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)
  • 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: February 2018

DANISH UPDATE – New Danish Capital Markets Act

Editors’ Note: Mattias Vilhelm Warnøe Nielsen is a Partner at Moalem Weitemeyer Bendtsen Advokatpartnerselskab in Denmark where he is Head of Venture Capital and Startup Companies. Mattias is a highly regarded specialist and advises Danish startup companies on fundraising through private investors and seed investments. Mattias also advises Danish and multinational corporations on mergers and acquisitions. Andreas is a Junior Associate at Moalem Weitemeyer Bendtsen Advokatpartnerselskab where he primarily advises Danish and multinational corporations, both publicly traded and private, on mergers and acquisitions. Andreas also advises both Danish and multinational corporations on litigation, arbitration and bankruptcy proceedings.

1. Highlights:

   a) Prospectuses

         The Danish Securities Trading Act (Past)

         The obligation to prepare and make public a prospectus when offering securities to the public applies if the value of the offering to the public is equal to or above EUR 1,000,000. Only prospectuses prepared for offerings to the public with a value equal to or above EUR 5,000,000 are recognizable in other EU member states.

         The Danish Capital Markets Act (Present)

         The obligation to prepare and make public a prospectus when offering securities to the public applies if the value of the offering to the public is equal to or above EUR 5,000,000. All prospectuses are recognizable in other EU member states.

         Summary of Amendment: The Danish Capital Markets Act repeals the obligation to prepare and make public a prospectus when offering securities to the public at a value between EUR 1,000,000 and 5,000,000 (i.e. small prospectuses), see item 3 below.

 

   b) Public Announcement of Own Shares

         The Danish Securities Trading Act (Past)

         Issuers are obligated to make public their ownership of own shares in the event that such ownership reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 or 90% of the voting rights or share capital.

         The Danish Capital Markets Act (Present)

         Issuers are obligated to make public their ownership of own shares in the event that such ownership reaches, exceeds or falls below 5% or 10% of the voting rights or share capital.

         Summary of Amendment: The Danish Capital Markets Act repeals the higher thresholds for the issuer’s obligation to make public their ownership. Thus, the obligation solely applies when the issuer’s ownership of own shares reaches, exceeds or falls below 5% or 10% of the voting rights or the share capital, see item 4 below.

 

   c) Equal Treatment of Shareholders

         The Danish Securities Trading Act (Past)

         An offeror making a takeover bid, whether mandatory or voluntary, shall treat all shareholders within the same share class equally.

         The Danish Capital Markets Act (Present)

         An offeror making a voluntary takeover bid with the objective of acquiring control over the issuer shall treat all shareholders equally, regardless of any division of share classes. For mandatory and other voluntary takeover bids, the offeror shall treat all shareholders within the same share class equally.

         Summary of Amendment: The Danish Capital Markets Act introduces a specific requirement of equal treatment of all shareholders in the issuer, regardless of share classes, in the event that the offeror makes a voluntary takeover to the shareholders in the issuer with the objective of acquiring control of the issuer, see item 5 below.

 

2. Introduction

The Danish Capital Markets Act, including certain executive orders, entered into force on 3 January 2018, replacing the former Danish Securities Trading Act and amending certain material aspects of the capital markets regulation in Denmark. Apart from certain amendments to the provisions of the Danish Securities Trading Act, the Danish Capital Markets Act contains provisions similar to those of the Danish Securities Trading Act with some language changes. This XBMA contribution highlights the material changes as a result of the Danish Capital Markets Act.

 

3. Prospectuses

The provisions in the Danish Securities Trading Act regarding the obligation to prepare and make public a prospectus for offerings to the public of a value between EUR 1,000,000 and EUR 5,000,000 have been repealed with the Danish Capital Markets Act which entered into force 3 January 2018.

The Danish Securities Trading Act contained both an obligation to prepare prospectuses for offerings between 1,000,000 and EUR 5,000,000 (i.e. small prospectuses) and an obligation to prepare prospectuses for offerings of or above EUR 5,000,000 (i.e. large prospectuses). The reason for the two different provisions was that the small prospectuses were subject only to Danish national regulation and did not enjoy the so-called EU passport for prospectuses (recognition in other EU member states than Denmark), as the small prospectuses were not prepared in accordance with the regulation as implemented from the Prospectus Directive (2003/71/EC).

As of 3 January 2018, issuers or offerors are only obliged to prepare and make public a prospectus when making offerings to the public of a value of EUR 5,000,000 or above. These are recognizable throughout all EU member states.

The threshold of EUR 5,000,000 is calculated on offerings made by the entity in question over a period of 12 months and on the basis of the market value of the securities in question and the costs associated with the offering to be paid by the investors, including e.g. levies. If the offering is made in DKK, the EUR 5,000,000 threshold is calculated based on the Danish National Bank’s public currency rate at the time of the commencement of the offering.

The Danish Capital Markets Act does not alter the obligation to prepare and make public a prospectus when securities are listed, and no threshold regarding value etc. applies to such obligation.

On 14 June 2017, the European Parliament and the Council adopted a new Prospectus Regulation (EU/2017/1129) that enters into force 21 July 2019. Certain exemptions to the obligation to prepare and make public a prospectus for public offerings entered into force on 20 July 2019, however; these specific exemptions are not the subject of this XBMA contribution.

In connection with the new Prospectus Regulation, the member states are authorized to increase the threshold for the obligation to prepare and make public a prospectus to offerings of a value on or above EUR 8,000,000. The Danish Parliament is currently treating an amendment to the Danish Capital Markets Act which will increase the Danish threshold from EUR 5,000,000 to EUR 8,000,000. If passed, the new threshold will apply from 21 July 2018.

Our opinion: As offerings in Denmark are usually smaller compared to offerings in other EU member states, the repeal of the requirement of small prospectuses and – if passed – the increase of the threshold for the requirement to larger prospectuses certainly lifts an administrative burden for offerors when making public offerings. This might mean that Denmark would become a more attractive forum for making public offerings, and in the future we might experience an increase in offerings.

 

4. Public Announcement of Own Shares

In accordance with the Danish Securities Trading Act, any shareholder in an issuer of listed shares was obligated to notify the Danish Financial Supervisory Agency (the FSA) and the issuer of the shareholder’s holding of shares in the issuer in the event that the holdings reached, exceeded or fell below 5%, 10%, 15%, 20%, 25%, 33%, 1/3, 50%, 66%, 2/3 or 90% of the voting rights or the share capital. The issuer should also notify the FSA in the event that the issuer’s holding of own shares reached, exceeded or fell below the aforementioned thresholds.

This provision has been implemented into the Danish Capital Markets Act. As of 3 January 2018, however, the issuer is only obligated to notify the FSA in the event that the issuer’s holding of own shares reaches, exceeds or falls below 5% and 10% of the voting rights and share capital. Other shareholders are still obligated to notify the issuer and the FSA regarding the holdings of shares in the issuer in the event that their holdings reach, exceed or fall below the old thresholds.

The issuer’s obligation has been amended in that the previous requirement, subject to the higher threshold, was a result of goldplating in Denmark, i.e. a national implementation of the Transparency Directive (2004/109/EC) in excess of the requirements in the directive.

Our opinion: As issuers most often do not hold a large bulk of own shares, the removal of the higher thresholds only has a practical value for a few issuers on the Danish capital markets. However, the amendments may prove to be an improvement of the administrative burden for such issuers. Moreover, should an issuer hold e.g. 20% of its own shares, such information will not be publically available in the future, unless the circumstances under which the issuer came to hold such shares have been disclosed in connection with the disclosure of inside information under the Market Abuse Regulation (EU/596/2014).

 

5. Equal Treatment of Shareholders

The Danish Securities Trading Act contained a requirement on offerors when making takeover bids to treat shareholders within the same share class equally.

The same requirement is adopted in the Danish Capital Markets Act, with exception, however, of a specific requirement on offerors making a voluntary takeover bid to the shareholders of a listed issuer with the objective of acquiring control over the issuer in question. In such event, the offeror shall treat all shareholders equally, irrespective of share classes and whether all or merely some of the share classes are listed on a regulated market place.

The requirement does not apply to a situation where the offeror makes a voluntary takeover bid without the objective of acquiring control over the issuer, nor does it apply to a situation where the offeror already has control over the issuer before making the takeover bid or where the offeror makes a mandatory takeover bid. In such events, the requirement of equal treatment of shareholders within the same share class applies.

Our opinion: There are certain scenarios in which this new requirement may be relevant, however, the most relevant scenario would be where an offeror makes a takeover bid for one share class with voting rights and intends to exclude another share class without voting rights from the takeover bid. In this event, and provided that control is the offeror’s objective, the offeror is forced to offer to purchase the other shareholders’ shares without voting rights on the same terms, including in relation to price etc., as the shareholders’ holding of shares with voting rights. As the shares with voting rights are more valuable to the offeror, we may see less favourable terms for purchasing shares during voluntary takeover bids in the future, seeing as an offeror shall compensate for the obligation of purchasing all shares on the same terms.

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.

CHINA UPDATE – Stricter enforcement of environmental regulations in China

Editors’ Note: Lodewijk Hijmans van den Bergh and Geert Potjewijd are partners at De Brauw Blackstone Westbroek, resident in Amsterdam, and Adam Li is a partner at JunHe LLP, resident in Shanghai and Silicon Valley. They are members of XBMA’s Legal Roundtable.  As leading M&A lawyers, they have broad expertise handling significant cross-border transactions.

Last year’s Party Congress made clear China’s commitment to environmental protection: in his opening speech, President Xi Jinping mentioned “environment” 89 times, while “economy” stopped at 70. The new environmental zeal has led to a surge in relocations and shutdowns, impacting companies active in China or heavily reliant on Chinese suppliers. This was illustrated by a recent Bloomberg article reporting that environmental action had resulted in a sudden shortage of raw material in the solar panel industry, driving up costs and crushing margins for scrambling manufacturers.

Companies active in China should comply with China’s new environmental regulations and assertively engage with authorities to prevent potential problems. In addition, companies heavily reliant on China-based suppliers, especially in highly-regulated areas or industries, should actively monitor risks and put precautionary measures in place to mitigate potential disruptions in their production and supply chains.

Changes in environmental policy enforcement 

Where previously China’s environmental enforcement authorities have been accused of lacking teeth due to the government’s unwillingness to interfere with economic growth, this notion has shifted since China’s new environmental protection law entered into force on 1 January 2015. In the past, environmental authorities reported to local government heads, who (for various reasons) might use their power to block environmental penalties interfering with their economic goals. Under the new law, however, these local environmental authorities can report directly to superior environmental authorities, removing this potential conflict of interest. Additionally, the new law enables environmental NGOs to pursue legal action – which could cause legal and reputational damage – against companies violating national environmental regulations.

The 2015 developments led to much stricter environmental enforcement in the following years. Since July 2016, four rounds of dawn raids and on-site inspections have penalised some 18,000 polluting companies. Moreover, shutdowns and relocations resulting from enforcement of environmental regulations have drastically increased since May 2017, affecting industries such as textiles, chemicals, plastics, coating, paper, rubber, metals, dyeing, painting and printing.

This trend is set to continue in the coming years as numerous new regulations and guidelines come into force. On 20 September 2017, China’s State Council released its ”Opinion Concerning Establishment of a Long-Term Mechanism for Early-Warning and Monitoring of Environmental and Natural Resources Carrying Capacity”. This opinion gives government authorities the power to suspend major projects in heavily-polluted areas. The opinion also states that companies responsible for damage to the environment, and local officials that fail to uphold the ban, may face criminal liability. Another development is China’s new environmental tax law, which came into force on 1 January 2018. This law increases the tax burden on entities that emit air, water, solid waste, or noise pollution, while granting preferential tax treatments to polluters which drastically reduce their emissions. Finally, the State Council issued ”Instruction 77 for Relocation of Hazardous Chemical Enterprises in Heavily Populated Areas” in August 2017, which addresses the relocation of hazardous chemical entities at a local level. Entities that create significant potential risks to the population must relocate by 2020, while larger entities need to move by 2025.

Assessment and outlook

Given the wide discretion of the enforcement actions, assertive engagement is crucial in dealing with China’s local government and environmental authorities. The increased importance of environmental protection will not only result in more inspections and enforcement, but is likely to have an impact on all regulatory approval. A satisfactory environmental narrative might very well become a key driver in establishing any form of government cooperation. For this reason, it is essential for companies to be proactive when addressing environmental protection. Proactive communication will not only help drive the conversation, but will also make the authorities more willing to collaborate.

From an operational perspective, China’s environmental crackdown has hit companies at every level, resulting in serious disruptions to supply chains, including for foreign multinationals. In addition to the example provided above, the SCMP recently reported that as a result of a forced shutdown of a Chinese supplier of a global car parts manufacturer, the production of more than 200 car models of 49 brands were affected. As this new enforcement trend is set to become the new norm, it is essential for companies to ensure that they not only comply with relevant regulations and guidelines themselves, but also audit their business partners’ compliance. In doing so, companies should be aware that even if they (or their business partners) comply with all existing legal requirements, they may still be subject to relocation; especially if a company operates in a highly-regulated area or industry, as relocation can sometimes be driven by unrelated (and thus more unpredictable) policy considerations. In this respect, supply chain management is key. As a sudden shutdown of a business partner can disrupt an entire production chain, it is crucial to carefully screen the complete supply chain for environmental compliance at both national and local levels and to ensure that any business partners have all the required licences. Depending on the standing of a company’s suppliers, contingency planning might be necessary.

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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