29 March 2010 AN INTRODUCTION TO THE TAKEOVERS LAW, No. 10 236 - PDF document

29 March 2010 AN INTRODUCTION TO THE TAKEOVERS LAW, No. 10 236 dt.18.2.2010 E Gjoni - Chairman, AMF INTRODUCTION The purpose of my address today is to give a brief overview of the Takeovers Law, No. 10 236 which has entered in power, on 18.2.2010. The aim now is to understand the law and the AMF's powers under this Law. The intention of the legislature is both to harmonize Albania legislation with EU standards and to provide stability at Albanian market The law is based on the EU directives, Directive 2004/25/EC of April 21 st 2004 ‘On Takeover Bids’, on the IOSCO standards and also on similar experiences of other countries. NATURE OF THE Law First, just a few comments on the overall nature of the Law. The Law is designed principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover and that shareholders of the same class are afforded equivalent treatment by an offeror. The objective has been to provide commercial and sensible rules to ensure that takeovers take place in an orderly fashion so that all shareholders are treated equally and, on the basis of proper disclosure, are in a position to make an informed decision as to whether to accept or reject the offer. The Law also provides an orderly framework within which takeovers are conducted. The Law applies to companies that fall within the definition of a "public company". It regulates the plans of an investor to acquire, either directly or through persons acting in concert, a controlling share in a joint stock company (JSC) which lists its shares with the stock market or sells them on an organized market. The law allows the investor to gain control by the purchase of shares gaining voting control over the company’s operations. The takeover basically involves the offeror and the shareholders of the target (‘offeree’) company as addressees of the ‘bid’/ offer. KEY FEATURES: • Fundamental Rule • Compliance Options 1

• Offers • Full Offers • Partial Offers • Equal Treatment • Minimum Acceptance Condition • Price • Contractual Document • Offer Procedure • Dealings during the Offer Period • Compulsory Purchase • Defensive Tactics Fundamental Rule We will all be aware that the Law is based upon a fundamental rule which prevents any person from becoming the holder or controller of more than the threshold of the voting rights in a public company except in a manner permitted by the Law. If any person already holds more than the threshold (control:30%, influence:20%) then that holding cannot be further increased except as permitted by the Law. In applying the fundamental rule it is important to consider closely various definitional aspects. For example the word "control" is defined as having "directly or indirectly effective control of the voting right". Hence the Law is built around "effective control" of the voting right and effective control may be held directly or indirectly. In addition there are a range of deeming provisions dealing with situations where groups of people act jointly or in concert or join together as associates. Some of these provisions at first glance appear somewhat complex. This law offers to all holders of the securities of the offeree company of the same class equivalent treatment and protection by obliging the offeror company to give them sufficient time and information to enable them to reach a properly informed decision on the bid and not deny shareholders the opportunity to decide on the merits of the bid. It protects the investors in such a way not to create “false markets” in the securities of the offeree company, of the offeror company or of any other company concerned by the bid in such a way that the rise or fall of the prices of the securities becomes artificial and the normal functioning of the markets is distorted. The law also safeguards the rights of the minority shareholders by including the requirement that anyone who acquires the control level must make an offer for all the shares of the target company. The Takeover Law comprises three forms of public ‘bids’: The takeover bid which is voluntary and aims at acquiring the control of the offeree company. Control is legally defined by setting a threshold level of shares owned; 2

The mandatory bid which must be launched once the mentioned control threshold has been reached, for example when the offeror or persons acting in concert with him have accumulated (smaller) share packages. The voluntary partial bid which aims to acquire shares which will not bring the offeror together with those acting in concert above the control limit. This form of bid is less important as it is launched for the acquisition of a smaller share package which does not produce any dominant influence (for example a 15% participation). Takeover laws require bidders to make a transparent public bid to the shareholders of the target company. The bid is then monitored and supervised by the Albanian Financial Supervisory Authority-AMF The AMF has a key supervisory role in the process and makes sure of the correctness and legality of individual practices. For this reason a whole chapter is dedicated to the role and competencies of the FSA as the regulatory body during the takeover process. This law, in this respect, is also fully complied with the Directive, which emphasizes the important role of the supervisory authority and other authorities responsible for supervising capital markets in the regulation and supervision of the takeover process, and it stresses out the importance to cooperate and supply each other with information and that the information exchanged to be covered by the rules of professional secrecy. The Law is not concerned with the financial or commercial advantages or disadvantages of a takeover. These are matters for the company and its shareholders. Nor is the Law concerned with those issues, such as competition policy, which are the responsibility of The Competition Authority It is a Law designed for the Albania situation so although it has features in common with Laws in other jurisdictions, it is not exactly the same as any other Law, it is designed to promote, in conjunction with other regulatory regimes, the integrity of the financial markets. The law has taken in consideration and interacts with the current legal regulatory supervisory schemes and those that are in development, the strategy of the AMF for a balanced development in compliance with its supervisory functions. I will not comment further on process and procedure. Appreciate the contribution of EU Experts in cooperation with the MEETE experts, for preparing the draft Law. This process took place after the reviewing the Commercial code, following the same procedure like in EU and that helps a lot to be in compliance and accordance with each other. 3

Also, the Financial Services Volunteer Corps (FSVC), at the request of the Albanian Financial Supervisory Authority (AMF), assisted in reviewing the draft law on the acquisition of securities to create a legal and operating environment conducive to improving the business climate in Albania, by preparing a report. 4