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

Transcription

1 Finland Squeeze-out Guide IBA Corporate and M&A Law Committee 2010 Contact Petri Haussila Petri Avikainen White & Case LLP

2 Contents Page INTRODUCTION 2 TRIGGERING THRESHOLDS 2 REDEMPTION PRICE 2 DISCLOSURE OBLIGATIONS 3 DISPUTE RESOLUTION 3 DESLISTING 3 SAMPLE TIMETABLE FOR SQUEEZE-OUT 4 Page 1

3 INTRODUCTION This guide describes the process for a squeeze-out in Finland, which is governed by the Finnish Companies Act (624/2006, as amended) (the Companies Act ). Chapter 18 of the Companies Act provides that a shareholder holding more than 90 percent of the shares and voting rights of a company 1 has the right to redeem (or squeeze-out) the remaining shares from any minority shareholders at a going price. In addition, such majority shareholder has an obligation to redeem the shares of any minority shareholder in case such minority shareholder demands the redemption of such shares. TRIGGERING THRESHOLDS In calculating the 90 percent threshold, shares owned by the issuer or by its subsidiaries, or voting restrictions included in law or in the articles of association of the issuer, are not taken into account. The redemption right (or obligation) can arise not only through directly held shares, but also from indirect shareholdings. The shares and voting rights of controlled corporate entities are taken into account when calculating the 90 percent threshold. As indirectly held shares and voting rights are fully included in the calculation, it is possible that the redemption right (or obligation) may be triggered for several parties simultaneously. In such case, the redeeming party is the entity which most directly has the majority of more than 90 percent of all shares and voting rights. For example, if A s subsidiary B owns 95 percent of all shares and voting rights in C, both A and B would be entitled (or obligated) to redeem the remaining shares in C. However, in this scenario, only B would have the redemption right (or obligation) because its ownership is most direct (A only indirectly holds shares in C by virtue of its stake in B). The redemption right (or obligation) relates to shares only and does not apply to any stock options or other special rights granted by the issuer, unless the terms and conditions of stock options or other special rights stipulate that such instruments are to be redeemed simultaneously. REDEMPTION PRICE The redemption price (or squeeze-out price) for shares held by minority shareholders is, as a general rule, the going price at the time preceding initiation of arbitration proceedings, and generally refers to the market price of the shares at such time. However, when the redemption right (or obligation) arises after (i) a voluntary tender offer that was accepted by shareholders representing more than 90 percent of the shares that were subject to the voluntary tender offer or (ii) a mandatory tender offer 2, the redemption price is generally determined by the price offered in the preceding tender offer. There may be situations, however, where special reasons are deemed to exist for a deviation from such price, such as where a relatively long time has passed since the tender offer took place, or where only a small number of shareholders to whom the offer was directed accepted the offer. 1 Stock options or other special rights entitling to shares do not affect this evaluation until such rights have been converted into shares of the company and such shares have been registered in the Finnish Trade Register. 2 Pursuant to the Finnish Securities Market Act (495/1989, as amended), a shareholder whose holding in a listed company increases above three-tenths or one-half of the total voting rights attached to the shares of such company, must make a mandatory tender offer to purchase the remaining shares and other securities entitling its holder to shares of such company for a going price. Page 2

4 DISCLOSURE OBLIGATIONS In case of a tender offer, the bidder must make public the result of the tender offer after the end of the offer period, and disclose its resolution to initiate squeeze-out proceedings, if applicable. The target company (subject to the squeeze-out) must publish its receipt of the notice given by the bidder regarding the result of the tender offer. Furthermore, the target company has a continuous duty to disclose all information regarding the target company that is likely to have a material effect on the value of the securities of the company. The target company must also be notified without delay by the bidder when its shareholdings either:(i) increase to more than 90 percent of all shares and voting rights; or (ii) decrease to 90 percent or less of all shares and voting rights. The target company receiving such notification must notify this to the Finnish Trade Register without undue delay. 3 Failure to deliver the above notifications to the target company does not have any effect on the redemption right (or obligation) as such, but such failure may result in an obligation to compensate for any damages resulting therefrom. DISPUTE RESOLUTION Any disputes concerning the right of redemption or the redemption price are resolved by arbitrators appointed by the Finnish Central Chamber of Commerce in accordance with the Chapter 18 of the Companies Act. 4 In disputes regarding the redemption price, the Companies Act provides that the arbitrators must take into account all relevant details of each individual case when determining the squeeze-out price. With regard to disputes involving broadly held listed companies, the commencement of arbitration proceedings, together with the appointment of a trustee which oversees the interests of minority shareholders, is the only practical way of completing a full redemption of all shares held by minority shareholders. In arbitration proceedings where the right of redemption has been legally established (i.e., a holding exceeding 90 percent) and the majority shareholder seeking redemption has posted acceptable security for the payment of the redemption price, arbitrators will typically issue an interim order to the effect that the title to the shares subject to redemption is deemed to have transferred to the majority shareholder. Thereafter, the only matter to be addressed by the arbitrators is the redemption price. DELISTING In accordance with the rules of NASDAQ OMX Helsinki Ltd., the stock exchange may, upon application by a listed company, terminate trading in the listed company s securities. Such delisting may not result in any significant harm to investors or to the orderly operation of the securities market. In a takeover situation, the delisting of the target company s shares requires in practice the full ownership of the target company by the bidder. 3 Notification to the Finnish Trade Register must also be made in case the company receives information from some other reliable source that a redemption right (or obligation) in respect of the company s minority shareholders has begun or ceased. 4 Generally, the redeeming party is liable for the costs of the arbitration proceedings. Page 3

5 SAMPLE TIMETABLE FOR SQUEEZE-OUT Timeline T T + 2 days T months T months Action Tender offer period ends Tender offer results announced. Arbitration proceedings may be commenced for minority squeeze-out if ownership is above 90 percent Interim award granted. Title to minority shares passes against posting of collateral. Delisting of the shares becomes possible Final arbitration award issued (can vary from approximately two to eight months) Page 4