Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • Changi Airport Group
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • BCC Partners
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek International Pte. Ltd.
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • Kazakhstan Potash Corporation Limited
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V. (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • TMI Associates (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Jurie Advokat AB (Sweden)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Monthly Archives: July 2012

Dutch Update – Private Company Law Simpler And More Flexible from 1 October 2012

Editors’ Note:  Geert Potjewijd is a partner at De Brauw Blackstone Westbroek, resident in Beijing, and a member of XBMA’s Legal Roundtable.  This paper was authored by Prof. Martin van Olffen and Prof. Harm-Jan de Kluiver, both partners at De Brauw Blackstone Westbroek.  De Brauw Blackstone Westbroek is a leading Dutch M&A firm with broad expertise in Dutch governance matters.

Executive Summary/Highlights:

The Act on simpler and more flexible laws of private limited liability companies (“BVs“) will come into force on 1 October 2012. The changes introduced by this Act will offer greater freedom in structuring BVs.  This article summarises the key changes and possibilities introduced by the new law. It also addresses a few points relevant to existing BVs.

For a matrix with the key changes please click here.

Main Article:

1              New possibilities

The new law offers a number of new possibilities when incorporating a BV or amending the articles of association of an existing BV. Some of these possibilities are summarised below.

1.1          Capital

The requirement of a EUR 18,000 minimum capital will be abolished, and also, as a consequence, various formalities, such as a bank’s statement for cash payment on shares and an auditor’s statement for contributions in kind.

Under the new law, the articles of association do not have to specify an authorised capital. As a result, the current requirement that 20% of the authorised capital be issued will no longer apply. Under the new law, the articles of association may provide for a par value of the shares in a currency other than euro.

1.2          Shares without voting rights and shares without entitlement to profits

The new law allows the articles of association to limit or exclude certain shares from sharing in the profits. Certain shares may also be excluded from voting.

This offers shareholders greater flexibility in structuring their mutual relationship and provides an alternative to issuing depositary receipts for shares, the current option for separating profit-sharing and voting rights.

1.3          Right to give instructions

The general meeting or another corporate body will be allowed under the new law to give specific instructions to the managing board. The managing board must follow these instructions unless this is not in the company’s interest. Under the current law the managing board can only be required by the articles of association to follow general policy principles.

1.4          Obligations of shareholders under the articles of association

Under the new law, the articles of association may attach to share ownership certain contractual obligations towards the BV, other shareholders or third parties. The articles may also attach certain requirements to share ownership and provide that shareholders must offer or transfer all or part of their shares in certain situations.

In current practice, these types of obligations are regularly included in a shareholders’ agreement. The advantage of including the obligations in the articles of association is that a provision can be added suspending a shareholder’s voting rights, profit-sharing rights and/or meeting rights if the shareholder fails to meet its obligations.

1.5          Appointment of managing and supervisory directors

There will be greater flexibility in how to appoint and dismiss managing and supervisory directors of companies that are not qualified as ‘large’ and therefore not subject to the Dutch structure regime. Under the new law, the articles of association may allow a shareholder to appoint, suspend and dismiss its “own” managing or supervisory director. Every shareholder with voting rights should be able to take part in the decision-making about the appointment of at least one managing director and one supervisory director, respectively.

Under the current law, the articles of association may not contain this type of provision. Parties often try to achieve the same result via a combination of binding nominations and a shareholders’ agreement.

2              Changes for existing BVs

The new law will offer new possibilities when incorporating a new BV or amending the articles of association of an existing BV. It also introduces changes that will be of immediate relevance to existing BVs as of 1 October 2012.

If and how these changes could affect a company will vary and depend partly on the wording of the company’s existing articles of association. These may contain a reference to sections of the current law that will change or cease to apply under the new law. It depends on the wording and intent of the relevant provision in the articles whether it will continue to apply after the new law enters into force. We would therefore recommend assessing whether existing articles of association will be applied and interpreted differently as a result of the new law or seeking advice on this. The following key areas could play a role:

2.1          Distributions

Distributions may only be made insofar as the company’s equity exceeds any reserves maintained by law or pursuant to the articles of association. In principle, distribution of share capital will be permitted under the new law. Under the new law a resolution of the general meeting to make a distribution will not have effect until the company’s managing board has approved the resolution. The managing board will refuse to give its approval if the company is unable to continue paying its due debts after the distribution.

 
Shareholders resolutions to make a distribution adopted before 1 October 2012 will remain subject to the current law.

2.2          Repurchase, capital reduction

The same rules will apply to repurchase and capital reduction as those introduced for distributions. In the case of capital reduction, the possibility of creditors’ opposition will no longer exist. This means that it will no longer be necessary to file a resolution to reduce the capital with the Trade Register and publish it in a national newspaper. A resolution to reduce the capital involving repayment to shareholders will not have effect until the managing board has approved the resolution. As in the case of distributions, the managing board will refuse approval if the company is unable to pay its due debts after the repurchase or capital reduction.

The prohibition of repurchasing more than 50% of the issued share capital will cease to exist after 1 October 2012. But a party other than the company or one of its subsidiaries will at all times have to hold at least one voting share. Under the new law, it will also be possible to cancel certain shares only.

A shareholders’ resolution to reduce capital adopted before 1 October 2012 will remain subject to the current BV rules.

2.3          Prohibition on financial assistance

The current law provides that a BV may not provide security for the acquisition of its own shares and may only extend loans insofar as the free reserves allow this. This financial assistance prohibition will cease to exist under the new law.

Existing companies have frequently included the financial assistance prohibition for information purposes in their articles of association. In such cases this restriction will generally no longer be in effect. Only in specific cases will such restriction remain in effect, provided that in principle this restriction will no longer be externally enforceable against third parties but can only be enforced internally.

2.4          Depositary receipt holders with meeting rights

BVs with depositary receipts issued with the company’s cooperation before 1 October 2012 will have to attach meeting rights to such depositary receipts if they amend their articles of association after 1 October 2012.

If depositary receipts have been issued with the company’s cooperation before 1 October 2012, the company must enter the details of the depositary receipt holders in its shareholders register before 1 October 2013.

If such details of these depositary receipt holders have not been entered in the shareholders register one month before the date of the first general meeting to be held after 1 October 2012, these depositary receipt holders will have to be called to the general meeting in the manner prescribed under the current BV rules.

2.5          Managing and supervisory directors – vacancy or being prevented from acting

Under the current law, the articles of a BV must provide for situations where there is a vacancy on the managing board or a managing director is prevented from acting. The new law also requires such provision for supervisory directors. Existing BVs will have to include the provision for supervisory directors if they amend their articles of association after 1 October 2012.

The new law will also allow provisions in the articles of association specifying when managing or supervisory directors are deemed ‘prevented from acting’.

2.6          Convening general meetings

Under the current law, general meetings must be convened at least 15 days before the date of the meeting. This period is reduced to 8 days under the new law.

General meetings held after the new law takes effect may be convened applying the new shorter notice period. If the articles require a longer notice period, however, that longer period will have to be observed.

3              More information

The following tools can be found on De Brauw Blackstone Westbroek’s website:

Sample Articles of Association

A guide for a 100% subsidiary under the new law

For these Articles of Association and a comparative text (in Dutch)

An overview of changes in Book 2 of the Dutch Civil Code resulting from the new law

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

GLOBAL STATISTICAL UPDATE – XBMA Quarterly Review for Second Quarter 2012

Editors’ Note:  The XBMA Review is published on a quarterly basis in order to facilitate a deeper understanding of trends and developments, reporting on M&A trends using consistent metrics and sources of data.  We welcome feedback and suggestions for improving the XBMA Review or for interpreting the data. 

Executive Summary/Highlights: 

  • Global M&A volume in Q2 was US$603 billion (US$2.2 trillion on an annualized basis), reflecting a relative rebound after a very slow first quarter (up 18% compared to Q1).
  • The M&A environment is showing signs of improvement as strategic and private equity acquirers look to deploy their cash and take advantage of stronger balance sheets.  The record low cost of debt financing for investment grade borrowers has also facilitated deal activity.  Nonetheless, M&A activity continues to be restrained by the continued crisis in Europe, stock market volatility and slower-than-expected growth in the United States, a slowdown in key Asian markets, and regulatory pressures.
  • Deal activity increased in most geographic sectors in Q2, with quarter-over-quarter M&A growth in each of the United States, Europe, and Asia for the first time since early 2010.  Europe and the United States contributed 63% of global M&A volume in Q2, although the respective shares of global M&A compared to global GDP of Japan, China, and much of the developing world indicate room for continued M&A growth in those jurisdictions.  M&A activity in China and Central Asia in particular are trending above recent historical averages.
  • Cross-border transactions accounted for 42% of global M&A volume in Q2, with cross-border deal volume remaining consistent with 2010 and 2011 levels on an annualized basis, despite a decline in aggregate deal volume so far in 2012.  Cross-border deal activity increased in most sectors in Q2 compared to Q1. 
  • “Mega deals” (or at least smaller mega deals) showed a modest rebound, with six deals exceeding US$10 billion in value in Q2 (compared to just one deal in Q1); many of the largest deals in Q2 were cross-border transactions.
  • The resource sectors continued to drive global M&A volume, with Energy & Power and Materials producing the greatest overall volume over the past 12 months, although Q2 witnessed a surge in Consumer Staples and Retail driven by large cross-border transactions.  Deal volume in the Financial and Healthcare sectors also increased after three consecutive quarterly declines.

Click here to see the Review

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

BRAZILIAN UPDATE – Changes to the Brazilian Merger Control System

Editors’ Note:  This paper was authored by Tito Amaral de Andrade, partner of Machado, Meyer, Sendacz e Opice Advogados, one of Brazil’s most respected corporate law firms with extensive experience in Brazilian M&A and antitrust matters.

MAIN ARTICLE

I.  Introduction

Law No. 12,529/2011 (the “New Antitrust Law”) has come into force on May 29, 2012.  Several regulations were issued by the Administrative Council for Economic Defense (“CADE”), as well as by the Ministries of Justice and Finance in the last couple of days, bringing significant changes to the Brazilian merger control system.

The main changes to the Brazilian merger control system are summarized below.  Please do not hesitate to contact our team should you require additional clarification.

II.  Filing thresholds

Under the new system, a filing with CADE will be mandatory when (i) the transaction has effects in Brazil; (ii) the transaction constitutes an economic concentration; and (iii) one of the economic groups involved in the transaction had Brazilian gross revenue of at least R$ 750,000,000 and one of the other economic groups involved in the transaction had Brazilian gross revenue of at least R$ 75,000,000 in the last fiscal year. 

Effects

The New Antitrust Law and the above-mentioned regulations do not entail any changes to the so-called effects test, which is met whenever the target has direct presence (subsidiary, branch, distributor, sales agent) in Brazil or indirect presence through export sales to Brazil.  There is still no de minimis rule on the value or volume of export sales that trigger a filing obligation.

Economic concentration

Article 90 of the New Antitrust Law clarifies that an economic concentration is deemed to occur when (i) two or more independent companies merge; (ii) one or more companies acquire, directly or indirectly, by contract or any other means, control or parts of one or more companies by virtue of purchase or exchange of shares, equity interests or convertible securities, or purchase of tangible or intangible assets; (iii) one or more companies take over one or more companies; and (iv) two or more companies enter into an associative agreement, consortium or joint venture, except if such transaction is aimed at participating in public bids or entering into agreements derived from public bids.

Complementing this provision, CADE’s regulations clarify that the acquisition of equity interests or assets described under (ii) above is subject to mandatory filing when:

a)  It entails the acquisition of control over another undertaking;

b)  The buyer already has control over the target and acquires directly or indirectly an additional shareholding equal to or higher than 20% of the target’s total or voting capital stock, from at least one of the sellers individually considered; or

c)  There is no acquisition of control, but:

i)  The buyer becomes the target’s largest individual shareholder;

ii)  In a conglomerate merger, the buyer acquires directly or indirectly 20% or more of the target’s total or voting capital stock, or the buyer already holds 20% or more of the target’s total or voting capital stock and acquires directly or indirectly an additional shareholding equal to or higher than 20% of the target’s total or voting capital stock from at least one of the sellers individually considered; or

iii)  In a horizontal merger or vertical merger, the buyer acquires directly or indirectly 5% or more of the target’s total or voting capital stock, or the buyer already holds 5% or more of the target’s total or voting capital stock and acquires, as a result of one transaction or of a series of transactions, an additional shareholding equal to or higher than 5% of the target’s total or voting capital stock.

Revenue

CADE’s regulations bring a definition of economic group, which is relevant for revenue calculation purposes and also for the preparation of the new filing forms.

Pursuant to such rules, an economic group comprises (i) all the companies that are under common internal or external control; and (ii) all the companies in which any of the companies under common control holds, directly or indirectly, at least 20% of the total or voting capital stock.

CADE’s regulations also clarify that, when dealing with investment funds, an economic group comprises (i) all the funds that are under common management; (ii) the manager itself; (iii) the quotaholders/investors who hold, directly or indirectly, more than 20% of the quotas of at least one of the funds indentified in (i); and (iv) the portfolio companies in which any of such funds holds, directly or indirectly, at least 20% of the total or voting capital stock.

Therefore, whenever one of the economic groups involved in the transaction had Brazilian gross revenue of at least R$ 750,000,000 and the other economic group had Brazilian gross revenue of at least R$ 75,000,000 in the last fiscal year a filing obligation will arise, provided that the effects test is met and that the transaction constitutes an economic concentration.

III.  Pre-merger suspensory regime

The New Antitrust Law has adopted a pre-merger control system, under which parties are prevented from consummating the transaction before CADE’s clearance.  In other words, CADE’s clearance has become a condition precedent to closing.

Under the new system, the merging parties shall keep their facilities and the competitive conditions unchanged before CADE’s clearance.  Further, the merging parties shall not transfer any asset or exercise any type of influence over the target, and the exchange of confidential information shall be limited to the minimum level necessary to execute the binding agreement.  In other words, the merging parties shall not adopt any measure amounting to gun jumping.

Exception

Only in exceptional circumstances the merging parties may be preliminary authorized by CADE to close pending clearance.  To require a such a preliminary authorization the parties will have to prove that (i) the transaction does not entail any risk to the competition environment in the relevant market; (ii) the required closing measures can be totally reversed; and (iii) the target would suffer severe and irreversible financial losses should closing take longer to occur, based on documentary evidence such as financial statements.

CADE will have up to 60 days to issue a decision on such requirement, and CADE’s preliminary authorization may be revoked in the course of the merger review procedure.

Should the parties fail to fulfill the obligations set forth in the preliminary authorization, they will be subject to a daily fine ranging from R$ 5,000 to R$ 250,000 and the revocation of the authorization.

Stock market transactions

CADE’s regulations provide that tender offers may be filed after their issuance and may be consummated pending clearance.  However, buyers shall not exercise their voting rights before CADE’s clearance, except when the exercise of such rights is necessary to protect the investment’s value.

IV.  Penalties

Under the New Antitrust Law there will be no fines for late filing.  However, merging parties that consummate the transaction before CADE’s clearance or engage in gun jumping may have the transaction declared null and void, will be subject to fines ranging from R$ 60,000 to R$ 60,000,000, and will also be subject to prosecution for anticompetitive conduct.

CADE has not issued yet any specific regulation on the method for calculating fines under the New Antitrust Law.  CADE’s Internal Regiment provides in a broad manner that the calculation of the fines will take into account inter alia the size of the companies, whether the measure was taken with malicious intent and the potential anticompetitive effects of the transaction.

V.  Merger review procedure

Merger review will be conducted only by CADE, which will be composed of a Directorate General and an Administrative Tribunal.

Under the New Antitrust Law, the Directorate General and the Administrative Tribunal shall conclude the merger review within 240 days.  Such term may be extended to up to 60 days upon request of the parties, or to up to 90 days upon decision of CADE.  Therefore, the maximum merger review term will be 330 days.  Pursuant to the article 133 of CADE’s Internal Regiment, cases that are not ruled within such term will be automatically cleared.

Merger cases that clearly do not raise antitrust concerns may be reviewed under the fast-track procedure.

Fast track procedure

Pursuant to CADE’s regulations the following transactions are eligible to fast track review, at CADE’s sole discretion:

i)  Non full function/cooperative joint ventures;

ii)  Consolidation of control;

iii)  Substitution of economic agent;

iv)  Horizontal mergers when the parties have a joint market share below 20%; and

v)  Vertical mergers when the buyer does not have a market share above 20% in any upstream or downstream market.

CADE’s regulations do not establish any deadline for the conclusion of the merger review under the fast track procedure.  However, CADE unofficially informed that transactions which clearly do not raise antitrust concerns and are reviewed under the fast track procedure will be cleared in approximately 60 days.

VI.  New merger filing form

Pursuant to CADE’s regulations, there will be different filing forms for transactions that will be analyzed under the ordinary procedure (Annex I) and those that do not raise antitrust concerns and are eligible to be reviewed under the fast track procedure (Annex II).

We provide below an overview of the information and documents that will have to be submitted to CADE under these two scenarios.

Annex I – Ordinary procedure

I.  Summary of the transaction (up to 500 words)

II.  Information about the parties involved in the transaction

III.  Information about the transaction

IV.  Documents (transaction agreements, shareholders agreement, list of documents created by virtue of the transaction, copy of all studies and reports prepared for the internal analysis of the transaction, list of all the documents that were prepared in the negotiation of the transaction, annual reports and financial statements, market studies and researches, business plans, etc.)

V.  Relevant markets

VI.  Supply structure

VII.  Demand structure

VIII.  Buyer power

IX.  Conditions of entry and rivalry

X.  Coordinated market power

XI.  Counterfactual (possible future structure of the relevant markets in the absence of the transaction

XII.  Final comments

Annex II – Fast track procedure

I.  Summary of the transaction (up to 500 words)

II.  Information about the parties involved in the transaction

III.  Information about the transaction

IV.  Documents (transaction agreements, shareholders agreement, list of documents created by virtue of the transaction, annual reports and financial statements, etc.)

V.  Relevant markets

VI.  Supply structure – only in cases that entail horizontal overlap and/or vertical integration

VII.  Final comments

Timing of filing, filing parties and filing fee

The New Antitrust Law does not establish when a merger filing must be submitted to CADE.  Article 108 of CADE’s Internal Regiment provides that it must be submitted at any time preferably after the execution of a formal binding document between the parties and before the consummation of any act associated with the transaction (i.e., before closing or any integration measure).

The parties involved in the transaction (e.g., buyer and seller, parent companies of a joint venture, etc.) are jointly responsible for the merger filing.

In practical terms, until the enactment of the New Antitrust Law the buyer usually took the lead in preparing the filing, counting on the cooperation of the seller to provide the necessary information on its side.  Now this practice will likely change and the seller will be directly involved in the preparation of the filing and the monitoring of the merger review procedure.

A merger filing in Brazil continues to require the payment of a filing fee of R$ 45,000 under the New Antitrust Law.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

RUSSIAN UPDATE – The Civil Code: New Risks and New Opportunities


Editors’ Note:  This paper was co-authored by Goltsblat BLP (the Russian practice of Berwin Leighton Paisner) partners Andrey Goltsblat, Alexander Smirnov, Anton Sitnikov, Anton Rogoza, Maksim Popov, Oleg Khokhlov and Elena Trusova.  Mr. Smirnov is Head of Commercial Practice, Mr. Sitnikov is Head of Corporate M&A, Mr. Rogoza is an expert in Corporate M&A, Mr. Popov is an expert in Real Estate and Construction, Mr. Khokhlov is an expert in Banking and Finance Practice, and Ms. Trusova is an expert in IP and Dispute Resolution.

Executive Summary:

On 27 April 2012, a significant law was passed amending the Civil Code of the Russian Federation.  The changes to the Russian Civil Code proposes to introduce new institutions and rules of the civil legislation and to amend, supplement and otherwise update many existing laws.  The attached memorandum summarizes some of the most important updates.

  1. Basic changes in civil law fundamentals and general provisions on obligations and contracts
  2. Key changes in corporate governance
  3. The key new provisions regulating corporate transactions and the tools used therein
  4. Key novelties in title and other rights in rem to real estate, including land
  5. Financial transaction regulation: how it is developing
  6. Better protection of intellectual results and means of identification

To see the full report, The Civil Code:  New Risks and New Opportunities, please click here.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CHINESE UPDATE – New SASAC Rules Enacted to Consummate Outbound Investment Supervisory System for Central SOEs

Editors’ Note:   Contributed by Fang He, a partner at Jun He and a member of XBMA’s Legal Roundtable.  Ms. He has broad experience in M&A, outbound investment, foreign direct investment, private equity and intellectual property.  Authored by Ms. Wei Chen and Mr. Jiahao Xie of Jun He Law Offices. Ms. Chen, a senior associate at Jun He, has more than 8 years of extensive experience practicing PRC law, specialized in M&A, overseas listing and investment and general corporate matters. Mr. Xie, an associate at Jun He, specializes in M&A and general corporate matters.

Highlights:

  1. Following two important circulars regulating outbound investments made by central State-owned enterprises (SOEs) issued in the middle of 2011, SASAC issued a new circular on 18th March 2012 to provide further elaborations on certain specific requirements and to further enhance the supervision on SOEs’ outbound investments.    
  2. Among other supervisory measures lately adopted by SASAC, central SOEs will no longer be allowed to engage in outbound investment projects falling outside their corresponding core business areas unless SASAC gives it a greenlight.   

MAIN ARTICLE

Recent years have witnessed an accelerated pace of expansion by Chinese enterprises towards the overseas market.  Among those participants in this “gold rush” movement, central State-owned enterprises (“Central SOEs”) often play a significant role by getting involved in the most ambitious and high-profile cases.  According to  statistics published by the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”), the aggregate turnover attributable to outbound investments by Central SOEs during the period between January and November 2011 reached RMB 3.4 trillion Yuan;[1] however, it has been reported that several giant Central SOEs have suffered huge losses in this outbound investment fever.

Circular No. 26 and Circular No. 27

For years, apart from the Interim Measures on the Administration of Title Registration for Overseas State-owned Assets issued in 1992 and the Interim Measures on the Administration of Overseas State-owned Assets issued in 1999, there had been a lack of manageable rules according to which a standardized supervisory procedure over Central SOEs’ outbound investments could be carried out.  The situation did not change until SASAC issued the Interim Measures on the Supervision and Administration of Overseas State-owned Assets of Central SOEs (“Circular No. 26”) and the Interim Measures on the Supervision and Administration of Overseas State-owned Equity Interests of Central SOEs (“Circular No. 27”) on 14th June 2011. Circular No. 26 sets forth a framework of a supervisory and control regime regulating outbound investment projects made by Central SOEs from the stage of initial decision making process to the subsequent project management and operation; while Circular No. 27 stipulates how the equity interests under the outbound investment projects shall be managed and monitored by Central SOEs and SASAC.

Interim Measures on the Supervision and Administration of Outbound Investments by Central SOEs (Circular No. 28)

While the framework of the supervisory system set out under Circular No. 26 and Circular No. 27 lays down filing and approval requirements, the particular details of certain requirements involved in the system remained unclear. As a result, SASAC subsequently issued the Interim Measures on the Supervision and Administration of Outbound Investments by Central SOEs (“Circular No. 28”) on 18th March 2012 to fill some loopholes and to enhance the certainty and transparency of the supervisory system. Circular No. 28 came into force on 1st May 2012. 

Highlights of Circular No. 28

  • Outbound investment management policies of Central SOEs

While Article 6 of Circular No. 26 requires every Central SOE to establish its own outbound investment management policies, the Circular is silent on what components such management policies should contain.  In response to this, Circular No. 28 provides that the outbound investment management policies of a Central SOE shall consist of certain items and shall be filed with SASAC for record.

  • Annual outbound investment plan

Circular No. 28 requires that each Central SOE shall come up with an annual outbound investment plan, which should be submitted to SASAC for review within a prescribed time period.  However, the Circular does not specify a precise timeline when such submission is required to be made.  The Circular provides that an annual outbound investment plan shall include the following information:

(i)             The aggregate investment amount, sources of funding and financing structure; and

(ii)            general information of key investment projects (including their backgrounds, business activities, shareholding structures, locations, investment amounts, financing proposals, time periods, risk analyses, rates of return, etc.).

  • Filing of “key investment projects” in core business areas

A “key investment project” belonging to the core business of the Central SOE, regardless of whether it has been included in the annual outbound investment plan of that Central SOE, is required to be filed with SASAC.  SASAC may raise an objection against a key investment project by issuing a written opinion to the Central SOE.  For key investment projects not included in the annual outbound investment plan, the filing has to be made upon the completion of the internal decision making process of the Central SOE in respect of such projects.  Circular No. 28 defines a “key investment project” as a project invested in by a Central SOE or its direct or indirect subsidiary, which is subject to the decision of the highest investment decision making body of the Central SOE in accordance with the internal outbound investment management system of that Central SOE.

  • Approval of investment projects in non-core business areas

Circular No. 28 makes it clear that, in principle, Central SOEs are not allowed to engage in outbound investment projects falling outside their corresponding core business areas.  In the event that such an investment is needed under special circumstances, Central SOEs should submit an application to SASAC for its approval.  SASAC will review the proposed investment from the perspective of the necessity of the investment, its influence on the development strategy and core business of the Central SOE, and the investment capacity and risk management of the Central SOE.

Comments

Circular No. 28 constitutes an indispensable part of the supervisory and control system over Central SOEs’ outbound investments set out by Circular No. 26 and Circular No. 27.  With more details regarding the rules set out under Circular No. 26 and Circular No. 27 being ascertained and revealed, it is expected that the whole outbound investment approval process for Central SOEs will become more transparent and predictable.


[1] Bai Tianliang, ‘Amount of Turnover of Central SOEs Reached RMB 20.2 trillion Yuan (去年央企营收20.2万亿元)’, People’s Daily, 21st February, 2012, available at  http://www.sasac.gov.cn/n1180/n1271/n20515/n2697175/14269308.html, last visit on 24th April, 2012.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

 

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