Serbia gets new law on takeovers – Stricter rules, greater shareholder protection

Illustration (Photo: Unsplash / Romain Dancre)Illustration
The Ministry of Finance has launched a public debate on the Draft Law on Takeovers of Joint Stock Companies, which brings significant changes to the way companies are taken over on the domestic capital market. The aim of the new regulations is, as stated, to strengthen transparency, prevent abuses and better protect minority shareholders.

The draft law defines in detail the rules of the game when it comes to the takeover of companies whose shares are traded on the stock exchange or on multilateral trading platforms. Special focus is placed on the equal treatment of all shareholders, which means that all owners of shares of the same class must have the same rights in the takeover process.

One of the key innovations is the obligation to publish a takeover bid when an investor exceeds a certain ownership threshold.

25% threshold

According to the proposed rules, any person who directly or indirectly acquires more than 25% of the voting shares in a company must publish a public takeover bid.

This provision is said to be intended to protect other shareholders by giving them the opportunity to sell their shares under the same conditions when there is a change of control over the company.

The law also introduces additional thresholds, for example, a new increase in ownership by more than 10% may reactivate the obligation to publish the offer.

Mandatory provision of money in advance

One of the more important measures relates to the financial security of the process. The bidder will have to provide funds for the purchase of shares in advance, either through a bank deposit, a loan or a bank guarantee.

This prevents situations in which offers are published without real financial coverage, which could previously have led to uncertainty in the market.

The draft law clearly prohibits any actions that could lead to an artificial increase or decrease in share prices. Also, all participants in the process, from the bidder to the company’s management, are obliged to act transparently and in the best interest of the company.

The management of the target company is obliged to publicly express its opinion on the offer, including its impact on employees and the company’s operations.

The public debate on the Draft Law on the Takeover of Joint Stock Companies lasts until May 4.

Source Link