The main Act regulating takeovers in Slovenia is the new Takeover Act (the TA), which entered into force on August 11 2006 and implemented Directive 2004/25/EC of the European Parliament and of the Council (April 21 2004) on takeover bids.

The provisions of the TA apply if the offeree company is a public corporation and if its voting shares are traded on the regulated market. The TA also applies if the offeree company is a joint stock company whose shares are not traded on the regulated market and has, on the last day of the year before the year that is relevant for the assessment of the TA's application, at least 250 shareholders and equity capital of at least €4.1 million ($5.3 million).

The TA defines a takeover as a situation in which the offeror, alone or together with persons acting in concert, achieves the takeover threshold, which is a 25% share of voting rights in the offeree company.

One of the alterations introduced by the TA is the definition of concerted action. Persons acting in concert are persons that act in concert on the basis of an explicit or implicit, oral or written agreement and whose aim is to acquire or consolidate their control of the offeree company or to prevent the offeror from making a successful takeover bid.

The controlled company and the controlling entity, companies controlled by the same controlling entity, and the management company and investment funds managed by this company are incontestably deemed to act in concert. The following persons are deemed to act in concert:

• Persons linked merely by circumstances associated with the acquisition of securities, such as:
  - The time in which the securities were acquired.
  - The amount of acquired shares, shares already in their possession, shares held by other holders.
  - Other circumstances associated with these acquisitions that point to a common intention.
• Members of the management or the supervisory board of the persons acting in concert.
• Members of the management or supervisory board together with other members of these bodies.
• Persons interconnected as immediate family members.
• Persons that proposed the adoption of a resolution by the offeree company's general meeting on the appointment or discharge of members of the management or supervisory boards or of other resolutions, according to the Act regulating commercial companies, to be adopted by at least a three-quarters majority in decisions made by the represented equity capital, and who have achieved the adoption of this resolution by exercising their voting rights or otherwise.

Pursuant to the TA, a controlled company is a company:

• in which the controlling company has the majority of voting rights;
• in which the controlling company has the right to appoint or discharge most of management or supervisory board members and is, at the same time, a shareholder of the company;
• of which the controlling company is a shareholder and alone controls the majority of voting rights in accordance with an arrangement made with other shareholders; or
• on which the controlling company has the right to exercise a controlling influence.

When determining whether a company is a controlled company, the rights of other persons in which a controlling company has a majority equity interest or the majority of voting rights also have to be taken into consideration.

Takeovers

A takeover can be achieved by mandatory or by voluntary bid.

Mandatory bid

An offeror who achieves the takeover threshold must submit a takeover bid. If persons acting in concert together achieve the takeover threshold, they are jointly and severally liable to make a takeover bid according to the TA, unless they reach an agreement that only one or some of them will make the bid.

A renewed takeover bid must be made by the offeror after having acquired a 10% share of voting rights (the additional takeover threshold) after the completed successful takeover bid procedure. The obligation of making a renewed takeover bid ceases when the offeror acquires at least 75% of the offeree company's voting shares (the final takeover threshold).

There are certain exceptions from the obligation to make a takeover bid, for example, if the threshold was achieved by acquiring a majority holding in the offeror, the purpose of which was not to take over the offeree company, or if the proportion of voting rights of the offeree company held by another shareholder or other shareholders that together constitute a group (according to the Act governing commercial companies) is higher than that person's holdings. In these cases a takeover bid according to the TA has to be made in case of further acquisition of securities unless the person exempted no longer achieves the takeover threshold.

Voluntary bid

An offeror who wants to carry out a takeover and has not yet achieved a takeover threshold before the announcement of the intended takeover bid may initiate a takeover bid.

Under the TA, the bids can be cash, substitute (payment in substitute securities), combined (payment partially in cash and partially in substitute securities) or alternative (payment in cash or in substitute securities, giving the holders of securities a choice). An offeror who has exceeded the takeover threshold contrary to the TA may make only a cash bid. An offeror who has acquired securities granting it a 5% or more share of voting rights for cash consideration in the 12 months before the publication of its takeover bid may make only a cash or alternative bid.

The price indicated in the takeover bid has to be equitable, that is, the price cannot be lower than the highest price at which the offeror acquired securities in the 12 months before the publication of the bid.

The offeror may define the successful bid threshold in its takeover bid, that is, the lowest percentage of all securities that the offeror has to acquire, together with securities already in its possession, on the basis of the takeover bid to make the bid binding. If the successful bid threshold has been achieved, the offeror has to publicly announce it on the next business day.

The TA regulates a competitive bid and determines that it has to be published after the first bid and no later than 10 days before the time limit allowed for acceptance of the first bid and no later than 28 days before the final date.

In the case of a competitive bid, the successful bid threshold can be defined if it has been defined in the first bid and has not yet been reached by the time the competitive bid is published. The successful bid threshold of a competitive bid cannot exceed the successful bid threshold defined by the first takeover bid.

The Securities Market Agency may refuse to grant an authorization to launch a competitive bid when it is obviously speculative and when it is manifest that its sole purpose is to change the price of securities that are the object of the first takeover bid.

Takeover procedure

Before announcing its takeover bid and within three business days of the takeover threshold being achieved, the offeror has to notify its takeover intention to the Securities Market Agency, the Competition Protection Office and the offeree company's management.

If the offeror waives its takeover intention after publication, it cannot make another takeover bid for one year after the waiver, unless the waiver is approved by the Securities Market Agency.

After the announcement of the takeover bid and before the expiration of the time limit allowed for its acceptance, the offeror may (if the prospectus provides for such a possibility) withdraw its bid and denounce the contracts concluded by accepting the bid, if another offeror makes a competitive bid or if circumstances arise that would make the offeror's obligations so difficult to comply with that the purchase of securities would no longer meet the offeror's expectations and if maintaining the validity of the contracts would be generally deemed unfair. The withdrawal of a takeover bid takes effect on the day of its publication.

The offeror has to announce its takeover bid simultaneously with the bid document (the prospectus) no later than 30 days after, and no earlier than 10 days after, the announcement of the takeover intention. Before the announcement of the takeover bid, the offeror has to obtain an authorization from the Securities Market Agency, has to conclude a contract for services associated with the takeover bid with the Central Securities Clearing Corporation and has to make an advance payment for these services.

After the takeover bid has been announced, the offeror may amend it no later than 14 days before the time allowed for acceptance expires and only by:

• Offering a higher price or a more favourable conversion rate.
• Setting a lower successful bid threshold, if any.

For the amendments to have legal effect, the Securities Market Agency and the Central Securities Clearing Corporation have to be notified of amendments to the takeover bid before its publication. If the takeover bid is amended, it is considered that accepting parties that have accepted the takeover bid before the publication of the amendment have also accepted the amended takeover bid.

The TA does not differentiate between hostile and friendly takeovers. It does, however, state the defensive measures that cannot be taken without the approval of the general meeting of shareholders, to protect minority shareholders. They include:

• Increase of the company's share capital.
• Entering into transactions outside the ordinary operations of the company.
• Taking up actions or entering into transactions that could seriously jeopardize future operations of the company.
• Acquisition of its own shares or securities, giving entitlement to them.
• Performance of actions that might impede the bid.

Decisions of the offeree company's management or supervision authorities that have been taken before the date of publication of the notice of intended takeover and require, before they are implemented or completed, the agreement of the offeree company's general meeting of shareholders, unless they are a part of the offeree company's ordinary operations and their implementation might impede the bid. Further, the TA also regulates the conditions under which the rules regarding defensive measures do not apply.

Within three days from the expiration of the time allowed for the acceptance of a takeover bid, the offeror has to publish a notice on takeover bid results. Then the Securities Market Agency will issue a decision announcing that the takeover bid is either successful or unsuccessful.

One of the consequences of an unsuccessful bid is that, in the 12 months after the decision announcing the results of the takeover bid, the offeror is not allowed to make a new takeover bid or to purchase securities that are the object of a bid that would, together with other securities already in its possession, make it exceed the takeover threshold.

Disclosure requirements

Persons who achieve, exceed or reduce a 5%, 10%, 15%, 20%, 25%, 33.3%, 50% and 75% share of voting rights (the qualifying holding) have to notify the issuer of securities and the Securities Market Agency within four business days after the day they become, or should have become, aware of it. A member of the management or supervisory board of the offeree company, however, has to notify the issuer of securities and the Securities Market Agency of any acquisition or disposal of the proportion of voting rights within the above time limit.

Before announcing its takeover bid, the offeror has to notify its takeover intention to the Securities Market Agency, the Competition Protection Office and the offeree company's management and has to publish its takeover intention on the same day. Offerors have to comply with the above obligation within three business days from the day they achieve the takeover threshold.

Within two business days after the publication of the takeover intention, the offeree company's management has to notify the Securities Market Agency of any arrangements or negotiations with the offeror or that there are no such ongoing arrangements or negotiations.

Where the capital market situation shows that an offeror intends to take over a company, the Securities Market Agency may request the offeror to make an explicit statement of its takeover intention within 24 hours of receipt of the Agency's request. This intention is considered to exist when:

• There is a takeover agreement between two persons.
• The regulated market has seen a substantial increase in the price of a security, which could lead to the conclusion that a takeover bid will take place.
• If the offeror's competent authority definitely sets the price in the takeover bid that has not yet been published.

The offeror has to announce its takeover bid simultaneously with the prospectus, and the offeree company's management has to publish and substantiate its opinion on the takeover bid within 10 days of its announcement.

Before the expiration of the time allowed for acceptance of the bid, the offeror acting as individual, members of the offeror's management board and supervisory board, and members of the offeree company's management and supervisory authorities have to report to the Securities Market Agency all securities transactions carried out by themselves, their immediate family and legal entities in which they have a majority holding or a share of voting rights in the 12 months before time allowed for acceptance of the takeover bid begins. Alternatively, they can send a statement that neither themselves nor other abovementioned persons have carried out such transactions.

Lastly, the offeror has to publish a notice on takeover bid results within three days from the expiration of the time allowed for the acceptance of a takeover bid.

Rights of squeeze-out and sale-out

The TA introduces the right of squeeze-out and determines that the exclusion of minority shareholders of the offeree company is possible when the offeror has acquired at least 90% of all voting shares of the offeree company by way of a successful takeover bid (exclusion of minority shareholders).

The right of squeeze-out has simplified the takeover procedures in Slovenia, as it is now impossible for a small minority of shareholders to block decisions by the majority shareholders. The procedure is often used with great success in practice and greatly decreases transaction costs of a takeover in Slovenia.

The TA also determines that, upon a request of one or more minority shareholders, the principal shareholder (offeror), who has acquired at least 90% of all voting shares by way of a successful takeover bid, must, within a month of receiving the request, offer that individual or more shareholders appropriate monetary compensation for the purchase of all the remaining shares of each individual minority shareholder (right of sale-out or withdrawal of minority shareholders).

The right of sale-out protects the minority shareholders who find themselves in an unfavourable position, having almost no influence over the operations of the company. The option of sale-out allows them fair compensation for their invested capital, even if they have not accepted the takeover offer.

Sanctions for violations

The TA maintains two kinds of sanctions for violations of its provisions:

Civil-corporate sanctions

An offeror who reaches the takeover threshold may not exercise its rights until it has either made a takeover bid pursuant to the provisions of the TA or disposed of securities and call options for shares that are not included in the securities, so that it no longer achieves the takeover threshold. If the offeree company enables the offeror to exercise its voting rights contrary to this requirement, and this results in the adoption of a general meeting's resolution that would not have been adopted if the votes cast by the offeror had not been taken into account, a challenging action to repeal the general meeting's resolution may be brought against the offeree company.

Any shareholder may file a claim for damages incurred as a result of the offeror's failure to make a takeover bid under the TA or to make a successful takeover bid against any offeror exceeding the takeover threshold.

Commercial penal sanctions

Fines imposed by the TA are higher than before. Fines for persons representing legal entities are at least €125 and can, in certain cases, amount to €12,518 whereas fines for legal entities are at least €4,172 and can in certain cases amount to €375,563.

Author biography

Katarina Kresal Attorneys at law Miro Senica in odvetniki Katarina Kresal has been deputy head of the office and head of commercial and international law department at Attorneys at law Miro Senica in odvetniki since 2003. Before that she was head of the legal department at Western Wireless International, Ljubljana, and senior consultant for commercial and corporate law at Kapitalska druzba, Ljubljana. She was a member of several supervisory boards in the companies owned by Kapitalska druzba. She has also been senior clerk at the Commercial Disputes Department of Ljubljana District Court. Kresal graduated from the faculty of law at the University of Ljubljana in 1996 with a diploma cum laude. She specializes in mergers and acquisitions, corporate finance, commercial law, industrial property law, telecommunications law, arbitration procedures, insolvency procedures.