Macedonia’s 2013 Law on Takeover of Joint Stock Companies provides a squeeze-out right enabling a majority shareholder who has acquired at least 95% of the shares of an eligible joint stock company on the basis of a takeover bid to require the minority shareholders to sell their securities at a fair consideration.
The squeeze-out right is combined with a sell-out right enabling the minority shareholders to require the majority shareholder to buy their shares at a fair consideration following a takeover bid. Joint stock companies which are eligible for the exercise of the squeeze-out right by a majority shareholder or the sell-out right by the minority shareholder include: (a) listed companies; (b) companies that have made an initial public offering; and (c) companies with a share capital of at least EUR 1 million and at least 50 shareholders.
Under the Law on Takeover of Joint Stock Companies (the “Takeover Law”), an entity which – acting independently or in consortium with other entities – intends to acquire at least 25% of the shares of an eligible Macedonia joint-stock company is required to make a takeover bid to the shareholders of the target for the purchase of all of their shares at a fair consideration. The takeover bid must contain all of the information necessary to enable the shareholders of the target to reach an informed decision on the bid, including the identity of the buyer, the terms of the bid, the shares or the class or classes of shares for which the bid is made, the consideration offered for each shares or class of shares and others. The buyer may offer as consideration liquid securities, cash, or a combination of both. If, as a result of the takeover bid, the buyer acquires at least 95% of the shares of the target, it obtains the right to squeeze them out – i.e., to purchase the shares of those shareholders who have not accepted the takeover bid at a fair consideration. The fair consideration offered by the buyer must have the same form as the consideration provided in the takeover bid. However, the buyer must provide cash as an alternative.
If the buyer wishes to exercise its squeeze-out right, it is required to make an application to the Central Securities Depositary (CSD) requesting the forced sale of the shares of the minority shareholders of the target within ninety days from the day of completion of the takeover bid. The buyer is also required to publish the application made to the CSD in the Official Journal of the Republic of Macedonia and one daily newspaper distributed throughout all of Macedonia. It is important to note that the buyer is required to deposit the consideration for the shares of the minority shareholders at the CSD or to provide the CSD with a bank guarantee from a reputable bank covering the period of ninety days from the day of completion of the takeover bid at the time of making the takeover bid. Hence, the consideration for the purchase of the target’s minority shareholder’s shares will be readily available for transfer by the CSD, should the buyer decide to exercise its squeeze-out right.
Upon receipt of the application from the buyer, the CSD is required to give notice to the minority shareholders about the exercise of the squeeze-out rights and to request that they provide their banking details for the transfer of the consideration for their shares. The CSD is required to transfer the consideration for the shares to the minority shareholders and to transfer the shares to the buyer within eight days from the day of receipt of the application. If any of the shareholders do not respond to the CSD’s notice or cannot be identified, the CSD is required to deposit and retain the consideration for their shares in a separate account until the time when those shareholders provide their banking details or are identified.
The same procedure set out above applies to the exercise of the sell-out right by the minority shareholders of the target. If the minority shareholders of the target wish to exercise their sell-out right, they are required to make an application to the CSD, also within ninety days from the day of completion of the original takeover bid of the buyer. Upon receipt of the application, the CSD is required to give notice to the buyer and to transfer the consideration to the minority shareholders.
By Gjorgji Georgievski, Partner, and Marija Serafimovska, Junior Associate, ODI Law Macedonia
This Article was originally published in Issue 4.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.