Ireland Squeeze-out Guide IBA Corporate and M&A Law Committee 2010

Transcription

1 Ireland Squeeze-out Guide IBA Corporate and M&A Law Committee 2010 Contact David O Donnell Justin McKenna Mason Hayes + Curran dodonnell@mhc.ie jmckenna@mhc.ie

2 Contents Page INTRODUCTION 2 REGULATED MARKET SQUEEZE-OUT IN THE CASE OF AN OFFER 2 NON-REGULATED MARKET AND OFF-MARKET SQUEEZE-OUT IN THE CASE OF AN OFFER 4 SCHEME OF ARRANGEMENT WITH A VIEW TO EFFECTING A SQUEEZE-OUT 5 COMPARISON OF SQUEEZE-OUT PROCEDURES 7 Page 1

3 INTRODUCTION This guide sets out an overview of the Irish law dealing with the concept of squeeze-out. Unlike a number of EU jurisdictions, Ireland has had laws permitting squeeze-out for over a century. The default law of squeeze-out in Ireland sets a threshold of 80% for an acquirer to squeeze out a minority (Section 204 of the Companies Act 1963). The implementation of Directive 2004/25/EC of the European Parliament and of the Council of April 21, 2004 (the Takeover Directive ), as transposed in Ireland has resulted in a less liberal law of squeeze-out for companies whose securities are admitted to trading on a regulated market. The applicable law for a proposed squeeze-out depends on the following two criteria: (i) (ii) whether or not the company being acquired has securities admitted to trading on a regulated market; and whether or not the proposed acquisition is by way of an offer by the acquirer ( an offer ) or by scheme of arrangement initialled by the company itself ( a scheme ). The legal situation is summarized in the following table: Company whose shares are admitted to trading on a regulated market Any other company Offer Acquirer of 90% or more can squeeze out minority Acquirer of 80% or more can squeeze out minority Scheme Shareholders voting in favour of a takeover: (i) holding 75% or more of the shares voted; and (ii) being more than 50% of shareholders voting, compel all shareholders to accept a takeover, subject to court approval REGULATED MARKET SQUEEZE-OUT IN THE CASE OF AN OFFER Where an Irish company has securities admitted to trading on a regulated market, the squeezeout procedure that applies is given by the Takeover Directive as implemented in Ireland. Regulated market squeeze-out - Under what circumstances can it be exercised? In order for the right of squeeze-out to be exercisable, an offeror must make a bid for the beneficial ownership of transferable voting securities in the capital of the company ( securities ), comprising either: all of the securities in the capital of the company; or where the capital of the company consists of two or more classes of securities, all of the securities in its capital of a particular class. Page 2

4 When the offeror has met the acquisition threshold by having acquired (or having unconditionally contracted to acquire) at least 90% of the securities affected that are not already owned by it, then the offeror is entitled to acquire the securities held by any security holder that has not assented to the offer a dissenting security holder. The 90% threshold has two components: the securities must amount to not less than 90% in nominal value of the securities affected; and carry not less than 90% of the voting rights attaching to the securities affected. Where the company has more than one class of voting securities, then both thresholds must also apply within each class that is the subject of an offer. It is important to note that the procedure for squeeze-out in the case of a company that has securities admitted to trading on a regulated market may not be used for classes of shares that are either: non-voting; or non-transferable. Another method must be used to acquire such shares (such as the scheme of arrangement procedure discussed below). Terms which must apply The same terms must apply to the acquisition of securities from dissenting security holders as apply to the acquisition of securities in respect of which the bid has been accepted including, where offered, the opportunity to elect between alternative sets of terms. Regulated market squeeze-out - Procedure The offeror has three months from the last acceptance date of the offer in which it can give notice to dissenting shareholders that it intends to exercise its right of squeeze-out. Once a notice has been served, a dissenting shareholder has 21 days within which it can apply to court for a declaration to the effect that the compulsory purchase is void. The declaration may be sought either where the conditions described above have not been satisfied or the notice itself or the terms specified in the notice do not comply with the requirements of the 2006 Regulations such as by specifying terms different from those applying to the bid that was accepted by assenting shareholders, including, where offered, alternative sets of terms. If a court application is made by a dissenting shareholder, the compulsory acquisition from that dissenting shareholder will be delayed until the outcome of that application, including any appeal. There is no time limit within which the court application must be dealt with. At the same time, uncontested compulsory acquisitions will proceed. If a notice has been served and no court order has been applied for by a dissenting shareholder, then acquisition of the dissenting shares will take place within one month of the notice being served. Right of certain holders of securities to be bought out The holders of securities have a corresponding right to require an offeror to acquire their securities where equivalent thresholds to the ones set out above have been exceeded in an offer for all of the securities in the capital of the company or for all of the securities in a particular class. The offeror is obliged to notify the remaining holders of affected securities within one month of such thresholds having been surpassed, and any such holder then has 3 months in which to require the offeror to acquire its securities on identical terms to the terms set out in the offer. Page 3

5 NON-REGULATED MARKET AND OFF-MARKET SQUEEZE-OUT IN THE CASE OF AN OFFER Section 204 of the Companies Act 1963 sets out the squeeze-out procedure applicable to companies that do not have securities admitted to trading on a regulated market. Non-regulated market squeeze-out - Under what circumstances can it be exercised? In order for the right of squeeze-out to apply, an offeror must make a bid for the beneficial ownership of shares in the capital of the company, comprising either: all of the shares in the capital of the company; or where the share capital of the company consists of two or more classes of shares, all of the shares in its capital of a particular class. The acquisition threshold is reached where the bid has become binding or been approved or accepted in respect of: 80% in value of the shares affected; and where on the date of the bid more than 20% of the aggregate value of shares in the company are already in the beneficial ownership of the offeror, 75% in number of the outstanding shares. Shares already in the beneficial ownership of the offeror (or of a subsidiary of the offeror) do not count towards the threshold in. The threshold must be reached not later than 4 months after publication of the bid. The offeror then has a further 2 months in which to give notice to the dissenting shareholders that it intends to exercise its right of squeeze-out. Terms which must apply The same terms must apply to the acquisition of shares from dissenting shareholders as apply to the acquisition of securities in respect of which the bid has been accepted including, where offered, the opportunity to elect between alternative sets of terms. Non-regulated market squeeze-out - Procedure Once a notice has been served, a dissenting shareholder has 1 calendar month in which to apply to court. If a court application is made, the compulsory acquisition from the dissenting shareholder will be delayed until the outcome of that application, including any appeal. There is no time limit within which the court application must be dealt with. At the same time uncontested compulsory acquisitions will proceed. If a notice has been served and no court order has been applied for by a dissenting shareholder, then the acquisition of the dissenting shares will take place. Right of certain shareholders to be bought out The holders of shares have a corresponding right to require an offeror to acquire their shares when the offeror has acquired 80% of all the shares in the company. The offeror is obliged to notify the remaining holders of affected shares within 1 month of that fact, and any such holder then has 3 months in which to require the offeror to acquire its shares on the terms set out in the offer or as ordered by the court on the application of the offeror or a shareholder. Page 4

6 SCHEME OF ARRANGEMENT WITH A VIEW TO EFFECTING A SQUEEZE-OUT This procedure is the same whether or not the company has shares admitted to trading on a regulated market. The procedure is governed by Section 201 of the Companies Act A scheme of arrangement is a court procedure to formalise a proposal to vary the rights of shareholders (or creditors) without requiring unanimous agreement. One of the possible uses of a scheme of arrangement is as a means to squeeze out dissenting shareholders. Where a scheme of arrangement is used to facilitate an offer for the entire issued share capital of a company, all shareholders will be bound by the terms of the scheme: the rights of dissenting shareholders in their shares will be varied in the same way as shareholders who vote in favour of the scheme. Scheme of arrangement - What is required for it to be used? A scheme of arrangement is initiated by application to the Irish High Court. The application must be made by the company itself or by a shareholder with the approval of the company which may be given by a resolution of the directors or an ordinary resolution of the members. The court will order the convening of a meeting or meetings of the shareholders in the company which will be affected by the scheme of arrangement (a Court Meeting ) including, as discussed below, separate Court Meetings for each group of shareholders that is in a separate class with respect to the scheme. The approval of the court) will only be given where the scheme of arrangement is approved at each Court Meeting by: 75% by value of the votes cast at the meeting; and more than 50% in number of the shareholders voting in person or by proxy at the meeting. Terms which must apply A scheme of arrangement can be made on any terms that are capable of being entered into between the company and its shareholders. Terms which are typically applied to a takeover by scheme of arrangement are that new shares in the offeree (the target company) are to be issued to the offeror in return for the payment of consideration to the existing shareholders, whose shares are cancelled. Scheme of arrangement - Procedure (i) The Court Meeting On the initial application of the company, the High Court will convene one or more Court Meetings of the affected shareholders. At a Court Meeting, which the Court will usually direct to be held on the giving of at least 21 days notice to shareholders, a resolution to approve the scheme will be considered and a vote on a poll will be taken. As noted above, the majorities required are: a majority in number; and a majority representing 75% in value of the members present in person or voting by proxy at the meeting. The question of whether all shareholders are in the same class with respect to the scheme must be investigated. Where the scheme has dissimilar effects on shareholders in different positions, then shareholders must be separated into different classes and separate Court Page 5

7 Meetings must be convened of each such class the resolution must be approved by the required majorities in each Court Meeting for the scheme to be validly approved. Neither the offeror nor any of its subsidiaries will be permitted to vote any of the shares that it owns in the company at a Court Meeting. Aside from the Court Meeting(s), the company may also choose to convene an extraordinary general meeting in order to pass such resolutions as may be required to facilitate the scheme. This is generally held immediately after the conclusion of the Court Meeting(s). The majorities required will depend on the nature of the resolutions proposed; in the case of a special resolution for example, to amend the company s articles of association the required majority is 75% by value of the votes cast in person or by proxy. (ii) Advertising the petition After the Court Meeting(s) have been held, the chairman will report the result of the vote to the High Court. On application, the Court will give directions for the advertising of the petition to sanction the scheme of arrangement. (iii) Court sanction of the scheme The final procedural step is for the company to petition the Court to sanction the scheme of arrangement. If the Court sanctions the scheme, it will become binding on all shareholders once an office copy of such order has been delivered to the Registrar of Companies. The Court s principal duty in hearing the petition to sanction the scheme is to see that the provisions of the statute have been complied with. The Court also has the obligation to consider whether the majority has been acting bona fide, and not with a view to coercing a minority whose interests are different from those of a majority. The court has powers to modify or impose conditions on the scheme in order to ensure that the arrangement is fair and equitable. Any member or creditor of the Company may appear in person or be represented by a solicitor or barrister at the hearing of the petition to sanction the scheme. The Irish Takeover Rules For companies subject to the jurisdiction of the Irish Takeover Panel (which includes Irishregistered companies listed on the Irish Stock Exchange), nothing in the statutory rules described above prejudices the Panel s jurisdiction. Though the sanction of a scheme of arrangement is ultimately a matter for the Court, the Irish Takeover Panel is entitled to receive copies of any motion or petition in relation to scheme proceedings and to be heard at any hearing in connection with the scheme. The Court and the Panel are required to have due regard to the exercise of each other s powers under company law and the takeover legislation respectively. Page 6

8 COMPARISON OF SQUEEZE-OUT PROCEDURES The following table summarises the differences between the squeeze-out procedures: OFFER FOR REGULATED MARKET COMPANY OFFER FOR NON- REGULATED MARKET COMPANY OR ANY OTHER COMPANY SCHEME OF ARRANGEMENT Who initiates the procedure? Offeror Offeror Offeree (i.e. target company) What percentage of persons in favour are necessary? 90% 80% where the offeror already holds more than 20% of the shares in the offeree, the approval of 75% in number of the of the holders of affected shares is also required 75% and a majority in number of those casting votes Do shares already in the ownership of the offeror count towards the required percentage? No, but this can be circumvented by structuring No, but this can be circumvented by structuring No, they are excluded from those entitled to vote What is the earliest stage that the procedure can be initiated? Once the threshold for acceptances has been met Once the threshold for acceptances has been met n/a What is the latest stage at which the procedure can be initiated? 3 months after the last day for acceptance of the offer 6 months after the publication of the offer n/a How long does the procedure take? Offer period (until threshold is reached) + 21 days Offer period (until threshold is reached) + 1 month Notice period (21 clear days) + Advertising of petition (around 14 days) + Hearing of petition and filing of an office copy with the Registrar of Companies (around 3 days) Is court approval necessary? No No Yes Page 7

9 OFFER FOR REGULATED MARKET COMPANY OFFER FOR NON- REGULATED MARKET COMPANY OR ANY OTHER COMPANY SCHEME OF ARRANGEMENT Who can contest the procedure? A dissenting shareholder A dissenting shareholder Any shareholder or creditor; the Irish Takeover Panel What is the forum for contesting the procedure? The Irish High Court The Irish High Court The Irish High Court On what grounds may relief be granted? Unfairness of the terms of the offer or technical noncompliance with the requirements of the Companies Act 1963 Technical noncompliance with the requirements of the 2006 Regulations Unfairness of the scheme or technical non-compliance with the requirements of the Companies Act 1963 What relief may be granted? Relief from compulsory purchase; an alternative order (such as to increase the consideration payable to dissenting shareholders) Declaration that the conditions for compulsory purchase have not been met or that the notice or terms of the offer do not comply with the 2006 Regulations Refusal to sanction the scheme; imposition of conditions on or modification of the scheme What time limits are there to contest the procedure? An application to the High Court must be made within 21 days of the giving of notice by the Offeror of its desire to acquire ownership of the shares of the dissenting shareholder(s) An application to the High Court must be made within 1 month of the giving of notice by the Offeror of its desire to acquire ownership of the shares of the dissenting shareholder(s) The petition sanctioning the scheme may be contested at the hearing of the petition Who pays the costs of the squeeze-out? The Offeror The Offeror Either usually the Offeree Page 8