Antonija Zubović

IS THERE A NEED FOR A REVISION OF THE CONTROL THRESHOLD IN CROATIAN TAKEOVER LAW

In the article authors analyze the control threshold set by the Croatian Takeover Act, which triggers a duty to launch the takeover bid. Authors question whether the percentage of voting rights, which confers the control, is set too low in Croatian law in light of the recent trends in European law and the law of some EU Member States. In order to obtain control in a company it is not necessary to acquire the majority of voting shares. That is why the concept of controlling the shareholder and the major shareholder differ. To become the controlling shareholder it is vital to have shares which confer voting rights in the percentage which will enable the blocking or preventing of the adoption of the most important company decisions. If the controlling block of shares is acquired in a listed company, then the holder of those shares should launch a takeover bid in accordance with the respective takeover law. With issuance of the takeover bid, a non-controlling shareholder is given the opportunity to sell his shares to the controlling shareholder at a price that should not be less than the market price. Moreover, it is highly probable that after takeover proceedings, the controlling shareholder would initiate share delisting or even squeeze out proceedings. While being the minimum harmonization directive, EU Takeover Bids Directive does not define the control threshold – it is left to the discretion of each EU Member State legislator. Until 2013, in Croatian Law there were three types of thresholds which triggered a duty to launch the takeover bid: control threshold, additional threshold, and final threshold. After 2013 amendments, the Croatian Takeover Act abandoned the concepts of additional and final threshold, but the control threshold remained the same – it was set at 25% +1 of voting rights. When comparing the adopted solution with the ones in the EU Member States, authors note that the control threshold in Croatian law is set too low. From the perspective of the controlling shareholder, it is hardly conceivable that this type of control would ensure the controlling shareholder the prevalence in all company decisions. Nevertheless, the controlling shareholder has the duty to launch the takeover bid and to offer exit to all remaining shareholders, which is costly, while the success of his offer depends on the acceptance of each and every shareholder. While having in mind the examples of Member States which have raised the control threshold, the authors question whether such an approach would be advisable to the Croatian legislator and how it goes along with raising Croatian capital market competitiveness.

Cash-Settled Derivatives and Their Role in Companies’ Takeovers

This paper deals with the role of cash-settled derivatives in the companies’ takeovers. EU capital market practice shows that they can be powerful instrument to gain or retain control in the target company. Because of abusive nature of their use—to hold them deliberately under the radar and then to create an element of surprise with the hostile takeover bid, many EU legislators upgraded their disclosure regime by adding new comprehensive “catch all” disclosure duties. In some EU states, these changes were done through “the major block of shares” disclosure duties, mostly aligned with takeover disclosure duties. Latest amendments in some jurisdictions showed that takeover disclosure duties deserve slightly modified approach. The reason was simple—if cash-settled derivatives are calculable into the control block, their adding can trigger mandatory takeover bid. If not, prospective hostile bidder could secretly build its “cash-settled stake” and “in last minute” reverses it into the voting rights resulting in loss of the takeover premium. This paper tries to approach the problem by putting emphasis on the intent of the bidder rather than on upgrading technically demanding rules on calculation.

POSITION OF THE HOLDERS OF NON-VOTING SHARES IN CORPORATE TAKEOVERS A COMPARISON OF CROATIAN AND EU LAW

In the article the author analyses the position of shareholders who hold non-voting shares of the offeree company in the takeover process. By using the comparative method, the author emphasises the solutions adopted in the European and Croatian Law. According to the Takeover Bids Directive, as well as the Croatian Takeover Act, a mandatory takeover bid has to be published for the acquisition of the shares carrying voting rights in the company. By adopting this solution, the shareholders of non-voting shares are not protected when someone acquires the controlling block of shares. However, since the Takeover Bids Directive is a minimum harmonization directive, national legislators could prescribe stricter offeror obligations. The Croatian legislator adopted the provision according to which the takeover bid may also be made to acquire non-voting shares. However, it has to be emphasised that the decision to cover non-voting shares by the takeover bid is in the offeror’s hands. Furthermore, if the offeror chooses to cover also the non-voting shares, the question arises what the bid price for non-voting shares would be. According to the solutions adopted in the European and Croatian law, the offeror is obliged to offer equal price for all the shares of the same class. This opens the question whether the offeror is allowed to offer a lower price for non-voting shares. Another open issue is the protection of holders of non-voting shares of the offeree company in squeeze-out and sell-out procedures. In line with the adopted provisions in the European, as well as in the Croatian law, if non-voting shares were not included in the takeover bid, the squeeze-out and the sell-out right could not be applied. Also, it is important to emphasise the influence of the application on the breakthrough rule on non-voting shares. Since the Croatian Companies Act allows only non-voting preference shares which in certain circumstances may be eligible to vote at the general meeting, the author investigates the consequences of the adopted provisions and looks for appropriate solutions de lege ferenda.