New Provisions Applicable to Takeover Bids and Squeeze-Outs15/04/08 / cata_legal-tax-update

Takeover bids

The Act applies to both voluntary and mandatory takeover bids. The fundamental definition of the takeover bid is identical to the previous concept; pursuant to the provisions of Section 2, subsection 1, it is a public offer to enter into a security purchase or exchange agreement which the bidder uses to demonstrate his will to acquire such securities in the scope making control over the target company possible or in the scope required following such control. The decisive interest is defined as an interest in the voting rights of the target company representing at least 30% of all votes (Section 2, subsection 6). However, a different approach applies to shared interests (there is a new term “cooperating parties”). As compared to the currently applicable provisions, the offer duty is terminated for thresholds of two-thirds and three-quarter interests in the registered capital. An essential change applies to the structure of the price for mandatory bids (Section 43); the amount of the consideration must correspond to the premium price, i.e. the highest price paid by the bidder or the cooperating parties throughout the 12 months before the offer duty was established. Only if the premium price cannot be calculated in this manner, the weighted average shall be used – i.e. the prices on the regulated markets for the most recent 6 months. The Czech National Bank may review the amount of the consideration under special circumstances defined in the provisions of Section 44, such fluctuation of premium price due to exchange rate distortion, market breakdown, etc.

Amended public offer to enter into a share purchase or exchange agreement as per the Commercial Code

As far as concerns the mandatory purchase of listed securities, the amended provisions of Section 183a abandons the requirement for the expert’s review of the adequacy of the consideration; however, the offer is subject to supervision by the Czech National Bank, which may prohibit it (Section 183a, subsections 5,6). The other public offers are not subject to supervision by the Czech National Bank. The act does not apply to voluntary bids addressed to less than 100 parties and/or bids of the aggregate value equal to or less than 1% of the issue volume. This exemption may be extended by including provisions to that effect in the Statutes under the terms and conditions imposed in the provisions of  Section 183a, subsection 8.

Squeeze-out changes

The Takeover Bid Act also introduced some changes to squeeze-outs. The newly formulated provisions of Section 183i provide detailed conditions by which a major shareholder may proceed to a squeeze out. At the same time, the three-month period for the exercise of the right was cancelled. An expert review of the adequacy of the consideration is no longer required for participation securities accepted for trading on a regulated market (Section 183n, subsection 2). The required expert review continues to apply to unlisted companies but the supervision by the Czech National Bank is no longer required. What is a positive change for the squeezed-out shareholders is the fact that the consideration is subject to interest from the moment that the title to the securities passes over until the payment thereof.