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Share buyouts

The Financial Instrument Market Law 1995 was recently amended, clarifying the regulatory framework for share buyouts in Latvia.

A buyout bid is defined as a public bid to certain shareholders of a public company (the target company) to buy their shares, expressed by other shareholders, a company or individuals. The law provides three types of share buyout bids – mandatory, voluntary and final.

Mandatory buyout

A buyout bid regarding minority shareholder shares must be expressed by any shareholder: (i) acquiring directly or indirectly 50% or more of the shares with voting rights; and (ii) who votes in a shareholders meeting to exclude the company's shares from a regulated market. A decision regarding exit from the regulated market must be made in an open voting session.

Voluntary buyout

A person or company is entitled to make a voluntary share buyout bid if their intention is to acquire least 10% of the shares with voting rights.

Where control (50% or more of all shares) has been acquired after a voluntary bid to all the shareholders, the obligation to make a mandatory bid no longer applies.

Final buyout

A person who, directly or by a voluntary buyout offer, acquires 95% or more of all the shares (the major shareholder) is entitled demand that minority shareholders sell their shares to the major shareholder.

The law establishes that the price of one share in a mandatory and final share buyout bid is determined by dividing equity by the number of shares. Upon making granting permission to make a bid, the Financial and Capital Market Commission (FCMC) will simultaneously notify the bidding party and the respective organizer of a regulated market institution on which the shares are admitted to trading and send the prospectus of the share buyout bid in an electronic form to that market organizer. The market organizer should post the prospectus of the share buyout bid on its internet homepage without delay.

Prospectus and timing

In any share buyout case the offeror must submit a prospectus regarding the share buyout bid to the FCMC. The prospectus should include the offered purchase regulations (such as term and price) and, in the case of voluntary offer, the minimum and maximum number of shares to be purchased. The purchase regulations must be similar for all shareholders with the same category of shares. The Commission will review the prospectus within 10 days.

A share buyout bid is valid for 30 to 70 days, starting on the day the bid is made. All of the abovementioned buyout cases differ, depending on whether a shareholder accepts or rejects a buyout bid.

If mandatory or voluntary buyout bid has been made, a person can choose to accept the bid and sell their shares or to reject it. However, if a final share buyout bid has been made, a person must sell their shares. If a shareholder does not accept a final share buyout bid by the expiration date, the shares will be blocked on its account the day after the expiration date and the shareholder will lose its using rights.

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