Extensive amendments to the Takeovers Act (ZPre-1) entered into force on 23 October 2015. The amendments are in line with the recently amended Book Entry Securities Act (ZNVP-1), which also enters into force on 23 October 2015. The amendments provide greater protection for minority shareholders, the preservation of assets of the target company, and enable the use of the technical solution TARGET2-Securities (T2S), but do not change the overall framework governing takeovers in the country.
What is TARGET2-Securities?
The growing volume of international securities transactions was the reason behind Slovenia's accession to the T2S project, which was initiated by the European System of Central Banks and Central Securities Depositories (CSDs) in the European Union. The project is aimed at establishing a pan-European technical platform that will allow for settlement of securities transactions. Due to the involvement of countries with different legal systems, it is important that holders and issuers of securities are subject to uniform standards provided by the Eurosystem in the form of T2S Standards on Corporate Actions – CASG/CAJWG standards. These standards will be introduced into the Slovenian legal system through the amended ZPre-1, ZNVP-1 as well as the Financial Instruments Market Act (ZTFI).
Importantly, the T2S technical platform facilitates trading opportunities through a centralised delivery-versus-payment settlement in central bank money, which in turn allows existence of only one record for dematerialized securities, while a cross-border transaction can be carried out on the basis of only two orders. This reduces the costs of the transaction on the one hand and, increases the security of such transactions on the other.
New minimum successful bid threshold
ZPre-1 establishes a new minimum threshold for the success of a mandatory takeover bid in the amount of at least 50 percent of all shares of the target company with voting right plus one share. This obligation does not apply to an offeror that already holds 50 percent of all shares of the target company with voting rights. If the threshold is not reached, the offeror will not be able to exercise voting rights, unless the offeror divides the securities under the takeover threshold or the additional takeover threshold. In the case of a voluntary takeover bid, the minimum successful bid threshold is not determined.
The purpose behind this legislation is to limit the progressive consolidation of controlling interests by successive takeover bids in different periods where the price is set so that the takeover bid is successful.
Disclosure of offeror's plans in respect of assets of the target company
In the interest of promoting transparency in takeover procedures, ZPre-1 also introduces a new obligation to disclose plans as to the potential future asset pledges of the target company which have to be disclosed in the prospectus. The legislature's intent here was to promote greater accountability in the preparation of takeover bids and the disclosure of the actual intention of the offeror regarding the future business of the target company.
Prohibition of pledge as collateral or insurance securities of the target company's assets for the securities, which were acquired prior to the takeover bid
It already applies under existing legislation that authorisation for a takeover bid, issued by the Securities Market Agency (ATVP), is conditional upon an offeror proving that payment for the securities was not, in any way, directly or indirectly, conducted through a pledge of collateral, insurance securities, or other forms of payment not owned by the offeror. This condition did not apply to securities which were acquired by the offeror outside the takeover bid procedure.
The amended ZPre-1 introduces an additional requirement: an offeror must prove that payment of the securities of a target company is not in any way, directly or indirectly, conducted through the pledge as collateral, or insurance securities, or other form of the target company that are not the property of the offeror. This requirement applies in addition to the existing requirement for payment of securities that are the subject of the takeover bid. This additional requirement is meant to strengthen the prohibition against fictitious transactions, which applies in accordance with the Companies Act (ZGD-1). This additional requirement is also included in the list of circumstances which render a takeover bid (un)successful. In such cases an offeror must prove the circumstances surrounding pledges and insurance securities twice: firstly before the publication of the takeover bid and secondly before the ATVP's decision regarding the takeover bid outcome.
The obligation of a target company's management to provide information regarding pledges and insurance securities on the target company for the account of offeror has also been supplemented. This information must be submitted within two days from the publication of the takeover bid and management must regularly and expediently inform the ATVP regarding any further changes until a decision regarding the takeover bid outcome is issued.
Obligation to disclose the transactions to the members of the management and supervision bodies of the target company
In order to achieve greater transparency in the takeover procedure and prohibit insider trading, the amendments now impose disclosure obligations on both the management and supervisory bodies of the target company and the offeror. Previously, disclosure regarding target company's bodies was applicable only alternatively: either to the management body or the supervisory body.
Amendments relating to fair prices for the exclusion or withdrawal of minority shareholders
The legislature has included an additional prerequisite in order to assess the fairness of compensation offered to minority shareholders in cases of exclusion or withdrawal, following a previously successful mandatory or voluntary takeover bid. The additional prerequisite is linked to the fact that the offeror of at least 90 percent of all shares of a target company with voting rights had to be acquired as a result of an accepted successful mandatory or voluntary takeover bid, which was accepted by holders of at least 90 percent of the (remaining) shares of the target company with voting rights, to which the takeover bid related.
Fair price in case of a preliminary request for judicial protection
ZPre-1 inter alia provides for a corrective mechanism which will include the price movement of the securities of the target company on the organized securities market when determining the fair price in a preliminary request for judicial protection. Such mechanism, which now takes into consideration what is more favourable for the shareholder, namely provides, that when determining the fair price, the 12 month period within which the offeror acquired a controlling stake in the target company is to be taken into consideration, in addition to the movement of share prices of the target company which corresponds to the current market trends.
Among other novelties, the Central Securities Clearing Depositories have been renamed to Central Securities Depository, and more detailed rules for oversight of brokerage firms have been specified. Furthermore, the amended ZPre-1 established new sanctions for the omission of due notifications to the ATVP, management of the target company and Competition Protection Agency. ZPre-1 also expressly provides for a legal basis for issuing new declaratory decisions by the ATVP and narrows the required content of the declaration regarding acceptance of the takeover bid.