A new Takeover Act came into effect in March 2006 in the Federation of Bosnia and Herzegovina (FBIH), one of the two entities that make up Bosnia and Herzegovina (BIH). (The other entity of BIH, the Republic of Srpska, has a similar law, the Law on Takeover of Joint Stock Companies, which came into effect in 2002.)
Takeover bids have been increasingly used to acquire companies, prompted by the country's transition to a market economy and the privatization of many state-owned companies. The Takeover Act attempts to respond to the need for a law that efficiently and comprehensively regulates and harmonizes takeover transactions in FBIH.
The Takeover Act's principal goal is to strengthen the capital markets by enhancing minority shareholder protection. The Act regulates the information that companies must release publicly in relation to a takeover bid, sets timetables and conditions for certain aspects of the takeover bid, sets minimum bid levels after a purchase of shares and introduces the concept of a competing takeover bid.
The Takeover Act applies to: (i) corporations registered in the register of issuers of the Securities Commission of the FBIH; (ii) securities, in particular voting shares (including shares with limited voting rights), and bonds that are convertible into shares or that carry a preemptive right to acquire shares; and (iii) trading in securities registered in the Register of Securities of the FBIH on a stock exchange or on another regulated public market, as well as trading outside of the stock exchange or any other regulated public market.
A takeover bid is obligatory if acquisitions result in the acquirer holding more than 30% of the voting shares of an issuer that has more than 40 shareholders. A takeover bid must also be launched in situations where the acquirer does not acquire more than 30% of the voting shares, but intends to carry out a takeover of a corporation with more than 40 shareholders.
The Takeover Act also provides for an additional takeover bid, in cases where the initial takeover bid results in the acquisition of less than two-thirds of the voting shares but the bidder wishes to further increase its stake. After the additional takeover bid has been published, there is no obligation to publish a further takeover bid.
The law lists nine exceptions to the obligation to launch a takeover bid. The exceptions mostly relate to the acquisition of shares as a consequence of inheritance, bankruptcy, division, merger or similar events. There are also exceptions in cases where the general assembly of the issuer agrees (without the acquirer voting any shares that it owns), that the acquirer may acquire more than 30% of the total voting shares. This exemption only applies to shares issued during an increase of the issuer's share capital through a private offering. Further exceptions include situations where a legal entity acquires shares from an affiliated legal entity. Acquirers can also avoid making a takeover bid by transferring to a non-affiliated person who is not acting in concert with the acquirer all shares exceeding the prescribed threshold, provided that the shares are transferred on the register within 30 days from the date of acquisition. If the acquirer intends to rely on this exemption, it must so inform the Commission before the acquisition of the shares in question.
The Takeover Act requires that the takeover bid (together with other required documentation) be submitted to the Commission for approval within 30 days after the relevant triggering event. The Commission will pass a decision within 30 days approving or rejecting the acquirer's request to publish the takeover bid. Once the publication is approved, a takeover bid and any amendments to it that have been approved or required by the Commission must be published within five days of the approval in at least one daily newspaper that is regularly distributed in the entire territory of the FBIH. The bid remains valid for 30 to 60 days. The time period may only be extended in the case of an approved modification to the takeover bid or in the case of a competing bid.
The Takeover Act replaces the Rulebook on Terms, Conditions and Procedures of Control over a Joint Stock Company and Takeover Bid Publication for the Purchase of Securities, which, together with the FBIH Law on Securities, previously regulated takeovers in the FBIH. Because the Takeover Act has only recently been adopted and has not been used extensively in practice, it is likely that a number of questions will arise during the course of a takeover bid, some of which may require adjustments or revisions to the Takeover Act.
Amar Bajramovic and Amila Strik
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