Formal requirements – transaction documentation

• LLC (GmbH): Notarial deed; strict formal requirement – absolute null and void.
• Stock corporation (AG): Bearer shares – basically formless (securities depository); registered shares – endorsement, when securitised (share certificate).

Further requirements/implications

• (Pre)commitment and disposition over shares (GmbH)
• (Virtual) share option plans (GmbH)
• Enforceable shareholder rights (eg pre-emptive rights)
• Power(s) of attorney

Capital maintenance

• Application: Corporate limited entities.
• Key statement: Other than through permissible distributions, company assets may not be reduced by (concealed) distributions to its shareholders or related third parties.
• Permissible distributions: retained earnings, capital reduction and distribution of liquidation surplus.
• Principle for any commercial exchange: "at arm's length" or "third party comparison" (reasonable conditions).
• Related third parties: (indirect) shareholders or sister companies.

Capital maintenance – structuring implications

• Transaction costs must be borne by the seller(s) and/or the purchaser(s), unless newly issued shares are acquired in the course of an investment round.
• Target cannot finance its own acquisition; limited possibilities of the target to provide collaterals securing the purchasers loan obligations.
• Costs for exit related participation plans for employees will have to be born by the shareholders.

Other transaction-related considerations

Taxes

• Share deal ≠ asset deal
• Transfer taxes (ie real estate transfer tax, fees, sales tax) and stamp duties

Non-competition

• Permissible to the extent that it does not lead to an unreasonable restriction of the seller's economic freedom of movement regarding the subject matter, time or place.
• Further restrictions under civil law and antitrust law: permissible only for a limited period of time under antitrust law (a maximum of two to three years), and inadmissible in the case of suppliers and customers (vertical non-competition agreements – exclusivity).

Foreign direct investment

• The ICA (Investitionskontrollgesetz) entered into force in July 2020; the cooperation mechanism is in force since 11 October 2020 (EU FDI Screening Regulation).
• The ICA covers foreign direct investments by a non-EU, non-EEA and non-Swiss person or legal entity.
• Foreign direct investment is the direct/indirect acquisition of an Austrian undertaking and either voting right thresholds of 10%, 25% and 50 % in such an undertaking, a controlling influence over such an undertaking, or the acquisition of essential assets of such an undertaking.
• The Austrian undertaking must be active in one of the security-relevant sectors included stipulated in ICA’s annex.
• Mandatory filing: immediately after signing; primary notification obligation of the acquirer.
• Possibility of non-jurisdiction letter (Unbedenklichkeitsbescheinigung); informal pre-notification contacts with the authority (Federal Ministry for Digital and Economic Affairs) are possible.
• "Implementations" prior to or without approval are null and void; criminal sanctions including fines and/or a custodial sentence of up to three years.
• UK trade deal: Principle of equal treatment (Article SERVIN.2.3) versus security exception (Article EXC.4).

Formal requirements – transferring shareholding interests/shares

Transferring shareholding interest in a limited liability company

• A written transfer agreement with the notarised signature of the transferor and the transferee is required. The transfer shall be subsequently registered in the Commercial Register, and this registration is only declaratory in nature. 
• A transfer agreement, endorsement and physical handover is required if the shareholding interest is incorporated in a common certificate. The transfer shall be subsequently registered in the Commercial Register, and this registration is only declaratory in nature.
• Transferring to another shareholder of the target company does not require the approval of the General Meeting unless this approval is explicitly required by the target company’s Memorandum of Association or Founding Deed. The Memorandum of Association or the Founding Deed may contain further restrictions on the shareholding transfer. Transfer to a third party requires the approval of the General Meeting unless the Memorandum of Association or Founding Deed stipulates otherwise. If the target company has a sole shareholder, the shareholding interest shall always be transferable without any restrictions.
• The statutory body (Executive Director(s)) of the Czech limited company shall register the new shareholder in the list of shareholders that the company is obliged to keep. The transfer of shareholding interest between the transferring parties is effective upon fulfilment of the above formalities. Regarding the limited liability company itself, the transfer is effective only after the duly executed and effective transfer agreement has been delivered to it or, in the case of a transfer of a common certificate, after the company has been notified of the change of shareholder and a common certificate has been presented to it. 

Transfer of shares in a Czech joint-stock company

• A transfer agreement and the endorsement and physical handover of the shares are required for a transfer of certificated registered shares. The transfer does not need to be registered in the Commercial Register unless the target company has a sole shareholder. The Articles of Association of a Czech joint-stock company may restrict the transferability of registered shares.
• A transfer agreement and registration of the transfer of book-entered shares in a Central Securities Depository are required for a transfer of book-entered shares. 
• A transfer of registered certificated shares between the transferring parties is effective upon fulfilment of the above formalities. Regarding the joint-stock company itself, the transfer is effective only when the transfer is evidenced to the company and the transferred registered certificated shares are presented to it. A joint-stock company is obliged to keep a register of shareholders and register any new shareholders. For book-entered shares, the Articles of Association may stipulate that the register at the Central Securities Depository replaces the joint-stock company’s shareholders’ register.

Other transactional documentation items to be checked when acquiring shareholding interests/shares

• Regulation of rights of majority and minority shareholders, and corporate governance
• Financial assistance issues
• Change of control clauses
• Choice of governing law of the transfer agreement and related agreements (eg shareholder’s agreements)
• Dispute resolution and enforceability of transactional provisions

Acquisition of regulated businesses

• The acquisition of a "qualified shareholding" or shares above certain thresholds in companies active in regulated businesses is conditional upon obtaining prior approval from the applicable regulator(s). Failure to obtain these approval(s) does not usually render the entire transaction invalid but may incur penalties (eg suspension of certain shareholder’s rights/voting rights, fines). 
• This applies predominantly to M&A involving banks, investment firms, investment funds, pension companies, insurance and reinsurance companies, savings and credit cooperatives, and relates to (among other things) an increase in direct or indirect shareholdings, registered capital increase, or acquisition of control. In certain cases, notification is required. Transfer of a business as a going concern or transfer of assets may also trigger the requirement to obtain approval from or notify the applicable regulator(s). 

Specific sectors

Certain activities (eg those undertaken in the arms industry) may be carried out with a licence granted only to Czech-controlled companies or individuals or with a licence granted only to companies or individuals in the EU (eg the gambling or pharmaceutical industry). Acquisition by a foreign entity could lead to withdrawal of this licence.

Where the internal order and external security interests of the Czech Republic are concerned, investments in certain strategic sectors of the Czech economy made by parties from third countries outside the EU can only be implemented with prior permission from the Czech Ministry of Trade and Industry (the Ministry) or after consultation with the Ministry.

Investors based abroad must obtain prior permission for any investment that would enable them to gain effective control over a subject engaging in a particular activity in a strategic economic sector or over an asset that the target company uses in its activities (the applicable laws define what constitutes effective control). A foreign-based investment in a target company may not be carried out without the Ministry’s permission if the target company is engaged in the following activities:

• research, development, manufacture of or innovations to military equipment, or ensuring the life cycle of such equipment
• operation of critical infrastructure (eg energy transmission and distribution, data centres and exchanges, certain animal and plant production sectors, and healthcare infrastructure)
• administration of the information and communication system of critical information infrastructure, administration of critical infrastructure or the operation of critical infrastructure (eg a telecommunications company, or providers and owners of energy infrastructure), or
• development or manufacture of dual use goods (eg goods that can be used for civilian or military purposes).

If an investment requires prior permission but the investor carries out the transaction without it (or if the conditions attached to the investment are breached), the investor faces the risk of: 

• the investment being prohibited
• the forced sale of the target company receiving foreign investment or being transferred, or
• ownership and voting rights being restricted.

Foreign investors may also face severe fines. 

Ultimate beneficial owner

Czech entities must have their ultimate beneficial owner(s) registered in the publicly available Register of beneficial owners. An ultimate beneficial owner, in principle, shall be a natural person who is the ultimate beneficiary of a significant part of the profit or exercises an ultimate influence in the company (either directly or indirectly).

Czech legislation imposes significant sanctions for breaching the obligation to enter information in the Register of beneficial owners. These penalties may: 

• impact entities financially
• restrict how much the entity can exercise its rights, and
• limit shareholders' ability to exercise their rights (eg by preventing the adoption of any shareholder resolutions, including the liability of a corporation's statutory body for any damage caused if it contravenes the above regulations; the board of directors would be liable for damages (eg if it pays a profit share to a shareholder which has not entered its ultimate beneficial owner(s) in the Register of beneficial owners).

Financial assistance 

In basic terms, financial assistance is defined as when a target company grants an advance payment, a loan or credit for the purpose of acquiring shares in the target company, as well as the granting of a security by the target company for doing so.

A Czech target company together with its Czech subsidiaries is usually unable to provide security for the acquisition financing unless the financial assistance meets the criteria set out by the applicable Czech regulations (eg the whitewash procedure in the case of limited liability companies). For joint-stock companies, the upstream merger of a Czech target company into an acquiring company is generally used to address the financial assistance issue. The same applies to refinancing. 

Due diligence

Restrictions to be complied with during a due diligence exercise:

• personal data protection rules/GDPR
• protective security measures (usually covered by confidentiality agreements or data room rules)
• business secrets, bank secrets, insurance policies, capital markets information restrictions, insider information
• competition law concerns and exchange of information among competitors.

The purchaser usually obtains information and documentation on the target company during the due diligence procedure from the seller/target company. The target company, however, is not under a legal obligation to disclose any information to a purchaser for a due diligence exercise and may not be legally ordered to do so. Only the founding documents of the target company (or, to a certain extent, going concern rules) may permit this. 

The purchaser may also obtain the publicly available information and documents relating to the target company (eg certain corporate documentation, annual financial statements, information about real estate or intellectual property owned by the target company) from public registers, such as: 

• Commercial Register
• Register of beneficial owners
• Insolvency Register
• Cadastral Register
• Trade Licensing Register
• Register at the Intellectual Property Office, or 
• Pledge Register.

Merger control rules 

The Czech Antitrust Authority must be notified of a transaction if:

• it constitutes a concentration (the applicable laws define a concentration)
• at least one of the turnover thresholds is met (guidelines on turnover calculation methods of the concentrating subjects are set out in the applicable laws), and
• the European Commission (as a "one-stop shop") does not need to be notified of the transaction. 

Regarding turnover thresholds criteria, one of the following must be met: 

• the combined net turnover of the concentrating subjects for the last financial year in the Czech market exceeds CZK 1.5 billion and at least two of the concentrating subjects each achieved a net turnover of at least CZK 250 million on the Czech market for the last financial year, or
• the net turnover for the last financial year on the Czech market exceeds CZK 1.5 billion and the worldwide net turnover of the other concentrating subject for the last financial year exceeds CZK 1.5 billion.

Employment M&A aspects 

Trade unions, employee representatives or individual employees do not have the right to block a transaction if it is structured as a share deal. Under certain circumstances, they have the right to be informed about the transaction.

For business transfers (transfer as a going concern) or the transfer of an employer’s activities and tasks, all employment agreements related to the transferred business or activities/tasks are automatically transferred to the new employer by operation of law. Employers shall discuss the transfer with the trade union or other employee representatives at least 30 days before the transfer. If there are no employee representatives, the employers must directly inform the employees affected by the transfer about the transfer within the same deadline.

The employees may serve a termination notice to their employer before the actual transfer takes place if they do not want to be transferred to the new employer. The employment relationship then ends with lapse of the notice period, but no later than on the day preceding the transfer. 

FDI process

Conditions

• The investor (direct or indirect) must be non-French.
• The investment must be for at least 25% (reduced to 10% if target is a listed companies) of the target share capital (for non-EU investors) or 50% of the target (for EU investors).
• The target’s activity must be one of the sensitive listed activities (eg defence, supply of vital products, cybersecurity, AI, robotics, energy storage, biotech etc).

Process

• The request for authorisation is sent to the Ministry of Economy.
• The Ministry of Economy has 30 days to reply.
• Closing cannot occur without prior authorisation.
• Violation of the FDI process can result in the transaction being null and void.

Works council’s consultation

• Companies with at least 50 employees must have a works council (CSE), which has certain rights in economic matters and regarding the general running of the company (notably, the works council must be consulted in advance of any sale of control of the company).
• The consultation process should be launched before the sale has become final (ie before any final decision is made or final legal documentation is signed). The SPA should not be signed until the works council has been properly informed and consulted regarding the proposed sale.
• The works council has no veto right over the sale, but has the ability to delay the sale if it believes that the information provided through the consultation process was not sufficient. However, the law provides for certain time limitations for the consultation process; after this time period expires, the process will be deemed completed, regardless of whether the works council has issued its opinion on the transaction yet.
• Sometimes, the seller will require the buyer to agree to a put option, so that the buyer cannot walk away before the consultation process is completed.

Loi Hamon

• The sale of a company with less than 250 employees (no minimum number) triggers the obligation for the company to inform the employees of the sale and offer them to submit their own offer to buy the company. The company has no obligation to accept any such offer.
• Employees have a two-month period to exercise their right to make an offer (this time period can be adjusted to reflect the time period for the works council consultation, if applicable) and the transaction should not close before this period has elapsed. However, employees may waive their right to make an offer, in which case the two-month period will early terminate on the day when all waivers are signed.

Non-compete

• Most M&A transactions will include some form of non-compete undertaking from the sellers; under competition rules, this non-compete is only valid if it applies to controlling sellers. They may be required not to compete with the acquired target for a maximum period of two years on the market (territory and products) where the target operated before the operation. This can be a three-year period if IP rights and know-how are part of the transaction.
• Sometimes, some of the sellers also have an employment contract with the company, which may also contain a non-compete undertaking; a non-compete clause in an employment contract is only valid provided it is specifically remunerated (among other conditions).
• If a seller who is also an employee is bound by the two different non-competes, careful analysis must be conducted to determine which clause should be applied. The general view will be that in case of a conflict, the non-compete clause in the employment contract will prevail over the non-compete clause in the SPA.

Financial assistance

• Rule: French companies are prohibited from lending money, granting loans or collaterals in view of the subscription or the purchase of its own shares by a third party.
• Sanctions: fines of up to €150,000 and transactions can be held null and void.
• If the target in a leveraged M&A transactions has excess cash or assets to pledge, any loan granted by the target to finance the purchase price of its own shares and any guarantee granted by the target to guarantee the payment of the purchase price of its own shares is prohibited. Conversely, post-closing dividend distribution for early repayment of the acquisition financing and post-closing cash pooling agreement if not completed "in view" of the acquisition are both acceptable.

Notarisation requirements

• Transferring shares in a German GmbH (limited liability company), capital increases, and the amendment of articles of association requires the formal notarisation of the respective documentation by a German notary public.
• Notarial deeds are often executed for sellers/purchasers in M&A-transactions by lawyers based on powers of attorney (PoA). A PoA for the acquisition of shares in a GmbH does not need to be legalised/notarised, whereas for a capital increase a legalised/notarised PoA is required. 
• German notaries require notarial confirmations of representation if PoAs are issued from entities located in jurisdictions that don’t have a public register comparable to the German commercial register. This notarial confirmation must be legalised/notarised and apostilled, but no apostille is required in Belgium, Denmark, France, Italy and Austria.
• Notarial deeds of incorporation of an entity (eg GmbH) or of amendment of the articles of association are executed in German. In international settings, a bilingual version is notarised; share Deals (SPAs) can be notarised in English only.
• The fees associated with the services provided by the notary public are linked to the value of the transaction and can be substantial; for example: M&A transactions worth €20 million and €60 million would incur a maximum notary fee of €34,000 (net) and €53,000 (net), respectively.
• A German notary has a similar law degree as an attorney. This means that acting notary publics are also allowed to practice as attorneys and be law firm partners in some federal states (eg Berlin, Frankfurt), whereas in other federal states, notaries are obliged to work exclusively as notary (Hamburg, Munich, Düsseldorf).

Merger control law

• The 10th Amendment to the German Act against Restraints of Competition (GWB) came into force on 19 January 2021. One of its most practically relevant amendments is the increase of the turnover thresholds of the merger control regime. It is expected that approximately one third of transactions that previously had to be notified will no longer be subject to notification in the future. The new thresholds are immediately applicable.
• The new "rule of three" is 500/50/ 17.5
• The cumulative worldwide threshold of €500 million remains unchanged. Whereas previously at least two companies involved in the transaction (eg acquirer and target company) had to achieve turnover in Germany of more than €25 million and more than €5 million respectively in the last completed financial year, these thresholds have now been raised to €50 million and €17.5 million respectively. The exception is that when the target company (including the seller) does not exceed a worldwide turnover of € 10 million, this is no longer applicable. This increase in domestic turnover thresholds also applies to the alternative set of turnover thresholds based on a transaction value of more than € 400 million.
• Practical significance for M&A and real estate transactions.
• The substantial increase in domestic thresholds will lead to a significant decrease in merger control proceedings in Germany. For companies, this lifts a considerable burden, as in the future, many transactions will no longer have to be notified in Germany. To the extent that a transaction was previously notifiable exclusively in Germany, the pre-requirement of merger control clearance as a closing condition is also ceased. So, for example: the acquisition of a company with a maximum turnover of € 17.5 million in Germany is no longer subject to notification, regardless of the buyer, and the acquisition of a company with sales in Germany of a maximum of €50 million by a foreign investor who in turn achieves sales in Germany of a maximum of €17.5 million no longer requires notification, either.
• Real estate transactions will only very rarely be subject to notification. As a rule, the rental income must already exceed € 17.5 million, or the transaction value for the target property must exceed € 400 million.

Foreign investment regime

• Sec. 55 et seq. Foreign Trade and Payments Ordinance (AWV) serves to prevent potential security risks caused by takeovers of German companies by non-EU individuals. The target company's activities and the percentage of the shareholding to be acquired are paramount. If critical infrastructures/technologies or security-relevant sectors are concerned or if target companies are acting in defense, an obligation to file a notification arises. 
• In the last year, the German FDI regime has become stricter: more transactions are covered, more require a notification in advance of the closing, a prohibition of execution before clearance applies in more cases. The scope of the businesses covered will also be extended shortly. 

What has changed in the last 12 months?

• The investment screening regime has been adjusted; it will probably be further adjusted by the end of Q1/21.
• There was a significant increase in screening cases at the responsible Ministry for Economic Affairs and Energy (BMWi). Investigations are expected to increase from 20 to 150 per year.
• The subject of the audit is "probable impairment" of public order or security of Germany – ie the scope for decision-making in the audit has been expanded (previously "actual threat"). The "public order or security of another EU Member State" and the effects on "projects or programmes of Union interest" will also be subject to the investment audit.
• Notification requirement has been extended to safety-relevant companies (cross-sectoral examination) in particular.
• The "blocking" of acquisition execution (ie pending invalidity of the purchase agreement) has been extended to all acquisitions subject to notification requirements (ie a prohibition to execute the transaction applies).
• The list of safety-relevant companies has been expanded, in particular, by companies from the healthcare sector such as manufacturers of vaccines and medical protective equipment. Further expansion of the list to encompass critical technologies is expected; these include: artificial intelligence, robotics, semiconductors, biotechnology and quantum technology.
• Adjustment of the time-limits regime (two months or four months); two months for a clearance certificate.

Employee involvement

• Companies with at least 100 employees have the duty to establish an economic committee (Wirtschaftsausschuss) within its works council; the works council appoints the members of the economic committee. 
• In case of an M&A-transaction the economic committee has to be informed about the proposed transaction pursuant to sec. 106 Works Council Constitution Act (BetrVG), ie regarding name of acquirer/bidder and future business activity. The information right exists in a share deal and an asset deal transaction structure.
• The obligation to inform is limited to the economic committee of the works council, which has to treat the information confidentially. The works council and the employees have no information rights.
• There is no formal consultation process, the economic committee has no right to see the purchase agreement (SPA) and the economic committee cannot block the transaction.

Due diligence

• The German commercial register which is accessible via its official website contains relatively comprehensive information of the corporate records of German companies, whereas the volume of documents uploaded in the commercial register depends on the legal form of the entity.
• Corporations (GmbHs and Stock Corporations) information in the register includes shareholders lists (issued by the notary public), articles of association, profit/loss transfer agreements, merger agreements, and application letters for the appointment of managing directors. Historical SPAs, transfer deeds, partnerships agreements, and private partnerships (GbR) are not available in the commercial register.
• There is only very limited information available in English, and the website is difficult to handle for non-German advisors.
• Data protection and cartel laws become more and more crucial in due diligence investigation (employee information, trade contracts, customer information etc). Clean Team Agreements provide a useful work-around here.

Hong Kong's legal system

• One country, two systems; a common law system.
• Free economy with no foreign investment restrictions: foreign companies do not face special approval procedures; there is flexibility in managing fund flow (no foreign exchange control), 100% foreign ownership of companies, with few restrictions; and it's ideal to establish a Hong Kong holding company to invest into the Chinese market.
• The National Security Law has no impact on commercial transactions at this point. 

Share transfers

• Check pre-emptive rights in the company’s articles.
• Prepare share transfer documents.
• Stamping with tax authorities: current rate for stamp duty is 0.2%; presentation of transfer documents and latest audit report/ management account (note stamp duty exemptions and tax structuring).

Due diligence

• Corporate documents and filings available for access from the Companies Registry online database: this information is not conclusive; it includes annual returns, change of directors/ company secretaries, registration of charges and their discharges etc.
• Litigation and bankruptcy searches are conducted by agents.
• Financial statements are not available except for public companies.

Asset versus share purchase

Share purchase:

• All the assets, liabilities and obligations will pass to the buyer.
• Less burdensome than asset purchase in terms of documentation. 
• Scope of due diligence not limited to assets, but other bank borrowings etc.
• Publication of notice on government gazette is not required. 

Asset purchase:

• Buyer acquires only specific identified assets and liabilities.
• More burdensome in terms of documentation.
• Due diligence focuses on the assets only.
• Requires publication of notice in government gazette for creditor protection.

Jurisdiction for disputes

• Hong Kong courts have a well-developed common law system.
• Hong Kong as an impartial arbitration venue: pro-arbitration approach, close proximity to Mainland China, arbitration awards made in Hong Kong are enforceable to signatories to the New York Convention and in Mainland China, minimal language difficulties, and multilingual professionals available to act as arbitrators.

Foreign Direct Investment (FDI) control

• General scheme: This scheme is for companies in core strategic sectors, such as the production of weapons and the provision of certain services related to electricity, gas, water supply.
• COVID-related temporary scheme (in force at least until 31 December 2021): This scheme is for companies with certain main business activities. It's much broader than the general scheme, and includes the manufacturing of medicine and medicinal products, retail, wholesale, telecommunications, and car manufacturing (among others).
• Ministerial approval is required, and the documentation needs to be submitted in Hungarian (or with Hungarian official translation).
• This process can delay the transaction significantly (by two-four months at least), and the relevant ministry can prohibit the deal. Under the general scheme, the state can also exercise a pre-emption right.
• Major sanctions if notification is not made include annulment/invalidity of the deal and/or substantial fines.

Competition authority clearing

• The competition authority needs to be notified of a transaction if the overall net income achieved in Hungary in the previous financial year exceeds HUF 15 billion (around €42,860,000), and at least two of the involved companies achieved a net income in Hungary exceeding HUF 1 billion (around €2,860,000) in the previous financial year.
• The competition authority also needs to be notified of transactions where the overall net income achieved in Hungary in the previous financial year reaches HUF 5 billion (around €14,290,000) and it is not evident that the merger would not result in a significant limitation of competition on the given market.
• This process can delay transactions significantly, and there are substantial fees (and potential fines) involved.

Financial considerations

• A "business quota" (the equivalent of a "share" in a limited liability company) may only be transferred to third persons if the member has fully paid up capital contribution.
• Any previously provided but no longer needed supplementary payments shall be paid back to the new member listed on the company’s members’ list or book of shareholders at the time of the repayment.
• Dividends and advance dividends shall be paid to the new member, or the new shareholder listed on the company’s members’ list or book of shareholders at the time of the payment.

Know your customer (KYC) requirements and the ultimate beneficial owner (UBO) registry

• Before undertaking a transaction, you need to find out the organisation's UBO by requesting an organisational chart and gathering the UBO’s personal data. Lawyers are not currently required to report data to the UBO registry, but only to keep this data on file (which may be inspected by the respective regional chamber).
• The UBO registry was established on 22 May 2021 and is kept by the tax authority. Account holding banks must submit UBO data monthly from 1 October 2021 and access to the UBO registry will be granted to lawyers from 1 February 2022.
• Organisations listed in the registry are assigned a "UBO index" (10 points at the time of the first data recording) which indicates the reliability of their UBO data. If the UBO index drops below eight points, the UBO data of the organisation is classified as "uncertain", while below six points is considered “unreliable”; if there is unreliable UBO data, an organisation is considered high risk.

Registration with the trade registry – formalities

• The registration of all members of a limited liability company is mandatory. 
• From a corporate law perspective, a limited liability company is only required to update its members list (although the update of deed of foundation or articles of association is also recommended), while companies limited by shares are only required to update their book of shareholders. This is a relatively easy electronic registration procedure.
• Regarding limited liability companies and the branch office of a foreign legal entity, the buyer’s data will be registered with the trade registry (making it publicly accessible).
• Transfer agreements/SPAs need to be in writing.
• There are no further formal requirements (like notarial deed), however, notarisation of signatures/Apostille may still be necessary. The transfer agreement/SPA does not have to be submitted to the authorities (except for FDI procedures) so, in general, information on the purchase price can remain confidential.

Pre-contractual obligations

• When conducting transaction negotiations, you have a duty to act in good faith and according to the principles of reasonableness and fairness; it is therefore unacceptable to terminate negotiations unilaterally.
• The consequences of terminating negotiations unilaterally will depend upon which phase of negotiations you are in.
• Even without a signed agreement, a termination of negotiations that is considered unacceptable could lead to liability for costs (negative contractual value) and, in exceptional cases, for loss of profits (positive contractual value).

Works council/SER notification

• Dutch law stipulates consultation rights for employees and employee representative bodies.
• Companies with at least 50 employees have the duty to establish a works council. There is also an information duty towards the works council (even the SPA can be requested).
• Consultation needs to be timely if it can still affect the outcome (ie prior to signing of the LOI, in practice signing protocol in place).
• Collective labour agreements applicable in the company may contain different or further provisions regarding the works council's consultation procedure.
• Failure to consult the works council can have potentially serious consequences; the works council can appeal to the Enterprise Court, which will then assess whether the decision is "manifestly unreasonable".
• Notification towards the SER.

Notarial involvement

• Although under Dutch law a large portion of legal instruments (agreements, deeds, resolutions etc) are not subject to formal requirements, certain corporate transactions must be recorded in a notarial deed executed by a Dutch civil law notary.
• Transfer of shares and issuance of shares and amendment of articles of association happens via the issuance of a notarial deed before a Dutch civil law notary.
• Dutch civil law notaries and attorneys have similar law degrees, but different specialisations. As a result, civil law notaries and attorneys can work for a single organisation.
• Fees associated with the services provided by the civil law notaries are not linked to the value of a transaction.
• It's standard practice to have the deeds executed on behalf of powers of attorney. These powers of attorney need to be legalised/notarised; if the power of attorney is legalised/notarised by a person outside of the Netherlands, apostil is required.
• Notarial deeds of incorporation of an entity (eg a limited liability company) or of amendment of the articles of associations are executed in Dutch. In international settings, an English draft is often the working document, however, the final version of the deed will be executed in Dutch. Notarial deeds of transfer of shares or issuance of shares can, however, be executed in the English language.

The position of employees during post-closure restructuring

• Companies that employ at least 50 employees are required to enable the staff to establish a works council. This works council has certain consultation rights relating to specific, material operational developments, and certain approval rights regarding employment matters.
• Decisions by the board concerning important operational changes (including the dismissal of certain staff members, or the carve-out of certain teams/business units) require prior consultation with the works council.
• When deciding whether to terminate an individual's employment, the board remember that employees are protected by a range of termination rights. In principle, employers have the following options for terminating an employment agreement: termination by mutual consent (via a settlement agreement), termination proceedings before the UWV WERKbedrijf (Employee Insurance Agency), termination proceedings before the court, termination with consent of the employee, and urgent cause.
• Employees facing termination are entitled to compensation rights under Dutch law.

Regulatory approvals

Authority for Consumers & Markets (ACM)

• The ACM oversees regular merger control in a two-phased process. Phase 1 requires notification for merger control if the undertakings involved have a global annual turnover in excess of €150 million, and two of the undertakings (including the target) have an annual turnover in the Netherlands in excess of €30 million. Depending on the outcome of Phase 1, more elaborate assessment is undertaken in Phase 2 which could result in conditions.
• Turnover thresholds are different for mergers between healthcare providers (€55 million worldwide and €10 million in the Netherlands) and pension funds (€500 million in annual premiums and €100 million in premiums received from Dutch residents).
• Runtime: Between three to four weeks from Phase 1 filing.

Dutch Healthcare Authority (NZa)

• The NZa handles the assessment of merger entities where the entities provide certain healthcare services and employ at least 50 healthcare providers.
• This process assesses whether the planned merger endangers the continuity of healthcare services. The NZa takes into account other internally required consultations, such as consultations from/with the works council and the client council.
• Runtime: Between four to eight weeks from filing.

Dutch National Bank (DNB)

• A declaration of no objections is required from DNB for the merger or acquisition of a qualifying holding in entities active in the financial sector, including banks and insurance companies. The assessment, conducted by the BNF, covers (among other things) the financial status of the acquirer and the target post-closing, and the reliability of the directors and non-executives. Responsibility for part of the assessment may lie with Authority for Financial Markets.
• Runtime: Between three to six months from filing (on average).

Authority for Financial Markets (AFM)

• The AFM is responsible for supervising the operation of the financial markets, including supervision of the conduct of parties active in the financial markets.
• One of the AFM’s responsibilities is supervising public takeover bids (ie offers to the market to buy shares of a listed company), which are highly regulated. As part of the bid process, the offeror must submit an offer document; this document requires prior approval by AFM.
• Runtime: Between one to two months from filing (on average).

Formal requirements – transaction documentation 

• LLC (sp. z o.o.): Share transfers must be made in written form with notarised signatures. 
• Joint stock company (S.A.): In private joint-stock companies which have either registered or bearer shares, the sale of registered shares must be made in writing via a declaration on the share certificate (or in a separate document) and by delivering the share certificate to the buyer. The sale of bearer shares requires delivery of the share certificate to the buyer.
• Electronic signatures: The use of qualified digital signatures is binding and enforceable. To be a qualified electronic signature, the signature must have been issued by a provider listed in the register of the National Certification Centre; only these e-signatures are considered equivalent to a wet ink signature. 

Taxes 

Share sale taxes include:

• a transfer tax at a rate of 1% of the fair market value of the shares transferred
• transfer tax payable by the buyer
• capital gains arising from the sale of shares subject to corporate income tax (CIT) at the rate of 19%.

Key tax considerations for asset sales include: 

• the transfer tax, which is at the rate of 1% on intangibles and 2% on tangibles
• the tax base is the market value of assets transferred
• liabilities assumed do not reduce the taxable base
• gains arising from the sale of assets are subject to 19% CIT rate
• a 9% tax rate applies to small companies and new businesses in the first year of their operation. 

Financial assistance 

A limited liability company may not take up, acquire or pledge its own shares. Exceptions to this rule include:

• satisfying company claims that cannot be satisfied from other assets of shareholders
• redemption of shares
• where the acquisition or taking-up of shares is otherwise provided for by law. 

A limited liability company can provide all kinds of financial assistance except the return of equity necessary to fully cover the share capital to shareholders, which is prohibited. 

A joint-stock company may not fully or partially reimburse shares to a shareholder. However, joint-stock companies can directly or indirectly (eg through subsidiaries) finance the acquisition of or subscription for their own shares in the following ways:

• providing loans
• providing advance payments
• creating security. 

Employee rights 

An asset sale may constitute a transfer of a work establishment (undertaking), or part of it, provided that the sold assets constitute an organised and separated part of the workplace, which could be an independent employment facility. 

Here, the employees or trade union organisations (if any operate at the seller or buyer) must be informed in writing no later than 30 days prior to the expected date of transfer. The consent of the employees or trade union organisations is not required for the transfer to take place.

In a share sale, the employment relationships remain unaffected. After the share sale the employees are still employed by the same employer. There is no legal requirement to inform the employees or trade union organisations, or to obtain employees' consent. 

Regulatory approvals and notifications 

• Ownership of agricultural land: The Agricultural Property Agency has a pre-emption right to shares sold in a company that owns agricultural land (unless it is a listed company, or a company disposed of by the State Treasury).
• Strategic companies: The Polish Act on Controlling Specific Investments aims to protect strategic Polish companies from hostile takeovers by requiring potential buyers to notify the Prime Minister or Minister of Energy of their intention to buy shares in a company in a strategic sector (eg energy, gas, and telecommunications).

Foreign ownership restrictions

Restrictions on acquisitions by foreign buyers apply towards direct or indirect acquisition of real estate located in Poland by foreign individuals, companies and partnerships. This type of acquisition requires a permit issued by the Ministry of Interior and Administration. 

If the required permit is not obtained before the transaction closes, the transaction is deemed null and void. This restriction does not apply to: 

• buyers from the EEA
• transfer of agricultural land to individual farmers or certain public entities. 
• Agricultural land transferred to other entities requires a permit issued by the President of the Agricultural Property Agency.

Transferring ownership interest(s) in a limited liability company (LLC)

• A written transfer agreement is required. Signatures of all parties (transferor/transferee) must be notarised. A transferee who is not yet a shareholder of the LLC must declare that he/she/it accedes to the articles of association of the LLC. The transfer can be with or without consideration (purchase price), however, any of these possibilities must be explicitly stated in the agreement.
• The transfer of the ownership interest takes effect on the LLC once the following conditions are met: the transfer agreement takes effect; the general meeting approves the transfer (as a default rule, however, articles of association may exclude this requirement or include other ones); depending on the size of the ownership interest, either the transfer agreement is delivered to the LLC (minority ownership interest, corresponding to less than 50% of all voting rights), or the transfer is registered with the Commercial Register (majority ownership interest, corresponding to at least 50% of all voting rights); if the transfer agreement or the articles of association stipulate additional conditions/requirement, these must be met as well.
• In principle, the company must file for registration of the transfer with the Commercial Register within 30 days from the moment when conditions of the transfer according to the transfer agreement and applicable laws.
• The transfer is subject to restrictions on chaining (the LLC cannot be a sole founder or a sole shareholder in another LLC, and one natural person can be a sole shareholder in three LLCs at most) and restrictions on transferability of ownership interests (which are by default: ownership interest can be transferred to another (existing) shareholder only with the approval of the general meeting, ownership interest can be transferred to a third person (non-shareholder) only if articles of association allows it, Articles of Association may render a transfer to a third person subject to the approval of the general meeting).

Transferring shares in joint stock companies (JSC)

• A written transfer agreement is required for physical shares or if the transfer is without consideration. Signatures do not need to be notarised (although this is still recommended). Changing a sole shareholder needs to be registered with the Commercial Register.
• Physical shares: the transfer is done based on endorsement and hand-over of the physical shares. The transferee can exercise his/her/its shareholder rights towards the JSC upon entry into shareholders list (maintained by the central depositary of securities for the benefit of the JSC).
• Book-entry shares: the transferee must have a securities account set up by a member of the central depositary of securities. The transfer requires (and is effective upon) its registration to the debit of the transferor's securities account and for the benefit of the transferee's securities account.

Due diligence

Data rooms

• Information is usually provided by the seller via a data room based on an understanding with the buyer.
• There is no general obligation of the seller to disclose, although there is a general obligation of both parties to take measures to prevent any disputes arising from their legal relations.
• Disclosing information without an NDA may constitute breach of director’s duty of confidentiality.

Data protection and anti-trust laws limit availability of provided information, whereas following solutions are available:

• increased protection of documentation
• sell-side due diligence, and
• multiple phases of due diligence.

Public sources

• Commercial Register: this contains basic company details (business name, company type, date of incorporation, seat, ID number, registration number etc), information on corporate bodies and their members, the identity of shareholders (for an LLC)/the identity of the sole shareholder (for a JSC). Collection of deeds includes basic corporate documents (eg (consolidated) founding deed, memorandum of association, articles of association, resolutions of the general meeting regarding certain matters etc. It also includes historical data, however, information on ultimate beneficial owners is not publicly accessible. Some information is partially available in English.
• Trade Licenses Register.
• Register of partners of public sector: this contains information on corporate structure and the ultimate beneficial owners of certain undertakings (carrying on business with state or public institutions).
• Register of (annual) financial statements.
• Notarial Central Register of Pledges.
• Land Register.
• Insolvency Register.
• Registries of intellectual property rights.

Merger control rules

Local or EU wide antitrust filings and approvals can be required depending on the size and nature of the transaction (eg merger, share or asset deal).

The Slovak Antimonopoly Office of the Slovak Republic (SAO) must be notified of and clear a planned transaction if the following turnover criteria are met concerning the last accounting period preceding the transaction (establishment of the concentration):

• The parties' combined annual turnover in Slovakia is at least €46 million and the turnover of at least two parties reached in Slovakia (by each party) is at least €14 million. 
• For mergers, the turnover of at least one party in Slovakia is at least €14 million and the worldwide turnover of any other party is at least €46 million.
• For another acquisition-based form of gaining control (eg share/asset deal), the turnover of at least one party which is being acquired/partly acquired in Slovakia is at least €14 million. In proceedings commenced at SAO since 1 June 2021, turnover of at least €14 million in Slovakia is required regarding at least one party over which (or over part of which) control is being acquired and the worldwide turnover of any other party is at least €46 million.
• For joint ventures, the turnover of at least one party in Slovakia is at least €14 million. In proceedings commenced at SAO since 1 June 2021, turnover of at least €14 million in Slovakia is required regarding at least one party over which (or over part of which) control is being acquired and the worldwide turnover of any other party is at least € 46 million.
• Since 1 June 2021, if the accounting period preceding the transaction (establishment of the concentration) even partially includes any part of a period during which a state of emergency was declared by the government – or one month following the month in which this state of emergency is terminated (emergency period) – and the parties did not achieve relevant total turnover in this accounting period, the immediately preceding accounting period which was not affected by the emergency period will apply.

Ultimate beneficial owners

• Shareholders of an LLC are disclosed in the Commercial Register.
• Shareholders of an LLC need to be updated every time shareholdings change.
• Sole shareholders of a JSC are disclosed in the Commercial Register; this must be updated every time a sole shareholder changes.
• The list of shareholders of a simple joint stock company is publicly available online via the national central depositary.
• The ultimate beneficial owner/s (UBO) of both LLCs and joint stock companies need to be registered in the Commercial Registry; this information is only available for certain authorities and is not publicly accessible.
• The UBO does not generally need to be disclosed other than for "know your client" checks by banks and other organisations, and in some limited sectors for regulatory purposes.
• Companies that want to carry on business with state entities (agencies) are required to register with the special publicly accessible register established for this purpose. The UBO needs to be disclosed, too.

Financial assistance

Financial assistance of a company to facilitate the acquisition of its shares is generally prohibited. Note that:

• this is only applicable to JSCs
• companies are prohibited from granting advance payments, loans and credits, or monetary means for the acquisition of its shares, or to grant security for these purposes
• under certain conditions, transactions involving the acquisition of shares by employees of the company or banks acting in their normal course of business are not prohibited, and
• acts that breach the prohibition are invalid.

Signing requirements

Limited liability company

• Notarial authentication of signatures on the SPA or pledge agreements is required.
• Notarial authentication of signatures of the sole shareholder or the chairman of the general meeting on general meetings minutes is also required where specific resolutions are concerned (eg changes of executive director, changes to registered capital etc).
• An apostille is required for the authentication of signatures from several jurisdictions.

Joint stock company

• A notarial deed is required for incorporation and for fundamental corporate resolutions.
• There are specific requirements of central depositaries on authorisation of signatures.
• An apostille is required for the authentication of signatures from several jurisdictions.

Protection of critical infrastructure

New legislation to protect critical infrastructure came into effect on 1 March 2021; this is not connected to the EU foreign investment screening mechanism.

The legislation applies to companies in sectors designated as being part of Slovakia's critical infrastructure (eg the energy, metallurgy, pharmaceuticals, and chemicals sectors). Prior consent from the Slovak government may be required in these sectors for any transfer of the element of critical infrastructure (inclusive of the enterprise/part of the enterprise), or a change of a direct/indirect shareholder or a person exercising similar control powers (10% threshold).

It is possible for this consent to be withdrawn if false information is supplied or the conditions outlined under the consent decision of the government are not met.

Transaction documentation signing formalities

• Anglo-American forms of contracts are widely used for M&As with a foreign element.
• Share deals and asset deals are possible.

Transaction documentation

The key documents are:

• an NDA
• a letter of intent (including basic terms and conditions)
• an acquisition agreement (with supporting documents, if necessary)
• an escrow agreement 
• the shareholders meeting minutes (joint-stock company), founder/s' or participant/s' resolution (limited liability company) covering amendments to entity in question (ie new shareholders, asset transfers based on the deal etc).

It is possible to choose foreign law if a foreign entity/individual is involved in the transaction. Agreements under English law are common. Notification obligations and procedural requirements under Ukrainian corporate laws will be mandatory to some extent, to reflect the ownership change.

Transferring shares

There are different regimes and regulations/approvals for the transfer of shares due to corporate laws (limited liability companies versus joint stock companies) and sector specific regulations (banks and other financial services entities as insurance companies, investment funds, financial leasing companies etc).

Foreign buyers are restricted from participation to some extent. This is due to: 

• their geographical corporate background (eg incorporation in countries, that Ukraine officially recognises as offshore zones, some Russian companies or individuals being under sanctions)
• some sector specific regulations towards the Ukrainian entities (eg media businesses, information and broadcasting). 

Some strategic industries under strict state control do not allow any private national or foreign investment.

Formalities when transferring shares

The following formalities need to be complied with when transferring shares:

• observing statutory pre-emptive rights
• obtaining the consent of the shareholder’s spouse (where appropriate)
• amending the articles of incorporation with wording that reflects the new shareholders' information (if necessary)
• notifying the authorities regarding the new shareholder structure
• disclosing the ultimate beneficial owners.

It is important to note that the transfer of shares is effective on the date of state registration.

Notarisation requirements

• A simple written form is all that's needed, unless the parties decide to issue a notarial deed.
• Any supporting documents for the introduction of ownership changes require notarial certification.

Taxes that could be applicable on share transfers (stamp duty)

• There is no special stamp duty for share transfers.
• A stamp duty of 1% of the purchase price and a pension duty of 1% of the purchase price (variable amount) applies to real estate sales.
• There is a corporate income tax rate of 18% or a PIT of 18%. 
• Foreign residents pay withholding tax at the rate of 15% unless otherwise agreed in bilateral tax treaties.
• VAT at the rate of 20% may apply for asset deals.

Rules and regulations concerning financial assistance

• This does not apply in Ukraine. Foreign buyers are restricted from participation to some extent (see section on signing formalities).

Employee rights on an M&A transaction

• Ukrainian law does not provide for the automatic transfer of employees as part of the transfer of business.
• Employers are not required to notify employees/obtain their consent for share or asset deals.
• The maximum statutory notice period employers need to provide is two months’ notice.
• Employees are protected against unfair dismissal regardless of the length of their service. 
• Layoffs require two months prior notice, and as part of this, the authorities receive a planned layoff notice and an executed layoff notice. If a works council is established, notification and coordination is required. Some employee categories are socially protected from mass layoffs. The severance payment usually one average monthly payment.

Merger control, regulatory approvals and notifications

The following merger controls, regulatory approvals and notifications are required:

Antitrust clearance with the Ukrainian antimonopoly authority (AMCU)

Different financial thresholds apply depending on whether all participants are active in Ukraine or only a target within the seller’s group.

• If at least two of the concentration’s participants are active in Ukraine: notification is required if the combined aggregate worldwide turnover or assets of all concentration’s participants exceeds €30 million, and the Ukrainian sales or assets in Ukraine of at least two of the undertakings concerned each exceed €4 million.
• Only the target within the seller’s group is active in Ukraine: notification is required if the combined aggregate worldwide turnover or assets of at least one concentration’s participant exceeds €150 million, and the Ukrainian sales or assets in Ukraine of the target company exceeds €8 million.

Notification to the Central Bank of Ukraine (NBU)

• An NBU is required for M&A in the financial sector.

Jurisdiction for post-completion disputes 

Disputes arising from corporate relationships governed by the Ukrainian law fall within the competence of the Ukrainian commercial courts.

• The exception is if the parties involved were eligible to choose a foreign law to govern their contractual relationships
• Generally foreign awards require recognition in Ukraine to be enforceable.

Company ownership and place of registration

UAE mainland (onshore) registered entities:

• Foreign ownership restrictions; national partner role
• Federal laws and Emirate specific legislation
• Very broad licensing options

Entities registered in a free zone:

• No foreign ownership restrictions
• Free zone-specific rules and regulations have priority over certain parts of Federal Companies Law
• Limitations when trading with onshore businesses

Offshore entities:

• No foreign ownership restrictions
• Specific rules and regulations administered by Free Zone Authority (but a separate regime)
• Conducting business with UAE customers not permitted

Company ownership

• Recent changes to ownership for mainland companies: Federal Decree Law No.26 (2020) removes the general requirement to have a majority national shareholder or agent for certain companies not deemed strategically important.
• Anticipated emirate-specific regulations: Federal law permits the individual emirate to regulate on activities opened/closed for more than 49% foreign ownership and any conditions for relevant approvals to be obtained.

Transferring shares

• Two-step process: Respective companies registration authority pre-approval is required prior to transferring shares (except at ADGM and DIFC) with a notarised/attested transfer instrument.
• New shareholders and officers need to pass compliance checks and for that purpose several documents of the proposed new shareholder, its officers and UBOs, and any new officers of the target must be provided in the pre-approval application. These documents must be translated into Arabic for mainland entities; free zones accept English documents. All foreign documents must be attested up to the level of the UAE Embassy in the country of origin – apostille only is insufficient.
• Locally notarised/attested transfer instrument will be arranged in addition to commercial SPA for local filing purposes.
• Standard MOA/AOA meeting certain requirements and formats that the local notary and/or company registration authority expects must be notarised/attested locally.

Employee-related concerns

• Asset sale: Employees do not automatically transfer to a buyer; there are no TUPE equivalent provisions in the UAE. The existing employer must terminate the employees’ contracts, cancel their visa, and the buyer of the assets must then re-employ employees and sponsor their work permit and residency visa.
• Share sale: Employees' employment contracts remain in place; if a buyer wishes to change an individual's contract, they must serve the employee notice and pay any benefits owed.
• End of Service Gratuity (ESG): This is due to be paid to employees when an employment relationship terminates, instead of ongoing social security scheme contributions. In a share acquisition, the buyer should take note of accrued benefits; in an asset acquisition where employees are taken over, the parties should agree how, when, and by whom the ESG should be paid.
• Redundancy: There is no statutory redundancy in the UAE – risk for arbitrary dismissal claims.

Due diligence

• Public register: For most entities, there is currently no publicly available register that the buyer’s counsel could obtain information from.
• Ultimate Beneficial Owner Register: Federal Cabinet Decision No.58 of 2020 introduced the Ultimate Beneficial Owner Register to make UAE companies more transparent; in the future, there may be more information about companies’ officers and shareholders publicly available.
• Seller contribution: For legal due diligence purposes, the buyer’s counsel is highly dependent on the seller making information available.

Jurisdiction for disputes

• Enforcement of foreign judgments: Under Article 235 of the Civil Procedure Code, the UAE courts may recognise and enforce foreign judgements, but certain requirements must be met. In practice, the reciprocity requirement and the UAE courts not having had jurisdiction over the original dispute matter are in most cases negated.
• Alternative Dispute Resolution: The UAE is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitration awards (1958). Enforcement of foreign awards is typically possible, unless the public order or Shariah principles would be violated in doing so.

Stamp Duty on share transfers

• Stamp duty is a tax payable on the transfer of shares at a rate of 0.5% of the total consideration paid for those shares. It must be paid within 30 days of the date of the transfer. Stamp duty is not payable on a transfer or series of transfers where the consideration is less than £1,000 in aggregate (and certain other limited exceptions). 
• The amount of stamp duty that will be payable is calculated based on the maximum ascertainable consideration. For example, if a transaction includes deferred or contingent consideration that may be paid following completion, stamp duty will be calculated as if the full maximum amount of such consideration had been paid at completion. There is no ability to reclaim stamp duty if the maximum amount of contingent consideration is not achieved. 
• Legally, stamp duty is a buyer tax, however, it is possible to contractually agree otherwise. This is often a point of negotiation with overseas buyers (particularly US buyers). If you are dealing with the sale of shares in an English company to an overseas buyer, the stamp duty cost should be flagged early in the transaction. 
• The legal title to shares in an English company will not pass to the buyer until such time as the stamp duty has been paid and accepted by HMRC (evidenced by the return of a "stamped" instrument of transfer, or a letter confirming payment of the correct amount of stamp duty under COVID-19 procedures currently in force). A voting power of attorney should be obtained in favour of the buyer of shares for the period between completion of the acquisition and the date on which legal title passes.

National Security & Investment Act (NSI Act)

• The NSI Act is a new screening regime for transactions affecting the UK which might raise national security concerns and must be considered where all transactions which have a connection to the UK are concerned.
• The legislation introduces a mandatory notification regime for transactions in 17 "sensitive sectors", some of which are obvious – like military, satellite, and space technologies – but also covering wider sectors such as communications, data infrastructure and transport.
• The notification regime will capture many transactions covering M&A and other investment activity, such as venture capital and private equity. This is because the first threshold which would trigger a notification has been set very low, at the acquisition of 15% of the target's share capital or voting rights. Asset transactions will also be covered. 
• The mandatory regime will be reinforced by a voluntary notification system whereby parties are expected to notify the relevant government authority regarding events where the transaction otherwise raises national security concerns.
• The legislation will have some element of extra territorial effect. So, if a transaction is being conducted between two non-UK entities but the target or one of the parties has a presence in the UK or supplies goods or services to the UK, then it may be caught by the legislation.
• The impact on the timetable for applicable transactions is likely to be significant.
• Applicable transactions must be notified and cleared prior to completion, or else the parties may incur heavy penalties and the transaction be declared void. 
• Clearances are expected to take around six weeks, however, if a full national security assessment is deemed necessary, then a further 21 weeks may need to be allowed for.
• Any required anti-trust clearances would be able to run in parallel to the new regime. 

Signing documents in a COVID-19 world

• When a contract is made wholly in writing, it can be structured as a simple contract, or as a deed.
• Signing formalities for simple contracts are minimal. Generally, the parties just need to sign the contract. If a party is a company, the signature of anyone who is authorised to sign on behalf of such company would be required (normally a director).
• Signing formalities for deeds are more elaborate. If an individual is executing a deed, they need to sign the deed in the presence of an independent witness who attests the signature. An independent witness is anyone who is: not a family member, not a minor and not a party to the relevant deed. 
• Companies can validly execute a deed by fixation of the common seal, by two authorised signatories signing the deed. This can be either: two directors, a director and a company secretary (if there is one), or a director signing the deed in the presence of an independent witness who attests the signature.
• Electronic signatures are permitted for both simple contracts and deeds. However, for deeds to comply with the requirement for an independent witness to be physically present while also observing a requirement to socially distance, the witness still needs to be physically present and able to see the signatory sign the document documents. Options for ensuring this include witnessing through a window, at a distance, or in an outside public space.

EMI share options

• EMI share options are tax favoured options that can be granted to UK resident employees of the entity over whose shares the options are granted. 
• There are various criteria that must be met for a company to be eligible to grant EMI options, and for any options that are granted to qualify as EMI options. 
• If an employee holds a valid EMI option, the tax they will pay on a sale of the resulting share will be reduced from a maximum effective tax rate of 54.59% (for higher rate tax payers) to as low as 10%. EMI share options are therefore an extremely powerful incentivisation tool. 
• If advising on an investment into, or acquisition of, a company that has granted EMI options, the compliance of those options with the various requirements that must be met for the resulting shares to qualify for the relief mentioned above should be the subject of careful due diligence. It is not unusual for there to be technical failings in the grant of EMI options that could invalidate the favourable tax treatment completely. 
• Failure of EMI treatment can cause significant issues for all parties involved in a transaction – the holder of a failed EMI option will have to pay significantly more tax than they had otherwise expected to. This can be a problem for the buyer if the individual is a key employee who they want to be involved in the business going forward. It is not unusual for companies to choose to gross up the proceeds to be received by the holder of a failed EMI option, which can mean a decrease in the consideration available to be distributed to all other shareholders. Finally, it may result in a tax charge to the company (in the form of employer taxes) which could be a post completion liability for the target and/or the buyer.

Acquiring 100% of a target

• There are various methods to ensure that a buyer can acquire 100% of the share capital of a target company. 
• The most obvious of these methods is to make sure that all the shareholders are willing and able to sign the purchase documentation (naturally, this is easier in situations where the target has only a small number of shareholders). 
• Another method is where a shareholder has already signed (or is willing to sign) a power of attorney nominating one of the other shareholders as their attorney to sign the documents. This method is particularly useful where there are many parties to sign the purchase documentation (for example, option holders). 
• The UK also has a statutory procedure for acquiring 100% of the company by using what is called a Companies Act takeover offer. This process allows the "squeezing out" of shareholders who dissent to an acquisition of shares otherwise approved by shareholders holding no less than 90% of the value of the shares. This is often used in the context of listed company transactions where there are many shareholders, but it can also be used to acquire private companies. 
• Another statutory procedure which enables the acquisition of 100% of the target's shares is called a Scheme of Arrangement. This method has an advantage over the takeover offer route because the buyer is only required to receive acceptances of its offer of 75% of the shares. However, this process is more complex, and involves at least two hearings in open court. 
• Finally, drag-along provisions can be included in a companies' articles of association or a shareholders' agreement. This is a right to force a shareholder to sell its shares when a controlling interest in a company is sold. Similar across many jurisdictions, this is a route that is sometimes used particularly where venture or private equity-backed companies are concerned.