Section 1: GENERAL OUTLOOK
1.1 What have been the key recent M&A trends or
developments in your jurisdiction?
Companies in Bangladesh are increasingly inclined to engage
in M&A, particularly in the telecom and energy sectors. Of
the numerous transactions that took place in Bangladesh in
2015, the merger of Robi Axiata and Airtel Bangladesh is
particularly noteworthy.
As for the legal framework, the competition law regime is
developing. Numerous sectors have called for the development
and implementation of M&A and antitrust regulations.
1.2 What is your outlook for public M&A in your
jurisdiction over the next 12 months?
The number of M&A deals will likely increase over the
next 12 months, with optimisation of labour and internal
management a key issue for corporations. However, the rate of
successful M&As may depend on the success of other merged
entities in the relevant sectors.
It is our understanding that public M&A will increase
since more firms are being enlisted. However, the existing
legislation needs to be reformed to allow for different M&A
strategies and fill the gaps within the existing legal
framework that regulates public M&A.
Section 2: REGULATORY FRAMEWORK
2.1 What legislation and regulatory bodies govern public
M&A activity in your jurisdiction?
The Company Act 1994 is a key statute for M&A. Other
sector-specific laws may also be applicable depending on the
industries involved. In addition, the Income Tax Ordinance 1984
may be relevant. The registrar of joint stock, the Bangladesh
Securities and Exchange Commission (BSEC) and the
sector-specific regulatory body will have a role to play in
approving a merger. More importantly, the M&A must be
approved by the High Court Division of the Supreme Court of
Bangladesh.
Bangladesh does not have any regulations that specifically
apply to public M&A, except the 2002 BSEC Substantial
Acquisition of Shares and Takeovers Regulations. The scope of
this regulation is limited.
The Competition Act 2012 has been enacted and the government
has declared the formation of a Competition Commission (CC).
However, the government has not yet framed any rules and
regulations concerning competition, including addressing
M&A activity.
2.2 How, by whom, and by what measures, are takeover
regulations (or equivalent) enforced?
The High Court Division of the Supreme Court of Bangladesh
sanctions the scheme of M&As and therefore enforces the law
relating to M&A. The interested parties submit a petition
under the Company Act 1994 for the sanction of the court,
normally with the approval of the relevant sector regulator. In
the case of a securities transaction, the BSEC has the power to
raise an objection regarding the effect of a merger. Once the
CC becomes fully functional, every M&A deal will be subject
to its approval.
Section 3: STRUCTURAL CONSIDERATIONS
3.1 What are the basic structures for friendly and hostile
acquisitions?
The structure normally involves the acquisition of stock or
assets of the target company. The entities may decide to merge
with each other to expand their operations.
3.2 What determines the choice of structure, including in
the case of a cross-border deal?
Generally, operational considerations, including control
over a particular corporation or its shareholders, and tax
implications will be determining factors in deciding the
structure. If the entities would like to minimise their
operational cost, while at the same time expanding their
business and revenue, a merger may be considered.
The need for approval from relevant government authorities,
as well as the time a particular transaction may take would
also be considered when determining the structure.
3.3 How quickly can a bidder complete an acquisition? How
long is the deal open to competing bids?
The timeline of acquisitions varies and it is difficult to
state a precise period for the completion of an acquisition.
However, under the Substantial Acquisition of Shares and
Takeovers Regulations 2002, a proposal for acquisition
cannot be withdrawn except in certain situations. Also, tender
offers must be published through an investment bank within
three days of deciding on the acquisition of shares. The
acquisition proposal is valid for at least four weeks. The
entire acquisition process has to be completed, including
payment, within four weeks.
3.4 Are there restrictions on the price offered or its form
(cash or shares)?
Yes, the price that has to be paid depends on whether the
acquisition of shares is made from the stock exchange or
otherwise. For a share acquisition not from the stock exchange,
the price offered must be the highest market price at the stock
exchange at the negotiated lowest rate or the average price of
the shares in the last six calendar months preceding the share
acquisition proposal, whichever is higher.
For an acquisition of shares from the stock exchange, the
highest market price at the stock exchange or the average
weekly market price in the last six calendar months preceding
the share acquisition proposal, whichever is higher. If the
shares to be acquired have not been traded on the stock
exchange for more than six months, the price is determined
through negotiation.
According to the Substantial Acquisition of Shares and
Takeovers Regulations 2002, the price offered may take
the form of cash, share or a combination of them or any other
form as accepted by the vendor.
3.5 What level of acceptance/ownership and other conditions
determine whether the acquisition proceeds and can
satisfactorily squeeze out or otherwise eliminate minority
shareholders?
According to the Company Act 1994, if a majority
representing three-quarters in value of creditors or members
that are present in the meeting agree to the merger, then it is
binding on everyone after being sanctioned by the High Court.
The transferee company may, at any time within 60 days after
expiration of 120 days after the offer is made, give notice to
any dissenting shareholder that it desires to acquire his
shares.
3.6 Do minority shareholders enjoy protections against the
payment of control premiums, other preferential pricing for
selected shareholders, and partial acquisitions, for example by
mandatory offer requirements, ownership disclosure obligations
and a best price/all holders rule?
In the course of acquiring shares, if the amount of shares
held by the public is reduced to less than 10%, then if those
shares are offered for sale, the purchaser must take over those
shares. Moreover, if it is stated in the contract deed or
memorandum of understanding that price must be paid in cash to
one class of shareholders, the rest of the shareholders are
entitled to receive the cash.
3.7 To what extent can buyers make conditional offers, for
example subject to financing, absence of material adverse
changes or truth of representations? Are bank guarantees or
certain funding of the purchase price required?
A tender offer notice must be published expressing the
interest to acquire shares. The proposal may be subject to the
following conditions: that the buyers can make conditional
offers such as that of taking approval from the shareholders of
the company, if applicable; any condition imposed by
legislation; any information necessary in the public interest
and related to a substantial acquisition of shares.
Section 4: TAX CONSIDERATIONS
4.1 What are the basic tax considerations and
trade-offs?
The tax laws in Bangladesh are silent on the tax
implications of the M&As. The key issue is whether the
transaction is essentially a transfer of assets, in which case
the tax on capital gain may be imposed. In the case of a share
acquisition by purchase or subscription, stamp duty and
value-added tax (VAT) may be applicable. The question of tax
implications, however, cannot be precisely laid down in the
case of M&A in the absence of any laws and/or rules dealing
solely with mergers.
4.2 Are there special considerations in cross-border
deals?
Parties may wish to consider whether Bangladesh has an
avoidance of double taxation treaty with the `foreign country
wherein one of the merged entities is registered.
Section 5: ANTI-TAKEOVER DEFENCES
5.1 What are the most important forms of anti-takeover
defences and are there any restrictions on their use?
Most M&As in Bangladesh are friendly, rather than
hostile. Companies are often willing to transfer or acquire
shares. However, a merger may be prevented on the grounds
specified in the Competition Act 2012.
5.2 How do targets use anti-takeover defences?
See 5.1.
5.3 Is a target required to provide due diligence
information to a potential bidder?
There is no legal obligation to provide due diligence
information to a potential bidder. Nonetheless, it is industry
practice to provide due diligence information to a potential
bidder.
5.4 How do bidders overcome anti-takeover defences?
See 5.1.
5.5 Are there many examples of successful hostile
acquisitions?
See 5.1.
Section 6: DEAL PROTECTIONS
6.1 What are the main ways for a friendly bidder and target
to protect a friendly deal from a hostile interloper?
The law does not specifically set out the ways for a
friendly bidder and target to protect a friendly deal from a
hostile interloper.
6.2 To what extent are deal protections prevented, for
example by restrictions on impediments to competing bidders,
break fees or lock-up agreements?
The competing bidder must submit its offer within two weeks
of the publication of tender offer notice.
Section 7: ANTITRUST/REGULATORY REVIEW
7.1 What are the antitrust notification thresholds in your
jurisdiction?
There is no specific threshold for antitrust notification.
However, it is a requirement under section 21 of the
Competition Act 2012 that a merger that adversely affects
competition in the market is restricted unless approved by the
CC. The CC has not been formed yet and the rules are yet to be
framed.
7.2 When will transactions falling below those thresholds
be investigated?
See 7.1.
7.3 Is an antitrust notification filing mandatory or
voluntary?
It is hoped that once the rules come into existence, it will
be possible to provide a precise answer as to whether antitrust
notification filing is mandatory or voluntary.
7.4 What are the deadlines for filing, and what are the
penalties for not filing?
See 7.1.
7.5 How long are the anti-trust review periods?
If aggrieved by any order of the CC, any person (including a
company) may apply in prescribed form and fees to review the
order within 30 days.
7.6 At what level does your antitrust authority have
jurisdiction to review and impose penalties for failure to
notify deals that do not have local competition effect?
The CC will not approve any M&A that adversely affects
competition. Moreover, it has jurisdiction over corporations or
persons residing outside Bangladesh so long as the
anti-competitive activity is taking place in Bangladesh. In
investigating such a case the CC shall take into account the
laws of both countries, i.e. where the activity is taking place
and where the anti-competitive corporation or person resides or
is registered.
7.7 What other regulatory or related obstacles do bidders
face, including national security or protected industry review,
foreign ownership restrictions, employment regulation and other
governmental regulation?
There does not appear to be any restriction on foreign
ownership. However, as for foreign companies, when approval
from the Board of Investment is taken, there may be a
restriction on the ratio of employees being appointed as
foreign and local employees.
Section 8: ANTI-CORRUPTION REGIMES
8.1 What is the applicable anti-corruption legislation in
your jurisdiction?
The anti-corruption legislation includes the Anti Corruption
Commission Act 2004 and the Money Laundering Prevention Acts
2012.
8.2 What are the potential sanctions and how stringently
have they been enforced?
The anti-corruption regime is overseen by the
Anti-Corruption Commission of Bangladesh and the laws are
strictly enforced. For activities found to be corrupt under the
legislation, in certain cases, imprisonment could be the
sanction if the offence is proven.
Section 9: OTHER MATTERS
9.1 Are there any other material issues in your
jurisdiction that might affect a public M&A
transaction?
No.
| About the
author |
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Kazi Ershadul Alam
Senior associate, Tanjib Alam and
Associates
Dhaka, Bangladesh
T: +8801711363456
F: +88028189239
E: ershadul.alam@tanjibalam.com
W: www.tanjibalam.com
Kazi Ershadul Alam is an Advocate of the Supreme
Court of Bangladesh and frequently keeps submission
before the Company, Writ and Admiralty benches of the
High Court Division. He specialises in corporate law,
corporate finance, and M&A. His expertise also
extends to joint ventures, demergers, private equity
transactions. He has advised a wide range of clients
and is considered to be one of the most promising
lawyers in the fields. He is part of the legal team on
the merger of mobile operators Robi and Airtel in
Bangladesh. He has also worked on several other
high-value M&As including the takeover of
GrameenPhone IT by Accenture.
Ershadul Alam is a barrister of Lincoln's Inn, and
he holds a graduate diploma in law.
He also holds an honours degree in computing and
information systems from the University of London, and
a master of business administration from Dhaka
University.
A senior associate of the law firm, his areas of
practice include: corporate matters; judicial review;
commercial law; arbitration; telecommunication;
intellectual property and information and communication
technology law.
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| About the
author |
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Imran Anwar
Associate, Tanjib Alam and Associates
Dhaka, Bangladesh
T: +01916144818
F: +88028189239
E: imran.anwar@tanjibalam.com
W: www.tanjibalam.com
Imran Anwar, an associate of the firm, has
experience in drafting legal agreements, opinions and
petitions on various legal issues. He is particularly
interested in corporate M&A, private equity law,
arbitration, intellectual property, procurement and
financial laws.
He holds an LLM in international commercial law with
a distinction from the University of Nottingham. During
his LLM, he was a participant at the 22nd Willem C Vis
Arbitration Moot in Vienna, Austria and received the
best participant award for the LLM international and
comparative copyright law module. He completed his LLB
at the University of London and was called to the Bar
of England and Wales from Lincoln's Inn in 2013,
following completion of a postgraduate diploma in legal
practice at Manchester Metropolitan University.
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