confirms that an acceding shareholder has to take into account the interests of the target company in the context of setting the conditions of the envisaged transaction.
viii The decision of the Supreme Court in the ASMI case
In 2010 the Supreme Court confirmed in the ASMI case5 the rule as previously stated in the ABN AMRO case,6 namely that matters of a company’s strategy are, in principle, to be decided by the management board under supervision of the supervisory board. Unless specifically provided for by law or the company’s articles of association, the management board does not have a duty to involve the general meeting of shareholders in its decision-making process where the relevant matters (such as strategy) fall within the management board’s scope of competence. In addition, the Supreme Court ruled that the statutory duties and responsibilities of the supervisory board do not include a duty for the supervisory board to mediate in conflicts between management and shareholders. Rather, the supervisory board has full discretion to consider case by case whether it should establish any contact with the shareholders or mediate between shareholders, or both. The Supreme Court ruling is remarkable in its unequivocal rejection of the earlier ruling by the Enterprise Section. As such, the ruling may turn out to be a setback for activist shareholders who seek to influence a company’s strategy and governance structure.
IV FOREIGN INVOLVEMENT IN M&A TRANSACTIONS
Foreign shareholding in Dutch companies has increased tremendously over the past years, both in listed and unlisted companies. A significant portion is taken by the large and internationally operating private equity houses, such as KKR, Apollo, Blackstone, Bain Capital, Cinven, EQT Partners, 3i, Carlyle and Providence. As far as the listed companies are concerned, more than 80 per cent of the capital is currently owned by foreign investors, more than half of which comes from the United States, Canada and the United Kingdom; 45 per cent of all M&A activity in relation to a Dutch target involved
4 OK 10 January 2008, JOR 2008/39 (PCM).5 HR 9 July 2010, JOR 2010, 228 (ASMI).6 HR 13 July 2007, ARO 2007, 120 (ABN AMRO).
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a foreign purchaser in 2012. Remarkably, the latter percentage decreased in 2012 for the first time in years (from 61 per cent in 2011).
This large international shareholding of Dutch companies is also reflected in the composition of their boards. In recent years, the number of foreigners on the board of Dutch-listed companies has grown to approximately 25 per cent.
Over the past decade, female equality has been given increasing attention in the Netherlands. Still, the results of this are rather disappointing. According to the annual Female Board Index of the Erasmus University in 2012 only 47.9 per cent of the Euronext-listed companies had a woman on the board (2011: 45.6 per cent) and of the 711 executive and non-executive board members 74 were women (10.4 per cent). An increased number of these positions are filled by Dutch women (from 44 per cent in 2007 compared with 62.2 per cent in 2011).
Although some improvement has been recorded in previous years, these figures have hardly changed recently. To improve female diversity within boards of large Dutch corporations a bill has been introduced, which contains provisions on the balanced distribution of seats between men and women on both executive and supervisory boards. The bill requires that at least 30 per cent of the seats in the executive and the supervisory boards are occupied by women. However, no further sanctions are included in the bill. It therefore remains to be seen if the bill will further enhance female diversity.
V SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES
2012 marked the return of the strategic buyers in the M&A market. More of them realise that economic growth is going to be at a low level and that M&A can be a clear opportunity to achieve growth. One of the major transactions in 2012 was the acquisition of C1000 by Jumbo (both large supermarket chains) for €900 million from CVC Capital Partners. With this acquisition Jumbo has become the main competitor of Ahold in the Netherlands. In its turn, Ahold took a large step into online sales with the acquisition of Bol.com for €350 million from NPM Capital, Cyrte and its founder Daniël Ropers. Another notable transaction was the acquisition of KEMA by Det Norske Veritas (DNV). With over 2,300 experts in more than 30 countries DNV KEMA has become a global provider of services for managing risk and serves a range of high-risk industries, with a special focus on the maritime and energy sectors.
On the Amsterdam stock exchange there was significantly more activity than last year. In 2012 both Ziggo (large cable operator) and DE Master Blenders 1753 (coffee company) had a successful and high-profile IPO on the Amsterdam stock exchange. Remarkably, already in early 2013 a public bid was made for DE Master Blenders 1753 by a Joh A Benckiser-led investor group. The deal is expected to be completed in 2013. Furthermore, several companies were made private in 2012, such as Wavin, Mediq, LBi, Amsterdam Molecular Therapeutics Holding (AMT) and Qurius. Another notable transaction on the Amsterdam stock exchange in 2012 was the acquisition by America Movil of 27 per cent of the shares in KPN (both telephone companies) by means of a partial public offer.
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The private equity sector was also present in a few significant transactions in 2012. Most remarkable, and considered the deal of the year, was the sale of Meyn (worldwide manufacturer of equipment and systems for the poultry processing industry) by Altor Equity Partners to Chore-Time Brock (portfolio company of Berkshire Hathaway). Further, the sale of Intertrust (worldwide trust company) by Waterland Private Equity to Blackstone is an example of involvement of private equity in a major transaction.
VI FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS
i M&A financing
Third-party financing of acquisitions is usually provided by way of bank loans. It is common for acquisition financing to be provided by way of two (sometimes three) layers of debt with subsequent seniority. A typical structure of multi-layered acquisition financing is a combination of senior facilities (term loans and revolving credit facilities) and mezzanine facilities (term loans), whereby security is granted to a common security agent. The ranking and distribution of proceeds of the security is then arranged for in an inter-creditor agreement.
Part of the financing of large transactions is sometimes provided against the issuance of (high-yield) notes. Under the Dutch Financial Supervision Act (FSA) an approved prospectus should be made available if securities are offered in the Netherlands, unless an exception or exemption applies. These exceptions and exemptions include an offering of securities to parties that qualify as ‘professional market parties’ as defined in the FSA and an offering of securities with a denomination per unit of at least €100,000 or to investors that can only acquire securities for a total consideration of at least €100,000.
Although less common in recent years, mezzanine lenders are in some cases granted rights to acquire an equity stake for a predetermined valuation in the form of warrants (i.e., an option to acquire shares) or conversion rights.
ii Security held by a security agent
If financing is provided by a syndicate of lenders, the lenders will want the security to be held by a security agent for the benefit of the lenders from time to time. Under Dutch law security interests can, however, only be granted to the creditor of the secured claims. The concept of trust is unknown in Dutch law and it is therefore uncertain whether rights of mortgage or pledge governed by Dutch law can be held in trust. A number of solutions have been developed so that rights of mortgage and pledge can be granted to a security agent. The solution most commonly used in practice is to create a parallel debt owing to the security agent equal to the aggregate debt owing to the lenders. This structure allows the lenders to transfer their loan participations without affecting the rights of mortgage and pledge.
iii Financial assistance
When the Bill making the law related to BV companies simpler and more flexible took effect on 1 October 2012, the prohibition on financial assistance was abolished as regards Dutch BVs. The Dutch prohibition on financial assistance continues to apply in the event the relevant target company is a Dutch company in the form of an NV. In practice,
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however, the Dutch prohibition on financial assistance applicable to Dutch NVs can be circumvented quite easily by converting the target NV into a BV. Such conversion in practice involves no more formalities than an amendment of the articles of association. If the acquisition related to shares in a Dutch NV that are listed on a stock exchange it may not be possible to convert the company in BV, as – in principle – shares in a BV cannot be publicly traded. Therefore, the prohibition on financial assistance may still be relevant in case of an acquisition by way of a public bid for listed shares in a Dutch NV.
The prohibition on financial assistance provides that a Dutch NV is not permitted to give security or guarantees to allow third parties to subscribe to, or acquire shares in, its own capital. This prohibition is absolute and there are no whitewash procedures in the Netherlands. Guarantees and security interests that have been granted in violation of this prohibition may be held void or subject to avoidance. This prohibition on financial assistance extends to all Dutch and foreign subsidiaries of the relevant Dutch NV. According to prevailing academic opinion, the prohibition on financial assistance does not extend to the acquisition of shares in a foreign parent company of a Dutch NV. This view is, however, to date not confirmed in case law.
It follows from case law of the Dutch Supreme Court that it is permitted for a target company in the form of a Dutch NV and its subsidiaries to give security and a guarantee for credit facilities that are used to finance a dividend distribution, also if the proceeds of such distribution are used by the (new) shareholder of the Dutch NV to pay part of the purchase price.7 In this manner it is possible to achieve a debt-pushdown of the acquisition debt to the level of the relevant Dutch NV up to the amount of its distributable reserves.8 The target group can then grant security for that part of the acquisition debt without violating the Dutch prohibition on financial assistance.
iv Corporate benefit
The power of a Dutch entity to grant security or guarantees is further limited by the Dutch rules on corporate benefit. Under Dutch corporate law the validity of a legal act entered into by a legal entity can be annulled by that entity or the receiver in its bankruptcy if, as a result, its objects are transgressed and the counterparty was aware of the transgression or, without personal investigation, should have been so aware.
The corporate object of a company is not only determined by the description of its objects in its articles of association. All relevant circumstances should be taken into account, in particular whether the interests of the company are served by the transaction. It follows from case law of the Supreme Court that group interests can be taken into
7 HR 7 May 2004, NJ 2004, 360 Muller q.q./Rabobank.8 An alternative to a dividend distribution may be to provide an upstream loan. Pursuant to
Section 2:98c Dutch Civil Code, a Dutch company is permitted to extend loans with a view to the acquisition of shares in its own capital finance up to the amount of its distributable reserves. If extended, the company should maintain a non-distributable reserve for the amount of the loan so extended. In addition, such a loan is subject to further requirements, including that the loan is extended on fair market conditions and a diligent assessment of the creditworthiness of the borrower and other parties involved.
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account as well.9 It is generally assumed that a company’s corporate object is transgressed in any event, if it enters into a transaction that will foreseeably jeopardise its continued existence.
Based on the foregoing, it is assumed that a Dutch company can in principle give upstream and cross-stream guarantees and security, provided that this will not jeopardise its continued existence. Lenders will typically require the submission of corporate resolutions, in which the board of directors (and board of supervisory directors, if any) confirms that the transactions contemplated by the finance documents to be entered into by the Dutch company are conducive to the interests of the company. On this basis the lenders can argue that they did not know nor should have known that the corporate object was transgressed, which is one of the requirements to successfully challenge a transaction on this basis.
Market practice in the Netherlands is to not include any limitation wording with a view of the Dutch rules on corporate benefit. The inclusion of a contractual limitation is deemed more likely to weaken than to strengthen the position of lenders. It may result in the loss of the lenders’ defence that they were not and should not have been aware that the corporate object would be transgressed.
VII EMPLOYMENT LAW
i The Works Councils Act
The Works Councils Act (WCA) allows employees to influence through the works council management decisions affecting the enterprise. Article 25 Paragraph 1 WCA gives the works council the right to render advice on a number of important proposed management decisions, which are set out in detail in this Paragraph. The following proposed management decisions require prior advice from the works council:a transfer of control over an enterprise or a part thereof;b establishing, takeover or disposal of control over another enterprise, establishing,
changing of long-term cooperation with another enterprise or a financial participation in another enterprise;
c termination of the activities of the enterprise or of a significant part of the activities;
d reduction, extension or change of the enterprise’s activities; e significant change in the organisation of the enterprise or in the attribution of
powers and authorities in the enterprise; f change of the location of the enterprise’s activities;g recruitment and temporary appointment of work force; h significant investment on behalf of the enterprise;i entering into a significant credit facility on behalf of the enterprise;j the providing of significant financial facilities or security to other enterprises;k the introduction of new technology or change in technology;l significant measures that relate to the enterprise’s care for the environment;
9 HR 18 April 2003, JOR 2003, 160 Boele/Van de Wetering.
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m setting rules in respect of the employers’ risks in the context of the Disability Act; and
n instructing external advisers on any of the aforementioned subjects (including the substance of the instruction).
An essential point in the advice procedure is the obligation of management to ask the works council for its advice before the decision is actually taken. As soon as the intention of management to take a decision on any of the subjects for which the works council’s advice should be sought, has formed and can be judged on its merits, the works council’s advice should be sought. The timing of the advice is therefore essential. Should the decision in fact already have been taken by management when the advice from the works council is sought, the request for advice will be considered tardy, and the decision will be considered to be in violation of the relevant statutory provisions (Article 25 of the WCA).
The management must submit its request for advice in respect of the proposed decision to the works council in writing and it must state the reasons for the decision. The management must also state the likely consequences that would arise for the employees from the proposed decision, and it state the measures that the management will take in the context of these consequences (Article 25 Paragraph 3 of the WCA). Before giving its advice, the works council is obliged to discuss the matter on which advice is sought, at least once in its regular meeting with the management (Article 23 of the WCA). At this meeting, the works council may ask the management for further information or for a further explanation of the proposed management decision.
Basically, the works council has three options. It can provide positive advice if it supports or if it has no substantial objections to the proposed management decision. It can provide negative advice if it rejects the proposed management decision. Alternatively, the works council can render conditional positive or negative advice, subject to certain conditions, set by the works council being fulfilled by management prior to taking the decision.
Once the management has received the advice of the works council it may take a decision. Subsequently, the management should notify the works council of its decision. If the decision is not or not entirely in accordance with the works council’s advice, the management must include in its notification the reasons it has not acted in accordance with the advice (Article 25, Paragraph 5 of the WCA). In this situation, the management has a statutory duty to suspend the implementation of the decision for the period of one month, starting the day after the day on which the management has notified the works council of its decision (Article 25 Paragraph 6 of the WCA). During this period, the works council may decide to lodge an appeal with the Enterprise Chamber of the Amsterdam Court of Appeal. If the Enterprise Chamber sustains the works council’s claim, it may order the management to (wholly or partly) undo any acts performed in the execution of the decision.
Under Article 30 of the WCA, the works council should be given the opportunity to advise on any proposed decision to appoint or dismiss a managing director of the enterprise. It should be noted that the WCA has its own definition of managing director and not every managing director or director in the corporate law meaning of the word is considered a managing director in the meaning of Article 30 of the WCA. Again, advice
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should be sought before the decision is taken and at a moment at which the advice of the works council may still influence the proposed appointment or dismissal decision. The management must explain to the works council why it wants to take the decision to appoint or dismiss the director and must submit sufficient information to enable the works council to form its opinion on the proposed decision for which its advice is sought. There is no appeal possible to an appointment or dismissal decision that is not in accordance with the works council’s advice.
Under Article 24 Paragraph 1 of the WCA, the management must discuss the general affairs of the enterprise with the works council in a regular meeting at least twice each year. During these meetings, the management must provide the works council with information on any decisions it is preparing relating to, inter alia, the areas pointed out in Article 25 Paragraph 1 WCA (see above under i). The management and the works council are expected to agree on the moment at which and the manner in which the works council will be involved in the decision-making process. Under Article 24, Paragraph 2 WCA – depending on the legal form and the structure of the enterprise – members of the supervisory board may also need to be involved in these regular meetings.
ii European Works Councils Act
The European Works Councils Act (EWCA) implements EC Directive 94/45 on the establishment of a European works council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purpose of informing and consulting employees. The rights of a local Dutch works councils pursuant to the WCA are not affected as a result of the applicability of the EWCA.
A Community-scale undertaking is any undertaking that, over the preceding two years, had an average of at least 150 EU employees in each of at least two EU Member States and an average of at least 1,000 employees in the Member States as a whole, unless it is part of a Community-scale group. In the case of a Community-scale undertaking, the management (referred to in the EWCA as central management) is obliged to apply the EWCA.
A Community-scale group is a group of undertakings consisting of a parent undertaking and the undertaking(s) over which it has control whereby:a at least two of the group undertakings are established in different Member States; b over the preceding two years, at least one undertaking had an average of at least
150 employees in one Member State and another undertaking had an average of at least 150 employees in another Member State; and
c over the preceding two years, all the undertakings together had an average of at least 1,000 employees in the Member States as a whole.
In case of a Community-scale group of undertakings, the responsibility to apply the EWCA rests upon the management (referred to in the EWCA as central management) of the controlling undertaking.
The aim of the EWCA is to properly inform employees of developments in the undertaking that are of their interest and to consult the employees in this respect. The central management may, on its own initiative, and must, if certain conditions are fulfilled, set up a special body for the purpose of negotiating the establishment of a
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European works council or some other form of information and consultation procedure relating to cross-border issues. The central management is obliged to create a special negotiating body upon the receipt of a written request from at least 100 employees (or their representatives) from at least two establishments (of a Community-scale group of undertakings) from at least two different Member States. The special negotiating body must be composed of such a number of representatives of the employees of the Community-scale undertaking or group to ensure that for each relevant Member State one member is elected or designated for every 10 per cent, or part thereof, of the employees employed in the relevant Member State, calculated over the total number of employees employed in the aggregate in all relevant Member States at the Community-scale undertaking or group. The Dutch members are appointed by the works council of the establishment of the respective undertaking, or by the central works council, if any. It is left to the central management and the special negotiating body to implement, at their own discretion, the aims of the EWCA as set out above.
In case a European works council is established, the central management and the negotiating body must agree on the council’s by-laws. The by-laws should address, inter alia, the composition of the council, the procedure for informing and consulting the council, the competence of the council and the venue and frequency of its meetings.
Under the following circumstances, the central management is obliged to establish a European works council in the absence of an agreement with the special negotiating body:a the central management has not met a request to establish a special negotiating
body within six months following the date of receipt of the request;b the central management fails to reach agreement with the special negotiating
body within three years after receipt of a request to establish the body, or, if the central management has set up the special negotiating body on its own initiative, within three years after the establishment of the body.
The central management and the European works council must meet at least once a year. At such a meeting, the council must be informed and consulted about the course of affairs and forecasts of the undertaking or the group. The central management must furthermore inform the European works council as soon as possible of all particular circumstances and proposed decisions that may be expected to have considerable consequences for the interests of the employees in at least two establishments or undertakings in two different Member States (more in particular the relocation or closing down of establishments or any collective dismissals).
As a general rule, disputes with respect to the application of the EWCA fall under the jurisdiction of the Enterprise Chamber of the Amsterdam Court of Appeal.
Since 15 November 2011, the EWCA has been amended in order to implement Directive 2009/38/EC on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees, which replaces Directive 94/45/EC. The amendments were made to (1) stimulate the efficiency of information and consultation rights; (2) clarify the rules set out in the EC Directive 94/45; and (3) come to a better harmonisation of European legislation regarding the role of employees. The amendments include:
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a further information duties for the employer;b a more transparent description of the rights of a European works council in cross-
border matters;c the possibility for trade unions to support or represent employee representatives
when negotiating on a European works council agreement;d a right for members of European works councils and special negotiating bodies to
receive proper training; and e an obligation to renegotiate on the European works council agreement in case of
substantial changes in the structure of a Community-scale undertaking or group.
iii The Merger Code 2000
The Merger Code 2000 is set by the Social Economic Council and is, even though not part of Dutch statutory law, generally well observed in the Netherlands. The Merger Code provides for rules aimed at the protection of the employee’s interests in relation to mergers. These rules apply if at least one enterprise located in the Netherlands employing at least 50 employees is involved in an envisaged merger. The Merger Code imposes a duty on the management of each enterprise involved in the envisaged merger to notify the trade unions of preparations taking place to effect such merger (Article 4, Paragraph 1 of the Merger Code). The management will have to provide the trade unions with (1) a motivation on the envisaged merger; (2) the intentions as to the company policy to be pursued as a result of such merger; and (3) the social, economic and legal consequences of such a merger and any intended measures in relation thereto. Subsequently, the trade unions should be given the opportunity to express their viewpoints on the envisaged merger (Article 4 Paragraphs 2 and 3 of the Merger Code). The trade unions should treat the information they have gained from the management in the context of the notification confidentially, unless the management has advised otherwise (Article 7, Paragraph 1 of the Merger Code). The same notification shall be made to the secretariat of the Social Economic Council (Article 8 of the Merger Code).
In the event of an alleged infringement of the Merger Code by a party to the envisaged merger or by the trade union concerned, the trade union concerned, respectively a party to the envisaged merger, can initiate proceedings before a complaints commission, which may rule that a party to the envisaged merger or the trade union concerned has not (fully) observed the Merger Code. The complaints commission can add to the decision that the non-observance of the Merger Code is of a serious nature and highly imputable. The decision is made public. The Merger Code will not apply in cases where the merger is affected outside the jurisdiction of the Netherlands. This is, for example, the case where two foreign companies located outside the Netherlands merge, while one of them has a subsidiary in the Netherlands. However, in case the merger between two or more foreign companies indirectly involves a Dutch enterprise and in case the sole or main purpose of such a merger is to obtain control over this Dutch enterprise, the Merger Code applies. This will be the case, for example, where a foreign entity having no operational activities acquires control over a foreign holding company, which on its turn holds the shares in a Dutch subsidiary (employing at least 50 employees).
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iv The Collective Dismissals Act
Under Dutch law there are three ways in which an employer may terminate an employee’s employment: the employer can (1) ask the court to terminate the employment agreement; (2) ask permission of the Labour Office to give notice of termination (taking into consideration the applicable notice period); or (3) mutually agree with the employee when and under what conditions the employment agreement will end.
The Collective Dismissal Act (CDA) provides for rules that apply if an employer intends for economic reasons to terminate within a period of three months the employment of at least 20 employees working in the same Labour Office jurisdiction. Terminations of employment agreements by a court and terminations by mutual consent between the employer and the employee must be taken into account when counting the number of (intended) dismissals within a period of three months.
If the CDA applies, the employer has to notify the Labour Office and the involved trade unions of its intentions and subsequently consult with the trade unions. It will have to provide specific information to the Labour Office and the trade unions as to the reasons for the collective dismissal, the number of employees to be dismissed and the method by which they will be selected, the intended termination date(s) and method(s) and the compensation they will receive. The CDA requires the employer to include in the notification information as to whether a works council exists, which has a right of prior advice as referred to in Article 25 of the WCA. If so, the employer must keep the Labour Office informed of the advice procedure. Likewise, the employer must keep the Labour Office informed on the consultation of the involved trade unions.
Upon receipt of the notification, the Labour Office will determine whether all required information has been submitted and whether the works council and the trade unions have been properly informed. Once all information is complete – no earlier – a one-month waiting period starts to run during which the employer may not implement any contemplated dismissals. The waiting period of one month will not apply in case the trade unions have agreed to waive it. Under the CDA, the involved trade unions must be informed of the intended dismissals when their opinion and suggestions can still influence the final decision on the collective dismissal. Trade unions must be given the opportunity to discuss with the employer’s management the exact dismissal plans, the consequences for the employees and the measures the employer intends to take so as to mitigate any such consequences.
As of 1 March 2012 the CDA contains sanctions that apply if an employer has not complied with the CDA. In case of non-compliance by the employer, any notices of termination given to individual employees or terminations by mutual consent that the obligations under the CDA have erroneously not been applied to may be challenged by the employees involved. In court proceedings, courts must verify whether the CDA is applicable and if its obligations have been met. Court-ordered terminations may be revoked if it turns out retrospectively that the CDA has wrongfully not been complied with.
v Transfer of undertaking
The rules on transfer of undertaking (TUPE rules) provide for protection of employees resulting from the transfer of ownership of an enterprise. The TUPE rules do not apply to share transfers. However, these rules do apply to ‘intra-group’ business transfers.
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In order to establish whether a certain business transfer falls under the scope of TUPE, the following aspects need to be taken into consideration: (1) the transfer of the business pursuant to an agreement, a merger or a legal separation; (2) the business to be transferred forming an ‘economic entity’; and (3) the economic entity retaining its identity after the transfer. In order to determine whether these requirements have been met, all facts and circumstances of the matter at hand need to be taken into consideration. It must be noted in this regard that the requirement that the business is transferred pursuant to an agreement, a merger or a legal separation has eroded to the extent that a transfer in the sense of the TUPE rules can even take place if the transfer takes place ‘in the context of contractual relations’. As an example: if a car manufacturer terminates the sales licence agreement with one dealer and enters into a new agreement with another dealer, this can under certain circumstances constitute a TUPE, even though the first and the second dealer have no contractual relationship with one another.
In some cases courts have ruled that a transfer in the sense of TUPE rules took place in situations where no material assets were transferred but only employees were taken over by the acquiring company.
Pursuant to the TUPE rules, the employees working in the business that is transferred will automatically enter into the employment of the acquirer of the business as per the date of transfer. After such transfer, the employees will remain entitled to the contractual employment benefits, which they enjoyed with the transferring company (the previous employer). It should be noted that special rules have been defined under Dutch law with respect to the transfer of pension entitlements. Also, special rules apply to the transfer of collective employment benefits.
As a result of recent case law, the TUPE rules may apply to employees who are physically working in a business that is transferred, who are not employed with the transferring entity but with another group entity. This was decided in a case where all employees in a group are employed in a personnel company and seconded to the various legal entities in the group, and the persons who were seconded to work in the business that was being transferred, were seconded on a permanent basis.
VIII TAX LAW
i Corporate income tax
For 2013 the corporate income tax rate remained at 20 per cent for profits up to €200,000 and 25 per cent for profits exceeding that amount. The Dutch participation exemption, providing for an exemption for income and capital gains derived from qualifying shareholdings, also remained in full effect. As of 2013, the Dutch Corporate Income Tax Act (CITA) includes a restriction on the deductibility of excessive financing costs on loans raised for the acquisition and financing of shareholdings that qualify for the participation exemption. Excessive interest remains to be deductible if such interest does not exceed a €750,000 threshold or if the loans were taken up in order to finance an expansion of the operational activities of the group. Simultaneously with the introduction of this restriction, the Dutch thin capitalisation rule was abolished. Furthermore, as in 2012, the CITA includes interest deductibility rules for acquisition financing from related parties and third parties. The perceived problem was that a Dutch acquisition
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company tends to form a fiscal unity with the Dutch target company in order to deduct interest paid on acquisition loans by the acquisition company from the profit of the target company. Such interest is only deductible from the profits of the fiscal unity (i.e., the target company in case of ‘sound financing’). Financing is deemed to be sound, if, in the year of acquisition the loan does not exceed 60 per cent of the purchase price. In the following seven years this percentage is reduced by 5 per cent per year up to 25 per cent of the purchase price. The restriction only applies to the extent the interest paid exceeds €1 million. It appears that the effect of this rule can be mitigated by debt push downs and asset transactions. Dutch companies can create a ‘fiscal unity’ and file a consolidated tax return, if the parent company owns 95 per cent or more of the shares of the Dutch-resident subsidiary. The CITA does include certain other limitations of deductibility of interest expenses (inter alia earnings stripping rules). In respect of pre or post-acquisition mergers or divisions, exemptions or rollovers can be claimed, unless such merger or division is considered to be aimed predominantly at tax deferral or tax avoidance.
ii Withholding taxes
In the Netherlands, withholding taxes are due only with respect to dividend distributions by Dutch resident entities with a capital divided into shares and interest paid on profit sharing loans with a term of more than 50 years. The statutory withholding tax rate is 15 per cent, which under certain circumstances may be reduced to 5 per cent or zero per cent. The zero per cent rate is for instance applicable with respect to payments made to corporate shareholders established in the EU or the EEA holding 5 per cent or more of the shares of the Dutch distributing entity. However, the non-resident shareholder of at least 5 per cent of the shares in a Dutch holding entity may be subject to Dutch income tax on dividends received if the shares are held with the primary aim or one of its primary aims to avoid the levy of Dutch income tax or dividend withholding tax with its direct or indirect shareholders. Profits distributed by a Dutch cooperative are not subject to withholding tax, unless the primary aim or one of the primary aims of the establishment of the cooperative is the avoidance of withholding tax or foreign tax with its direct or indirect members. These anti-abuse rules will not be applicable if the corporate shareholder(s) or member(s) of the cooperative conduct(s) an enterprise to which the shares in the holding entity or the membership rights of the cooperative can be allocated. In addition to functioning as an acquisition holding company, Dutch cooperatives are widely used to structure co-investments made by management of Dutch target companies in Dutch acquisition vehicles.
iii Transaction taxes
In the Netherlands no stamp duties, capital taxes or transfer taxes are levied on the issuance or transfer of shares in a Dutch-resident entity, unless a purchaser acquires one-third or more of the shares of the entity involved and the assets of the acquired entity consist for more than 50 per cent out of passive real estate. The rate of the real estate transfer tax is 6 per cent and is levied over the fair market value of the real estate owned by the entity involved.
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iv Value added tax
A transfer of shares is not subject to VAT. The same applies to a transfer of an enterprise or an independent part of an enterprise. Services rendered to a Dutch entity in connection with a transfer of shares will generally be subject to VAT at a rate 21 per cent.
IX COMPETITION LAW
The Dutch Competition Act (DCA) provides for merger control by the Authority for Consumers and Markets (ACM).10 Dutch merger control is largely based on the EC Merger Regulation. Where a transaction falls outside the scope of the EC Merger Regulation, Dutch merger control will apply to concentrations whereby the aggregate worldwide turnover of the parties concerned exceeds €113.45 million, provided that at least two of these parties each achieves a turnover in the Netherlands of at least €30 million (both amounts being calculated for the calendar year preceding the transaction). Sector-specific thresholds apply to concentrations in the health-care sector (approximately half the amounts). There are also special threshold rules for credit and financial institutions.
A concentration is:a the merger of two or more previously independent undertakings;b the direct or indirect acquisition of control by:
• one or more persons or legal entities who already have control over at least one undertaking; or
• one or more undertakings over one or more other undertakings or parts thereof through the acquisition of share capital or of assets, pursuant to an agreement or in any other way; or
c the establishment of a full-function joint venture performing on a lasting basis all the functions of an autonomous economic entity.
Parties are prohibited from implementing a concentration that meets the turnover thresholds until they have notified such concentration to the ACM and obtained the ACM’s explicit or implicit approval (the ‘standstill obligation’). The ACM has four weeks in which to make its initial assessment. The notification must provide detailed information so as to allow the ACM to assess the potential effects of the proposed transaction on competition. If the undertakings concerned have not provided all the information required by the notification form or if the information provided is insufficient for a sound decision on the potential effects of the proposed transaction, the ACM may ask the notifying party for additional information. Question lists of the ACM have the effect of ‘stopping the clock’ and extending the period of review by the ACM. The obligation to notify lies with the undertakings concerned. This does not include the seller.11 Notification by one of the undertakings concerned relieves the other(s) of this obligation. The filing fee for a notification is €15,000.
10 The ACM is the successor to the Dutch competition authority (NMa) and combines the NMa with the telecoms regulator and the consumer authority.
11 CBb 24 February 2012 (LJN: BV687).
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As a result of its assessment of the notification, the ACM will inform the undertakings concerned whether a licence (filing fee: €30,000) is required for the concentration. Parties to a concentration may offer remedies to the ACM in this first assessment phase, to resolve any competition concerns identified by the ACM and avoid the obligation to apply for a licence.
The ACM will decide that a licence is required if it has reason to believe that the concentration could lead to a significant restriction of competition in the Dutch market. Its decision to require a licence reflects a provisional view on the likely effects of the transaction which may be revised in its assessment of the licence request. A concentration for which a licence is required may not be implemented unless and until such licence is implicitly or explicitly granted. The ACM has 13 weeks to decide on a licence request. In practice this period is often extended as a result of question lists from the ACM. A licence may be granted subject to limitations or conditions. The ACM will refuse to grant a licence in cases where the envisaged concentration will result in a significant impediment to competition on the Dutch market.
The standstill obligation does not apply where the concentration is effected through a public takeover bid. Parties can rely on this exception provided that the takeover bid is notified immediately to the ACM, and the bidder does not, without the prior approval of the ACM, exercise any voting rights in respect of the shares in the target company until the ACM has assessed the transaction.
X OUTLOOK
Both 2011 and 2012 recorded marginal M&A activity. The continuing uncertainty of the future of the eurozone had severe effects on M&A activity in the past two years. Banks remained restrictive in their funding and some industry players postponed major investments in M&A in view of economic and political uncertainties. A slowdown of growth in emerging markets, including China, further limited M&A potential in 2012.
Expectations for 2013 are more positive. The main drivers of M&A activity will most likely be strategic buyers. These companies have, in recent years, improved their balance sheets significantly and built up large cash positions, which allows for more investment in M&A. Another indicator of increased M&A activity in 2013, is the abundance of sellers. Around 50 per cent of the portfolio companies of private equity firms have been owned by these private equity firms since 2007. These companies are now nearing the end of their holding period, which puts pressure on private equity firms to put these companies up for sale. Finally, investor confidence is set to rise following a period of stable and increasing share prices.
Nevertheless, banks are likely to remain cautious in the near future, putting pressure on the successful execution of large transactions. It is therefore expected that M&A activity will mainly take place in the small and medium-sized market with deal sizes up to €350 million.
Private equity deal activity in the Netherlands is not expected to increase significantly in 2013, but will remain an important driver of M&A activity, in particular in the medium-sized market. It is generally believed that private equity could play an
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important role investing in (forced) divestments of companies that are under pressure from their shareholders or their financing bank(s) to change course or narrow focus.
Another important development for private equity and venture capital firms in 2013 will be the introduction of the Alternative Investment Fund Managers Directive (AIFDM) and European Venture Capital Funds Regulation (EVCFR) as per 22 June 2013. As from that date private equity and venture capital firms will be regulated by the Authority Financial Markets and the Dutch Central Bank. Depending on the size of the assets under management either a relatively light regime or a full compliance regime will apply.
Activity on the Amsterdam stock exchange significantly increased in 2012. This trend is set to continue in 2013. Already, two large public transactions have taken place on the Amsterdam stock exchange in the first months of 2013. Boskalis (global maritime services company) acquired Dockwise (heavy marine transport company) for €1.3 billion and it is expected that the public bid for DE Master Blenders 1753 by a Joh A Benckiser-led investor group will be completed in the coming months. A third and major transaction, the acquisition by UPS of TNT Express, was prohibited by the European Commission because of competition concerns.
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Appendix 1
about the authors
ONNO BOERSTRAVan DoorneOnno Boerstra is an established practitioner with extensive experience of cross-border issues. His practice has been recognised and recommended in Chambers Global 2013, Legal 500 EMEA 2013, Chambers Global 2012, Mergers and Acquisitions: IFLR1000, Private Equity; Legal 500 2012; and Chambers Global 2011.
Mr Boerstra joined Van Doorne in 1984 and has been a partner since 1992. From 1999 until 2001, as managing partner at Van Eps Kunneman Van Doorne in Curaçao, he was responsible for the management and reorganisation of the Curaçao and Aruban offices. He returned to the Amsterdam office of Van Doorne in 2001 and was managing partner of the firm from 2007 until 2010.
He specialises in mergers and acquisitions, private equity and buyouts, joint ventures, corporate restructuring and corporate governance. He represents several Dutch and foreign companies, private equity funds and other investors, primarily in the field of cross-border transactions.
Mr Boerstra has authored several publications on corporate and related subjects, and is highly recommended for mergers and acquisitions, corporate finance and private equity in several independent international surveys. He speaks Dutch, English and German.
GUUS KEMPERINKVan DoorneGuus Kemperink is partner at Van Doorne’s corporate practice group and advises on strategic mergers and acquisitions transactions, strategic joint ventures, corporate governance issues and corporate restructurings. In addition, he has developed a corporate litigation practice, dealing with shareholder disputes and takeover battles.
Mr Kemperink regularly publishes in academic journals on corporate law. Recently, he was published in the Common Market Law Review on the EC takeover
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directive and competing bids. Mr Kemperink is recommended in various legal counsel handbooks including the Legal 500 2013.
He speaks Dutch, English, French and German.
VAN DOORNEJachthavenweg 1211081 KM AmsterdamNetherlandsTel: +31 20 6789 123Fax: +31 20 7954 [email protected]@vandoorne.comwww.vandoorne.com