Recently, Slovenia passed so-called anti-tycoon legislation, which restricts certain acquisition financings. The changes affect banking law, takeover law, and corporate law.
1. Takeover law
On January 5 2008, Slovenia adopted an amendment to the Takeovers Act, according to which any bidder in a public takeover must not secure the financing of a takeover bid by pledging the shares in the target company either directly or indirectly. Moreover, in such a case, the bidder has to prove to the supervising authority that it did not directly or indirectly pledge the shares in the target company. Since this amendment of the takeover legislation is recent, no precedent or practical experience exists to indicate how the Slovenian supervising authority (Agencija za trg vrednostnih papirjev) would handle the provision or which proof would need to be submitted by the bidder. According to past experience, the Agency has, generally speaking, taken a strict rather when dealing with takeover matters.
2. Banking law
An amendment of the Banking Act (valid as of January 5 2008) stipulates that a pledge of shares in a target company in a public takeover offer is not recognised as eligible collateral. This provision, however, seems to be relevant only if a Slovenian bank acts as a lender in the transaction.
3. Corporate law
As of January 31 2008, the following relevant changes to the Slovenian Companies Act entered into force:
3.1 Broader definition of financial assistance rule
Any advance payment or loan granted by a company for the financing of an acquisition of shares issued by such a company is null and void, as well as any other transaction with a similar effect.
3.2 Restrictions on post-acquisition mergers
An amendment of the corporate law introduced strict limitations on post-acquisition mergers (both down-stream and up-stream mergers) for companies limited by share. In short, if two or more legal entities intend to merge, whereby one entity (the acquiring entity) holds more than 25% of the shares in another entity, and the acquiring entity has pledged the shares in the target or otherwise given the shares as collateral for the financing (or similar transaction) of the acquisition of those shares in the target, the following consents are required for the merger documentation to be legally valid:
(i) The consent of the majority of the creditors of each of the entities participating in the merger.
(ii) The consent of each individual creditor of each entity participating in the merger that has receivables representing more than 5% of the entire obligations of the relevant entity.
(iii) The consent of the employees of each of the entities participating in the merger. The employees' representatives provide this consent.
The consent of the majority of creditors is deemed to have been granted if the creditors that own receivables representing more than 75% of the entire obligations of the relevant entity grant their consent. Such obligations must be evident from the balance sheet of the company on the date of the effectiveness of the merger. When calculating the obligations of a relevant entity, it is necessary to add the payment obligations the company would have in the form of severance payments for employees if the company were liquidated on the date on which the merger becomes effective. Since the employees are also considered creditors of an entity, they need to give their consent as part of the "majority of the creditors". This means that the employees participate on two fronts. The creditors and the employees' representatives must grant their consent in the form of notarial deeds.
Dr Markus Bruckmüller