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Croatia > Legal Developments > Law firm and leading lawyer rankings


New Takeover Act Enacted


In five years of application of the Croatian Takeover Act 2002 ("Act 2002"), altogether 150 takeover bids have been launched in accordance with its provisions. It has been noted that the annual figure of bids has been steadily decreasing trough the years since the application of the Act 2002 has been confined solely to takeovers targeting public joint stock companies (these are joint stock companies which issue their shares through public offering, or have at least 100 shareholders and a share capital of at least approx. EUR 4.1 million) and the number of such companies is limited with most of them already having been subject to takeover.

During the application of the Act 2002, the Croatian Financial Supervisory Agency ("Agency") and the practitioners have identified several items in need of further clarification especially with respect to the relations between acquirer and the target company and its shareholders. In addition, a number of elements in relation to the takeover procedures required elaborate and precise explanations, such as shares carrying voting rights; joint actions in the context of share acquisitions; rights and obligations of target companies; deadlines for certain Agency's decisions (e.g. for authorization of the bid publication).

Solutions Proposed  

Croatian Parliament has enacted a new Takeover Act ("Act 2007") on 5 October 2007. According to the accompanying Government's document, the legislative policies behind the adoption of this new piece of legislation were (i) implementation of solutions adopted in Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids; (ii) bringing more transparency in the takeover procedures; (iii) protection of interests of all shareholders and especially of the minority shareholders; (iv) strengthening of Agency's powers; (v) combating insider trading; (vi) ensuring timely and complete informing of the shareholders and employees; (vii) defining the rights and obligations of the involved companies and their corporate bodies.

As to the concrete solutions adopted in the Act 2007, several are of particular interest. First, the Act 2007 defines target companies not only as public joint stock companies within the meaning of the Croatian laws, but also as the joint stock companies listed on the regulated markets of countries belonging to the European Economic Area within the meaning of the Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (it should be noted that this provision shall enter into force with the accession of Republic of Croatia to the European Union).

Second, the Act 2007 obligates the Management Board of target company to publicize a reasoned opinion on the takeover bid within 10 days following the publication of the bid (as opposed to the solution adopted in the Act 2002 which required the Supervisory Board to issues the opinion). Also, the Act 2007 requires the Management Board to submit its reasoned opinion to the employees' representatives before publication.

Third, the Act 2007 expressly excludes a white knight defense from the general prohibition of the active defensive measures imposed on the Management Board of the target (generally, the use of defensive measures might be approved by the target's Shareholders' Meeting). Of course, it remains to be seen how this and other potential defensive measures shall be utilized in practice especially since one cannot expect a large number of hostile transactions (mostly due to generally law free-float of shares in Croatian companies). 

Fourth, the Act 2007 authorizes acquirer holding more than 95% of the shares of target company to squeeze out the minority shareholders within three months following the expiry of the takeover bid. In turn, the minority shareholders are authorized to sell their shares to the majority shareholder holding more than 95% of the shares of target company in the same timeframe. These provisions shall enter into force only with the accession of Croatia to EU.

Fifth, the Act 2007 contains provisions allowing the target company to facilitate its takeover (e.g. through exclusion of restrictions on transfer of shares postulated in the company's Articles of Association or in shareholders agreements) and making it easier for the acquirer holding 75% or more of the target company's shares to convene the first Shareholders' Meeting of the target company and to appoint new Supervisory Board. However, these provisions introducing dual-mode breakthrough rule will take effect only upon the accession of Republic of Croatia to the European Union and only if they are incorporated in the target's Articles of Association.

Finally, it should be noted that the Act 2007 prescribes that bidder may offer (i) cash; (ii) shares or (iii) the combination of two as a consideration for the shares of target company. However, even if the bidder chooses the compensation consisting of shares or the combined compensation, it must always offer the cash compensation as an alternative.


Contributed by Boris Andrejaš, Associate at Babić & Partners



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