Mergers & Acquisitions 2020 - Sabeti & Khatami

Mergers & Acquisitions 2020A practical cross-border insight into mergers and acquisitions

14th Edition

Featuring contributions from:

Aabø-Evensen & Co Advokatfirma

Abdulnasir Al Sohaibani Attorneys and Counsellors

Advokatsko druzhestvo Stoyanov & Tsekova

Alexander & Partner Rechtsanwaelte mbB

Atanaskovic Hartnell

Bär & Karrer Ltd.

BBA//Fjeldco

Bech-Bruun

Blake, Cassels & Graydon LLP

Brain Trust International Law Firm

Cains

Cektir Law Firm

Consortium Legal

Debarliev Dameski & Kelesoska Attorneys at Law

de Bedin & Lee LLP

DF Advocates

Dittmar & Indrenius

E&G Economides LLC

ENSafrica

FTPA

Gjika & Associates

GSK Stockmann

HAVEL & PARTNERS s.r.o.

Houthoff

Laurence Khupe Attorneys (Inc. Kelobang Godisang Attorneys)

Law firm Vukić and Partners

Maples Group

Matheson

MJM Limited

Moravčević Vojnović and Partners in cooperation with Schoenherr

Nader, Hayaux & Goebel

Nishimura & Asahi

Nobles

NUNZIANTE MAGRONE

Oppenheim Law Firm

Ramón y Cajal Abogados

Sabeti & Khatami

Schoenherr

Shardul Amarchand Mangaldas & Co

Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

Škubla & Partneri s. r. o.

Stibbe

SZA Schilling, Zutt & Anschütz Rechtsanwaltsgesellschaft mbH

Vieira de Almeida

Wachtell, Lipton, Rosen & Katz

Walalangi & Partners (in association with Nishimura & Asahi)

Walkers

WBW Weremczuk Bobeł & Partners Attorneys at Law

White & Case LLP

Zhong Lun Law Firm

Mergers & Acquisitions 202014th Edition

Contributing Editors:

Lorenzo Corte & Scott C. HopkinsSkadden, Arps, Slate, Meagher & Flom (UK) LLP

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Strategic Partners

Table of Contents

Q&A Chapters

12

The Developing Landscape of ESG ConsiderationsLorenzo Corte, Skadden, Arps, Slate, Meagher & Flom (UK) LLP

The New Dealmakers and Dealbreakers: M&A ActivismAdam O. Emmerich & Trevor S. Norwitz, Wachtell, Lipton, Rosen & Katz5

The Dutch ‘Stichting’, an Effective and Useful Tool in Global StructuringAlexander J. Kaarls, Paul P. de Vries & Willem J.T. Liedenbaum, Houthoff

24

AlbaniaGjika & Associates: Gjergji Gjika & Evis Jani17

AngolaVieira de Almeida: Vanusa Gomes & Susana Almeida Brandão

Expert Chapters

1

39

AustraliaAtanaskovic Hartnell: Lawson Jepps31

AustriaSchoenherr: Christian Herbst & Sascha Hödl

59

BelgiumStibbe: Jan Peeters & Joachim De Vos50

BermudaMJM Limited: Jeremy Leese & Brian Holdipp

71

BotswanaLaurence Khupe Attorneys (Inc. Kelobang GodisangAttorneys): Seilaneng Godisang, Laone Queen Moreki & Muhammad Mitha

66

British Virgin IslandsWalkers: Patrick Ormond & Matthew Cowman

102

BulgariaSchoenherr (in cooperation with Advokatskodruzhestvo Stoyanov & Tsekova): Ilko Stoyanov & Katerina Kaloyanova

95

CanadaBlake, Cassels & Graydon LLP: Markus Viirland & Richard Turner

87

Cayman IslandsMaples Group: Nick Evans & Suzanne Correy

110 CroatiaLaw firm Vukić and Partners: Zoran Vukić & Iva Sunko

117 CyprusE&G Economides LLC: Virginia Adamidou & George Economides

161

GermanySZA Schilling, Zutt & Anschütz Rechtsanwaltsgesellschaft mbH: Dr. Marc Löbbe & Dr. Michaela Balke

153

Hong Kongde Bedin & Lee LLP: Claudio de Bedin & Helen Morris

HungaryOppenheim Law Firm: József Bulcsú Fenyvesi & Mihály Barcza

169

IcelandBBA//Fjeldco: Baldvin Björn Haraldsson & Stefán Reykjalín

175

IndiaShardul Amarchand Mangaldas & Co: Raghubir Menon, Sakshi Mehra & Dipayan Bhattacherjee

182

IndonesiaWalalangi & Partners (in association with Nishimura & Asahi): Miriam Andreta & Siti Kemala Nuraida

190

IranSabeti & Khatami: Behnam Khatami, Amir Mirtaheri, Niloofar Massihi & Farzaneh Montakhab

196

IrelandMatheson: Fergus A. Bolster & Brian McCloskey203

Isle of ManCains: Tristan Head & Scott Leonard-Morgan213

ItalyNUNZIANTE MAGRONE: Fiorella Alvino & Fabio Liguori

220

JapanNishimura & Asahi: Tomohiro Takagi & Kei Takeda

DenmarkBech-Bruun: Steen Jensen & David Moalem

138

FranceFTPA: Alexandre Omaggio & François-Xavier Beauvisage

131

MaltaDF Advocates: Celia Mifsud & Edward Meli

227

LuxembourgGSK Stockmann: Marcus Peter & Kate Yu Rao

146

FinlandDittmar & Indrenius: Anders Carlberg & Jan Ollila

124 Czech RepublicHAVEL & PARTNERS s.r.o.: Jan Frey & Jan Koval

236

242

78

ChinaZhong Lun Law Firm: Lefan Gong

Table of Contents

271 NetherlandsHouthoff: Alexander J. Kaarls & Willem J.T. Liedenbaum

280 NicaraguaConsortium Legal: Rodrigo Taboada & Olga Barreto

285 North MacedoniaDebarliev Dameski & Kelesoska Attorneys at Law: Emilija Kelesoska Sholjakovska & Ljupco Cvetkovski

292 NorwayAabø-Evensen & Co Advokatfirma: Ole Kristian Aabø-Evensen

307 PolandWBW Weremczuk Bobeł & Partners Attorneys at Law: Łukasz Bobeł

314 PortugalVieira de Almeida: Jorge Bleck & Francisco de Almeida Viegas

322 Saudi ArabiaAlexander & Partner Rechtsanwaelte mbB in association with Abdulnasir Al Sohaibani Attorneys and Counsellors: Dr. Nicolas Bremer

329 SerbiaMoravčević Vojnović and Partners in cooperation with Schoenherr: Matija Vojnović & Vojimir Kurtić

337 SlovakiaŠkubla & Partneri s. r. o.: Martin Fábry & Marián Šulík

343

South AfricaENSafrica: Professor Michael Katz & Matthew Morrison

354

SpainRamón y Cajal Abogados: Andrés Mas Abad & Lucía García Clavería

264 MozambiqueVieira de Almeida: Guilherme Daniel & Paulo Trindade Costa

370

TaiwanBrain Trust International Law Firm: Hung Ou Yang & Jia-Jun Fang

363

SwitzerlandBär & Karrer Ltd.: Dr. Mariel Hoch

378

TurkeyCektir Law Firm: Berk Çektir388

UkraineNobles: Volodymyr Yakubovskyy & Alexander Weigelt

405

United KingdomWhite & Case LLP: Philip Broke & Patrick Sarch

397

United Arab EmiratesAlexander & Partner Rechtsanwaelte mbB: Dr. Nicolas Bremer

413

USASkadden, Arps, Slate, Meagher & Flom LLP: Ann Beth Stebbins & Thad Hartmann

257 MontenegroMoravčević Vojnović and Partners in cooperation with Schoenherr: Slaven Moravčević & Miloš Laković

SloveniaSchoenherr: Vid Kobe & Bojan Brežan

421

250 MexicoNader, Hayaux & Goebel: Yves Hayaux-du-Tilly Laborde & Eduardo Villanueva Ortíz

Mergers & Acquisitions 2020

Chapter 28196

Iran

Sabeti & Khatami

Iran

Amir Mirtaheri

Farzaneh Montakhab

Behnam Khatami

Niloofar Massihi

(a) “strategic” foreign investors (i.e., those who own more than 10 per cent of the shares of a listed company, or have one seat on the board of directors of such company) may not sell their shares within two years of acquisition; and

(b) non-strategic foreign investors are subject to the following aggregate foreign ownership limits: (i) shares of all such investors in a single listed company must not exceed 20 per cent of the shares of the company; and (ii) shares of all such investors in multiple listed companies must not exceed 20 per cent of the shares of all such companies.

1.4 Are there any special sector-related rules?

In addition to what is mentioned in question 1.3, there are special rules governing ownership of financial institutions. For instance, acquiring more than 10 per cent and up to 33 per cent of a bank or credit institution by a “single owner” (defined broadly to include related persons) requires the approval of the Central Bank of Iran (the CBI). Ownership of such institution by a single owner above 33 per cent is prohibited.

Direct and indirect ownership of insurance companies by an individual or a non-governmental legal person must not exceed 20 per cent.

See the answers to questions 2.14 and 10.1 below for more details.

1.5 What are the principal sources of liability?

The SEO rules and regulations impose several obligations on listed companies, including in relation to disclosure, mandatory procedures and formalities, and approvals. Violation of these laws and regulations may result in civil and criminal liabilities for the offender(s) and the company itself.

For non-listed companies, the principal sources of liability are the Commercial Code and the Civil Code. With respect to anti-competition practices, the Law Amending Certain Provisions of the Fourth Development Plan 2008 and the Competition Council’s directives and decisions are the main sources of liability.

2 Mechanics of Acquisition

2.1 What alternative means of acquisition are there?

In private M&A transactions, there is flexibility in deal struc-turing due to the principle of freedom of contract.

1 Relevant Authorities and Legislation

1.1 What regulates M&A?

Private M&A transactions with respect to non-listed companies are governed by various laws and regulations, most notably the Commercial Code 1932, the Law Amending Certain Provisions of the Commercial Code 1968, the Civil Code 1921, and Article 111 of the Direct Taxation Law 1967 and its Implementing Regulation 2004.

Non-private M&A transactions, where at least one of the parties is listed with Tehran Stock Exchange (TSE) or with Fara Bourse (Iran’s over-the-counter (OTC) exchange, and together with TSE, the Exchanges), are mostly governed by the rules and regulations of the Securities and Exchange Organisation of Iran (the SEO).

There is no specific regulator for private M&A transactions, although changes to ownership structure of a company must be registered with the Corporate Registrar, which has, in the past, adopted an expansive view of its powers in demanding changes to filing documents. The SEO regulates non-private M&A transac-tions to the extent a listed party is involved.

1.2 Are there different rules for different types of company?

Except for “cooperative companies”, there is no specific rules governing M&A transactions based on the types of companies involved. Cooperative companies are subject to the Law on Cooperative Sector of the Economy of the Islamic Republic of Iran 1991 and its Implementing Regulation 1992.

1.3 Are there special rules for foreign buyers?

Industries such as banking, insurance, telecommunication and aviation are commonly considered as “strategic” industries subject to foreign ownership restrictions. For example, the aggregate foreign ownership of a bank or a credit institution must not exceed 40 per cent; and the aggregate foreign owner-ship of an insurance company must not exceed 49 per cent.

For other industries, there are no limits on foreign owner-ship except that, pursuant to the Foreign Investment Promotion and Protection Act 2002, aggregate foreign ownership must not exceed certain levels within each “sector” and each “industry”.

The Implementing Regulation for Foreign Investment in the Exchanges and Non-Exchange Markets 2010 requires foreign investors to obtain a transaction licence before they trade secu-rities in the Exchanges. Furthermore:

© Published and reproduced with kind permission by Global Legal Group Ltd, London

197Sabeti & Khatami


IRR 1 billion in capital (in Fara Bourse) or more than IRR 3 billion in capital (in TSE) are to be acquired; or (ii) at least five per cent of the shares of a company with IRR 1 billion or less in capital (in Fara Bourse) or IRR 3 billion or less in capital (in TSE) are to be acquired.

2.6 What differences are there between offering cash and other consideration?

In block sales, through the Exchanges and subject to observing certain formalities with respect to any non-cash consideration, settlement is possible using cash, non-cash contributions, or a combination of both. In a sub-class of Major Transactions, the SEO regulations impose a number of minimum cash payment requirements (or equal amounts in bank guarantees) while the rest of the price may be settled via non-cash consid-eration, which is again subject to observing certain formalities. In other types of offering on the Exchanges, cash is the sole method of payment.

2.7 Do the same terms have to be offered to all shareholders?

An offering on the Exchanges must be on the same terms and conditions for all shareholders.

2.8 Are there obligations to purchase other classes of target securities?

There is no such obligation.

2.9 Are there any limits on agreeing terms with employees?

There is no such limit.

2.10 What role do employees, pension trustees and other stakeholders play?

There is no specific role defined under the law for employees or other stakeholders, but an M&A agreement may create rights for such stakeholders (e.g., by requiring their consent).

There is no trust law in Iran, but the parties may agree on terms and conditions to create a trust arrangement.

2.11 What documentation is needed?

In a regular offering on the Exchanges, share ownership docu-ments, identification documents and the offering application form must be submitted through brokers.

Pursuant to Article 2 of the Rules and Requirements for Purchasers of Shares and Pre-emption Rights in Major Transactions through the Exchanges 2011 (as last amended in 2019, the Rules), a bidder in a Major Transaction must make a representation that the proposed acquisition will not result in a monopoly. Such bidder must also establish that it has sufficient financial means by submitting source and ownership informa-tion for the funds required for the transaction.

In Major Transactions resulting in control, the bidder must also submit its management plans for the company, record of criminal clearance (for natural persons), and commitment letters

In non-private M&A transactions, alternative means of acqui-sition are: share acquisition through public bidding; participa-tion in a block sale where a limited number of participants bid for buying the target’s shares; and negotiated acquisition by a single buyer.

2.2 What advisers do the parties need?

In private M&A transactions, the parties should consult with valuation experts, tax and financial advisors, and lawyers.

In non-private M&A transactions: brokers conduct the offering and the bidding, respectively, on behalf of the offeror and the bidder; and valuation experts can help in determining a base price while an investment bank can provide payment guar-antees to the offeror. Parties to non-private M&A transactions may also seek advice from market advisors, accountants and lawyers.

2.3 How long does it take?

In non-private M&A transactions, the method of acquisition used is the principal factor in determining how long the process would take. Nonetheless, other factors, such as the requirement to obtain an approval (e.g., approval by the Communications Regulatory Authority in a telecommunication M&A), could prove to be significant. Generally speaking, it may take several months for the following steps to be completed:■ preparingreportsandotherdocumentationwiththehelp

of a broker;■ preparing and filing the offering documents with the

SEO;■ documentreviewandapprovalbytheSEO;and■ offering(withpossibleextensions).

In private M&A transactions, it would be difficult to provide a time estimate due to the diversity of transactions and the parties involved, but private deals are generally expected to be concluded quicker than public M&As.

2.4 What are the main hurdles?

Financing arrangements, obtaining competition clearance (where needed), and securing the support of the requisite majority of shareholders and board members of the relevant companies are the principal hurdles in M&A transactions. Moreover, in the absence of comprehensive regulations on corporate aspects of M&A transactions, deal structuring and post-M&A corporate reorganisations could prove to be challenging.

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

Pricing and other deal terms in private M&A transactions are subject to the parties’ agreement.

Pricing and other terms in non-private M&A transactions are subject to the rules and regulations of the SEO. Except in limited circumstances, all transactions in the Exchanges must take place through competitive bidding processes. For that purpose, the average daily variance of the relevant share price determines the acceptable price range for an M&A – although the foregoing does not apply to Major Transactions (defined below), for which the price must be set by the seller.

A transaction will be deemed a Major Transaction if: (i) at least one per cent of the shares of a company with more than


198 Iran


majority of the present votes (or a two-third majority in case of an extraordinary shareholders’ assembly).

2.16 When does cash consideration need to be committed and available?

In non-private M&A deals to be conducted through block sale, payment is committed upon closing but is made subject to the parties’ agreement. In regular Major Transactions, payment must be made within three days of the transaction. In M&A deals to be conducted through public bidding, the entire trans-action amount must be paid in cash upon closing. Commitment of cash consideration in private M&As is subject to the parties’ agreement.

3 Friendly or Hostile

3.1 Is there a choice?

Hostile takeovers may happen in private M&A transactions where a hostile bidder endeavours to launch a proxy fight in the shareholders’ assembly or board meetings, as the case may be. Non-private M&A transactions cannot be subject to the approval of the board of target companies, rendering the issue moot.

3.2 Are there rules about an approach to the target?

There are no such rules.

3.3 How relevant is the target board?

In a private M&A transaction, depending on the authorities delegated to the target company’s board, the transaction and the manner of its implementation may need to be approved by the board of directors. Private M&A transactions may also be subject to restrictive provisions such as right of first refusal in a shareholders’ agreement, with respect to which the target board usually has some roles to play (e.g., informing existing share-holders, managing the process for exercise of pre-emptive rights or determining the fair market value). Non-private M&A trans-actions, though, cannot be subject to the approval of the board of target companies.

3.4 Does the choice affect process?

In a private M&A transaction, where the approval of the target’s board is needed, a hostile bidder will have to directly negotiate the share purchase with shareholders (subject to any right of first refusal and tag along rights agreed by the shareholders) or launch a proxy fight to vote out the opposing board members and to replace the management.

4 Information

4.1 What information is available to a buyer?

For private companies, few basic corporate information is publicly available via the Official Gazette (available online at www.rrk.ir); information needed for M&A deals is usually obtained directly from target companies.

regarding, inter alia, continuation of the company’s accounting policies and no disposition of non-revenue-generating assets for a period of time (Articles 2 & 6 of the Rules).

2.12 Are there any special disclosure requirements?

For public companies, any change in the company’s shareholding structure and any material information, as well as any corpo-rate decisions affecting the foregoing, must be disclosed to the public via an online portal (www.codal.ir). According to Article 13 of the Directive on Disclosure Requirements of Companies Registered with the Securities and Exchange Organisation, any information related to an M&A involving a listed company is deemed material and must be immediately disclosed.

2.13 What are the key costs?

Purchase price, advisors’ and legal fees, and taxes on transfer of shares are the key costs. In addition, brokers’ and the Exchanges’ fees together amount to approximately 0.004 per cent of the purchase price.

Under Article 111 of the Law of Direct Taxation, any profit accrued to shareholders as a result of an M&A transaction is taxable income. Transfer of shares of listed companies is subject to 0.5 per cent taxation.

2.14 What consents are needed?

According to Article 29 of the Directive on the Manner of Conducting Transactions in Tehran Stock Exchange 2011 (as amended in 2018), TSE transactions require TSE’s approval before becoming final. Major Transactions further require the approval of the managing director of TSE. With respect to companies listed on Fara Bourse, transactions in which more than 0.5 per cent of shares of a company are transferred must be first approved by the SEO.

Depending on the target company’s industry, approval of other authorities may be required regardless of a private or non-pri-vate nature of the M&A transaction. For instance, approval by the Communications Regulatory Authority for telecommunica-tion deals, and that of the CBI for banking deals involving more than 10 per cent of the shares of a bank, must be obtained. In the insurance industry, share transfers between foreign persons require approval of the Central Insurance of Iran.

The Law on Implementation of the General Policies of Article 44 of the Constitution 2008 prohibits M&A transactions if they would result in a monopoly, unreasonable price hike, or disrup-tion of competition. Parties to a proposed M&A transaction may make an inquiry to the Competition Council; if within one month of such inquiry the Council clears the transaction or does not respond to the inquiry, the proposed M&A may proceed. Furthermore, the Council has the authority to suspend or termi-nate an ongoing M&A transaction, or reverse a concluded deal, if it determines competition laws are breached.

2.15 What levels of approval or acceptance are needed?

Based on the articles of association of the concerned compa-nies, M&A decisions are usually taken by the board of direc-tors or shareholders’ assembly. Unless otherwise provided in the company’s articles of association, decisions are made by a simple


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5 Stakebuilding

5.1 Can shares be bought outside the offer process?

Shares of listed companies may not be purchased outside the Exchanges’ offer process. There is no such process for private M&A transactions.

5.2 Can derivatives be bought outside the offer process?

The only derivative available in relation to listed companies is stock options, which may be purchased solely through the offer process.

5.3 What are the disclosure triggers for shares and derivatives stakebuilding before the offer and during the offer period?

There are no stakebuilding disclosure requirements per se under Iranian law. However, according to Article 9 of the Directive on Listing of Securities in Tehran Stock Exchange, approval of the relevant Exchange is required for a share transfer exceeding 50 per cent of a listed company’s shares, and a share transfer resulting in ownership by the acquirer of more than 50 per cent of a listed company’s share. Moreover, pursuant to the Rules and Requirements for Purchasers of Shares and Pre-emption Rights in Major Transactions through the Exchanges 2011 (last amended in 2019), a bidder in a Major Transaction must make a representation that the proposed acquisition will not result in a monopoly.

5.4 What are the limitations and consequences?

Where an approval of an Exchange is required (e.g., for a transfer of more than 50 per cent of a listed company’s shares), failure to obtain the approval prevents the M&A transaction from proceeding.

In addition, the Competition Council has the authority to suspend or terminate an ongoing M&A transaction, or reverse a concluded deal, if it determines competition laws are breached (e.g., where the transaction has resulted in a market disruption or a monopoly as defined under the Law Implementing the General Policies of Article 44 of the Constitution 2008, and its regulations). The measures the Council may take include termi-nation of the relevant agreements, suspension or annulment of the proposed M&A transaction, split-off or demerger of merged or acquired companies, imposition of limits on a company’s scope of permitted activities, imposition of minimum supply levels and price ranges in relation to the products of the merged or acquired company, and financial penalties.

6 Deal Protection

6.1 Are break fees available?

There are no statutory break fee provisions with respect to private M&A transactions, which are mostly governed by private parties’ agreements.

Listed companies are subject to the Implementing Regulation on Disclosure of Information by Listed Companies 2007 (the Disclosure Regulation) and other similar regulations, and must make extensive discourse to the SEO including regular financial reporting, disclosure of material information, announcement of general meetings, and disclosure of capital structure decisions. The information will be then published on TSE’s portal (www.tsetmc.com) and the SEO’s portal (www.codal.ir).

4.2 Is negotiation confidential and is access restricted?

There is no statutory confidentiality requirement.

4.3 When is an announcement required and what will become public?

In a private M&A transaction, the only required announcement is made following the conclusion of the deal through registra-tion of the ownership changes with the Corporate Registrar, which changes are later publicised via the Official Gazette.

With respect to listed targets, if a proposed acquisition is worth less than 50 per cent of the registered capital of the target, a public announcement describing the offering must be made four days prior to the opening of the offering. Otherwise, the announcement must be made seven days prior to the opening.

Pursuant to Article 15(b) of the Disclosure Regulation, listed companies may, in certain circumstances, delay the disclosure of material information related to M&As in ongoing negotiations (including disclosure of the existence of the negotiations).

4.4 What if the information is wrong or changes?

Pursuant to Articles 142 and 154 of the Law Amending the Commercial Code, providing incorrect information in an M&A transaction could result in liability for the relevant company’s managers and inspectors. In addition, material changes in a target company affecting acquisition decisions must be disclosed to potential acquirers. Otherwise, the acquirer may be able to terminate the transaction and seek damages.

With respect to listed companies, under Article 249 of the Law Amending the Commercial Code and Article 2bis(1) of the Disclosure Regulation, the managing director and board members of a disclosing company will be liable for providing any inaccurate, false, unfounded, incomplete or misleading informa-tion to the SEO or to potential acquirers. The consequences range from criminal punishment for fraud and misrepresenta-tion (i.e., imprisonment, financial penalties or both, depending on the severity of the offence) to disciplinary measures admin-istered by the SEO.

Pursuant to Article 19bis of the Directive on the Manner of Conducting Transactions in Tehran Stock Exchange 2011, where information disclosed by a listed company is suspected to be false, the SEO may, on its own initiative or upon the request of TSE, suspend the target company’s index for 10 days until the company provides correct information. The suspension may eventually result in delisting of the company if the situation is not resolved.


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requirements thereunder. In particular, the SEO will not approve changes it determines to be detrimental to the rights of bidders where an offering has already been announced.

7.3 When does control pass to the bidder?

Closing of private M&A transactions is governed by the parties’ agreement.

In general, transfer of control to the bidder in a non-pri-vate M&A transaction occurs after securing the approvals of the SEO and the general meeting of the target company and, in case of corporate bidders, the approval of the general meeting of the bidder. Even though a bidder may take over the day-to-day control of the target company, a minority shareholder may still be able to block decisions in the general meetings or meetings of the board of directors if quorum requires the presence of such minority shareholder.

7.4 How can the bidder get 100% control?

Unless the company’s articles of association provide for a higher threshold, shareholders having more than 67 per cent of the shares of a joint-stock company will have full control in general meetings and in the meetings of the board of directors.

8 Target Defences

8.1 What can the target do to resist change of control?

In practice, a target can resist change of control through negoti-ation over valuation, or by relying on other shareholders’ share purchase rights (if any) under its articles of association, share-holders’ agreement or similar documents.

8.2 Is it a fair fight?

In private M&A transactions, it may be difficult for an unsolic-ited competing bidder to defeat a preferred bidder if the former lacks the means to influence decision making in the general meeting and the board of the target company.

To the extent they are subject to the SEO rules and regula-tions, non-private M&A transactions offer a more level playing field.

9 Other Useful Facts

9.1 What are the major influences on the success of an acquisition?♥

Pricing and payment conditions play significant roles in the success or failure of an acquisition.

9.2 What happens if it fails?

If negotiations fail, conditions precedent are not met, or the buyer fails to pay in due course, the deal falls apart and the offeror or the acquirer, as the case may be, could seek damages based on contractual rights.

With respect to listed companies, the Directive on the Manner of Conducting Transactions in Tehran Stock Exchange 2011 allows for withdrawal from the public offering before the date of offering. The Directive, however, does not provide for a break fee.

6.2 Can the target agree not to shop the company or its assets?

No-shop agreements are possible in relation to non-listed targets.

Listed companies’ share purchase takes place through public offering on the Exchanges and, therefore, a target company’s agreement to refrain from seeking alternative proposals will not be enforceable.

6.3 Can the target agree to issue shares or sell assets?

There is no statutory restriction with respect to share issuance to frustrate a competitor. In general, however, the necessity of share issuance must be approved by both the general meeting and the board of directors of the company pursuant to the inspec-tors’ review. In case of listed companies, approval of the rele-vant Exchange must also be secured prior to the share issuance.

Aside from any restrictions in the company’s articles of asso-ciation, shareholders’ agreement or similar documents, there is no legal restriction on the sale of assets to frustrate a competing bidder.

6.4 What commitments are available to tie up a deal?

In general, agreeing on the principal terms of the deal with major shareholders facilitates the negotiations and helps obtain the requisite corporate approvals.

7 Bidder Protection

7.1 What deal conditions are permitted and is their invocation restricted?

In private M&A transactions, the principle of freedom of contracts governs the agreements and the parties can agree on various sets of conditions.

Listed targets may specify the number of shares to be purchased by a bidder through block sale, and a successful bidder must purchase all such shares; otherwise, the transaction will be void. The SEO regulations do not impose any restric-tions on conditions privately agreed by the parties so long as they do not contravene SEO rules and regulations, and do not infringe upon the rights of shareholders.

7.2 What control does the bidder have over the target during the process?

In private M&A deals, a target may agree to various restrictive covenants including in relation to corporate changes and dispo-sition of assets during the M&A process.

Significant changes to listed companies are subject to the SEO rules and regulations, and the approval and disclosure


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10 Updates

10.1 Please provide a summary of any relevant new law or practices in M&A in your jurisdiction.

The Directive on Ownership of Shares of Banks and Non-Bank Financial Institutions was approved by the Money and Credit Council of the CBI on 3 September 2019. According to this Directive, acquiring more than 10 per cent and up to 33 per cent of a bank or credit institution by a “single owner” requires the approval of the CBI. Ownership of such institution by a single owner above 33 per cent is prohibited. Single owner is broadly defined as a single natural or legal person, or several natural or legal persons having financial, familial, representative or management relations with each other. The Directive applies to both Iranian and foreign persons except that (i) total foreign ownership in a bank or financial institution must not exceed 40 per cent, and (ii) ownership of shares of financial institutions is prohibited by foreign governments and governmental entities.


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Behnam Khatami was admitted to the Iranian Central Bar Association in 2006. Since then he has been advising clients, in particular foreign companies, in their business and investment activities in Iran across different industries (including airport, aviation, automotive, e-commerce, fintech, food & beverage, logistics, manufacturing, mining, oil & gas, pharmaceuticals, ports, power, railway, renewables, and telecommunica-tion) and became well-known and highly regarded by international clients doing business in Iran.

Sabeti & Khatami4 West Zayandeh Rood StreetMollaSadra Avenue, North Shirazi StreetTehran, 1991614158Iran

Tel: +98 21 8821 7107Email: [email protected]: www.sabeti-khatami.com


Iran

Amir Mirtaheri trained and practised as a lawyer in Canada and, prior to joining the firm, was an internal legal counsel at Export Development Canada, Canada’s export credit agency. As an experienced international transactional lawyer, Amir is attuned to understanding the business context of transactions and working closely with clients to devise solutions that address their legal and business concerns while mitigating the risks involved.


Sabeti & Khatami is a legal practice offering clients first-rate advice, commercial awareness, effective solutions and outstanding service on matters of Iranian law with an international element. The firm aims to establish enduring relationships of trust with the most discerning clients, and to be their legal advisor of choice on strategic or complex matters of Iranian law. To that end, Sabeti & Khatami offers a unique proposition in the market: top-level international experience and reputation; and leading domestic expertise and standing. This permits the firm to deliver a combi-nation of high-quality legal advice and outstanding client service that sophisticated clients expect of premier law firms. Sabeti & Khatami has been actively involved in the most important M&A transactions in the Iranian market and has advised leading investors and target companies on fund raisings and deal structuring, conducted M&A due diligence exercises, and prepared and negotiated transaction documentation.

www.sabeti-khatami.com


Niloofar Massihi advises clients on various corporate, contract and capital market matters. Prior to joining the firm, she was an associate at August Debouzy, where she advised clients on issues related to their business in Iran, regulatory matters, local entity establishment, foreign investment licences, renewable energy projects, tax and employment matters.


Farzaneh Montakhab advises and assists clients on various corporate and finance matters. She completed her Bachelor of Laws degree in 2016 at Allameh Tabatabaei University in Tehran, where she later completed her Bachelor of Arts in French translation and interpretation in 2018 and is also completing her Master of Laws degree in public international law.





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Mergers & Acquisitions 2020 - Sabeti & Khatami