The Austrian Takeover Code (Übernahmegesetz) has been in force since January 1 1999. The Code empowers the Takeover Commission (Übernahmekommission) to implement further regulations (Verordnungen) concerning, among other matters, the definition of a controlling shareholding and concerted action, as well as exceptions for transactions of credit institutions. The first regulation of the Takeover Commission was implemented in March 1999. Its follow-up, the second regulation, has been in force since April 2000 and deals particularly with 'creeping-ins'. The second regulation provides that a shareholder holding a controlling shareholding (as defined in the Code), but not a majority of voting rights of a public limited company, is obliged to make a public bid for all of the outstanding shares of the target when buying an extra 2% or more of the target's voting rights within a 12-month period.
According to the first regulation, a controlling shareholding exists if :
a) a person holds at least 30% of the voting rights; or
b) a person holds between 20% and 30% of the voting rights, provided that the person had a de facto majority of the voting rights in the three most recent annual shareholder meetings.
While in exceptional cases control may be held by a person with a shareholding of less than 20%, the second regulation typically applies to shareholders with between 20% and 50% of voting rights. The 2% threshold referred to above is calculated on the basis of all issued shares, not on the basis of the outstanding shares. In addition, the regulation applies to the acquisition of an extra 2% of the voting rights within any 12-month period, irrespective of whether the purchases have been made in the same calendar year.
The second regulation's primary purpose is to prevent the circumvention of the mandatory bid, and thus enable the owners of small shareholdings to sell their shares at a fair price in the event of a controlling shareholder's creeping extension of its holdings.
There are certain exceptions to the rule: first, the exceptions set out in Section 24 para 1 of the Code also apply in the context of a creeping-in, ie a controlling shareholder acquiring additional shares through inheritance, divorce or an annulment of a marriage is generally exempted from the obligation to launch a bid for all shares of the company. The Commission has also introduced an exception especially designed for creeping-ins. If a controlling shareholder acquires more than 2% by way of a public bid under the Code, and its shareholding does not exceed 47% after the bid, it is not subject to the obligation to make a bid for all shares. The controlling shareholder has to inform the Takeover Commission of such an acquisition within 20 days. This exception is based on the consideration that in the case of a public offer, the principle of equal treatment of all minority shareholders (Section 3 of the Code) is not violated. Furthermore, the 47% threshold ensures that the controlling shareholder cannot acquire a majority of voting shares within 12 months without making a bid for all shares, as he would exceed the 2% threshold, triggering a mandatory bid.
Peter Huber and Johannes Trenkwalder
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