The International Comparative Legal Guide to: Mergers & Acquisitions 2013 - Slovenia

1 RELEVANT AUTHORITIES AND LEGISLATION

1.1 What regulates M&A?

In Slovenia, different aspects of M&A are regulated by different bodies of law. The company law aspects (corporate governance, corporate finance, changes to the corporate form and mergers) are subject to the Companies Act. Certain aspects of takeovers of public companies (the mandatory bid rule, the takeover offer process, target defence restrictions) are regulated by the Takeovers Act. Moreover, the Markets in Financial Instruments Act and the Ljubljana Stock Exchange Rules provide a regulation of the capital markets aspects of M&A. Apart from that, the Slovenian M&A framework is set by regulations provided for by, inter alia, the Competition Act, the Labour Law Code of Obligations and the Rights in Rem Act.

Certain sector-specific regulations, e.g., the Insurance Act, the Banking Act, the Investment Funds Act, and the Media Act, etc., provide for special regimes with respect to mergers/acquisitions of certain regulated corporate entities.

Certain additional requirements with respect to acquisitions and reorganisations of municipality/state-owned companies are governed by the Public Finance Act.

1.2 Are there different rules for different types of company?

The takeovers regime stricto sensu (the Takeovers Act - mandatory bid rule, the takeover offer process, target defence restrictions) only applies with regard to acquisitions of (i) listed public limited companies (i.e. joint-stock companies, the shares of which are admitted to trading on an organised market), and (ii) non-listed joint-stock companies if certain requirements regarding the size of the target company are met (at least 250 shareholders or total assets of at least EUR 4 million).

Similarly, capital markets regulations (such as market transparency and market abuse) only apply in regard to such companies. For example, the Financial Instruments Market Act provides for certain reporting obligations with regard to stakebuilding in a listed company. Once a single shareholder (option holder, a person entitled to jointly exercise voting rights, etc.) has reached such 5, 10, 15, 20, 25, 1/3, 50 or 75% of all voting rights in a public listed company (or if its stake has fallen below such a threshold), it is obliged to notify the management of the respective company. In turn, the company management is obliged to publish the fact that such an acquisition has been effected. Such reporting obligation applies mutatis mutandis to a non-listed joint-stock company that is subject to the Takeovers Act.

1.3 Are there special rules for foreign buyers?

As a rule, foreign buyers (especially EU/EEA-based buyers) are subject to the same regulations and requirements as the Slovenian buyers.

Certain sector-specific regulations (see question 1.4 below) provide for certain additional conditions that are to be met by an acquirer of a shareholding in certain regulated entities in order to obtain a respective authorisation by the competent public authority.

1.4 Are there any special sector-related rules?

Transactions within certain business sectors (banking, insurance, fund management, media) are, in addition to the general M&A regime, governed by various sector-specific rules. Usually, an approval by the relevant controlling public authority is required before the acquisition of a controlling stake in a regulated entity. For instance, the acquisition or sale of a shareholding in a Slovenian bank, insurance company or fund management company upon which the thresholds of 20, 33, or 50% of all the voting rights in such insurance company are reached or exceeded, trigger the requirement for preliminary approval by the relevant regulator (Bank of Slovenia, Slovenian Insurance Supervision Agency). Similarly, an acquisition of 20% or more shares in a daily media publishing undertaking may only be effected upon consent of the Slovenian Ministry of Culture.

1.5 Does protectionism operate in favour of local owners?

The applicable legislation does not distinguish between local and foreign owners.

1.6 What are the principal sources of liability?

In addition to the contractual liability, the participants in M&A transactions should consider the liability provided for noncompliance with the obligation to duly notify the Slovenian Competition Protection Agency (the "CPA") of the merger (when triggered)/seek an approval by the competent public authority (when applicable – see question 1.4 above).

For example, the completion of an M&A transaction without the prior notification/clearance from the CPA (when required) may entail a penalty in the amount of up to 10% of the turnover that the undertaking (along with other undertakings of the same group) achieved in the past business year, to be imposed upon the undertaking obliged to notify.

Additionally, the fines for infringement of the rules regarding bid procedures set out in the Takeovers Act (e.g. the failure of the bidder to instigate the tender offer procedure when it acquires more than 1/3 of the voting capital in the target company), may reach the amount of approximately EUR 125,200. Further penalties are provided under the sector-specific regulations mentioned under question 1.4 above. In addition to a monetary penalty, the acquirer will also suffer loss of the voting rights, stemming from the shares acquired outside the tender offer procedure.

Moreover, the Financial Instruments Market Act provides for a monetary penalty of EUR 25,000 to 125,000 for the failure to report an acquisition of a significant stakeholding (please see question 1.2 above).

Lastly, the acquirer of a Slovenian public company (joint-stock company) should take into account the provisions of the Financial Instrument Market Act regarding insider dealing and market abuse (closely mirroring the Directive 2003/6/EC on insider dealing and market manipulation). Breach of the respective provisions may, inter alia, entail a monetary fine of up to EUR 125,000 for the infringing undertaking, prohibition from further trading with financial instruments, as well as criminal sanctions (including imprisonment) for the responsible persons within the undertakings.

2 MECHANICS OF ACQUISITION

2.1 What alternative means of acquisition are there?

The control of a business is usually acquired by acquiring control of the corporation-owner of the business. This may be implemented by way of share purchase, takeover/merger, de-merger, or through a management agreement (where a dominant company controls the target company based on agreement, not equity). The acquirer can also acquire control of the target business via an asset purchase agreement.

In case of a share purchase, the investor will generally acquire control once the transfer of the title to the shares (closing) has been duly effected. In order to gain (positive) control, the investor should acquire at least 50%+1 of the voting shares. A more efficient level of control is obtained by way of acquisition of at least 75% of the voting shares in a company and full control by 90% (although shareholders aggregately holding a 10% interest still have certain minority blocking rights).

2.2 What advisers do the parties need?

In a common M&A transaction, the investor/purchaser is (depending on the size and complexity of the transaction) usually advised by local legal, financial and tax consultants. With regard to specific sectors of business, additional specialised advisors may be necessary (such as environmental regulation/industry specialists).

2.3 How long does it take?

The timeframe of an M&A transaction depends on the transaction structure and the eventual prior approvals/notifications required. In case of bid procedures under the Takeovers Act, the bidder must, before submitting the bid: (i) publish a takeover intent declaration; and (ii) obtain an authorisation from the Securities Market Agency. Once the said conditions are met, the bid shall stay open for a minimum of 28 days, and a maximum of 60 days.

If the transaction requires prior notification to be filed before the CPA, the general timeframe will usually be extended by up to one month for the CPA's preliminary (phase I) investigation. If the CPA decides to initiate a full investigation (in cases where the proposed transaction could lead to a market concentration significantly impeding effective competition on the Slovenian market – phase II), the CPA's decision should be expected in three months upon such initiation.

2.4 What are the main hurdles?

An M&A transaction may experience hurdles in cases when preliminary notification/approval by a public authority is required (see questions 1.4 and 2.3 above). Delays are mainly caused by the formalities that must be complied with and, sometimes (depending on the sector/public authority), the lack of decisive guidelines and/or practice – especially in cases of complex transactions. It should further be noted that the statutory time limits in which public authorities are to render their respective decisions are, in most cases, of an instructive nature, i.e. do not represent a strict obligation for the public authorities.

2.5 How much flexibility is there over deal terms and price?

In principle, the price and other transaction terms may be freely negotiated between the parties.

When the target is a public company falling within the...