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意大利
Italy – M&A – Conventional guarantees and “WARRANTY & INDEMNITY” insurance policies
2020年2月17日
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
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荷兰 写信给 Simone
意大利的M&A收购交易:股票交易或资产交易
2020年1月15日
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意大利
- 公司法
- 并购
- 私募股权
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
写信给 Simone
Brazil- M&A and Agency Agreements
2019年8月20日
-
巴西
- 机构
- 公司法
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
How to incorporate a company in Spain
2019年1月29日
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西班牙
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
写信给 Mercedes
Spain – Purchase of a business unit and tax liability
2018年10月16日
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西班牙
- 公司法
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
写信给 Mercedes
Brazil – M&A checklist
2018年8月1日
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巴西
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
银行业的投资与并购：什么是“合格控股（qualifying holding）”？
2017年6月8日
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意大利
- 并购
- 银行业
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
写信给 Simone
国际比较法律指南 -目标公司的防御
2017年5月23日
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中国
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
写信给 Roberto
国际比较法律指南 – 收购方保护
2017年4月28日
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中国
- 并购
This week the Interim Injunction Judge of the Netherlands Commercial Court ruled in summary proceedings, following a video hearing, in a case on a EUR 169 million transaction where the plaintiff argued that the final transaction had been concluded and the defendant should proceed with the deal.
This in an – intended – transaction where the letter of intent stipulates that a EUR 30 million break fee is due when no final agreement is signed.
In addition to ruling on this question of construction of an agreement under Dutch law, the judge also had to rule on the break fee if no agreement was concluded and whether it should be amended or reduced because of the current Coronavirus / Covid-19 crisis.
English Language proceedings in a Dutch state court, the Netherlands Commercial Court (NCC)
The case is not just interesting because of the way contract formation is construed under Dutch law and application of concepts of force majeure, unforeseen circumstances and amendment of agreements under the concepts of reasonableness and fairness as well as mitigation of contractual penalties, but also interesting because it was ruled on by a judge of the English language chamber of the Netherlands Commercial Court (NCC).
This new (2019) Dutch state court offers a relatively fast and cost-effective alternative for international commercial litigation, and in particular arbitration, in a neutral jurisdiction with professional judges selected for both their experience in international disputes and their command of English.
The dispute regarding the construction of an M&A agreement under Dutch law in an international setting
The facts are straightforward. Parties (located in New York, USA and the Netherlands) dispute whether final agreement on the EUR 169 million transaction has been reached but do agree a break fee of €30 million in case of non-signature of the final agreement was agreed. However, in addition to claiming there is no final agreement, the defendant also argues that the break fee – due when there is no final agreement – should be reduced or changed due to the coronavirus crisis.
As to contract formation it must be noted that Dutch law allows broad leeway on how to communicate what may or may not be an offer or acceptance. The standard is what a reasonable person in the same circumstances would have understood their communications to mean. Here, the critical fact is that the defendant did not sign the so-called “Transaction Agreement”. The letter of intent’s binary mechanism (either execute and deliver the paperwork for the Transaction Agreement by the agreed date or pay a EUR 30 million fee) may not have been an absolute requirement for contract formation (under Dutch law) but has significant evidentiary weight. In M&A practice – also under Dutch law – with which these parties are thoroughly familiar with, this sets a very high bar for concluding a contract was agreed other than by explicit written agreement. So, parties may generally comfortably rely on what they have agreed on in writing with the assistance of their advisors.
The communications relied on by claimant in this case did not clear the very high bar to assume that despite the mechanism of the letter of intent and the lack of a signed Transaction Agreement there still was a binding agreement. In particular attributing the other party’s advisers’ statements and/or conduct to the contracting party they represent did not work for the claimant in this case as per the verdict nothing suggested that the advisers would be handling everything, including entering into the agreement.
Court order for actual performance of a – deemed – agreement on an M&A deal?
The Interim Injunction Judge finds that there is not a sufficient likelihood of success on the merits so as to justify an interim measure ordering the defendant to actually perform its obligations under the disputed Transaction Agreement (payment of EUR 169 million and take the claimant’s 50% stake in an equestrian show-jumping business).
Enforcement of the break fee despite “Coronavirus”?
Failing the conclusion of an agreement, there was still another question to answer as the letter of intent mechanism re the break fee as such was not disputed. Should the Court enforce the full EUR 30 million fee in the current COVID-19 circumstances? Or should the fee’s effects be modified, mitigated or reduced in some way, or the fee agreement should even be dissolved?
Unforeseen circumstances, reasonableness and fairness
The Interim Injunction Judge rules that the coronavirus crisis may be an unforeseen circumstance, but it is not of such a nature that, according to standards of reasonableness and fairness, the plaintiff cannot expect the break fee obligation to remain unchanged. The purpose of the break fee is to encourage parties to enter into the transaction and attribute / share risks between them. As such the fee limits the exposure of the parties. Payment of the fee is a quick way out of the obligation to pay the purchase price of EUR 169 million and the risks of keeping the target company financially afloat. If financially the coronavirus crisis turns out less disastrous than expected, the fee of EUR 30 million may seem high, but that is what the parties already considered reasonable when they waived their right to invoke the unreasonableness of the fee. The claim for payment of the EUR 30 million break fee is therefore upheld by the Interim Injunction Judge.
Applicable law and the actual practice of it by the courts
The relevant three articles are in this case articles 6:94, 6:248 and 6:258 of the Dutch Civil Code. They relate to the mitigation of contractual penalties, unforeseen circumstances and amendment of the agreement under the tenets of reasonableness and fairness. Under Dutch law the courts must with all three exercise caution. Contracts must generally be enforced as agreed. The parties’ autonomy is deemed paramount and the courts’ attitude is deferential. All three articles use language stating, essentially, that interference by the courts in the contract’s operation is allowed only to avoid an “unacceptable” impact, as assessed under standards of reasonableness and fairness.
There is at this moment of course no well- established case law on COVID-19. However, commentators have provided guidance that is very helpful to think through the issues. Recently a “share the pain” approach has been advocated by a renowned law Professor, Tjittes, who focuses on preserving the parties’ contractual equilibrium in the current circumstances. This is, in the Court’s analysis, the right way to look at the agreement here. There is no evidence in the record suggesting that the parties contemplated or discussed the full and exceptional impact of the COVID-19 crisis. The crisis may or may not be unprovided for. However, the court rules in the current case there is no need to rule on this issue. Even if the crisis is unprovided for, there is no support in the record for the proposition that the crisis makes it unacceptable for the claimant to demand strict performance by the defendant. The reasons are straightforward.
The break fee allocates risk and expresses commitment and caps exposure. The harm to the business may be substantial and structural, or it may be short-term and minimal. Either way, the best “share the pain” solution, to preserve the contractual equilibrium in the agreement, is for the defendant to pay the fee as written in the letter of intent. This allocates a defined risk to one party, and actual or potential risks to the other party. Reducing the break fee in any business downturn, the fee’s express purpose – comfort and confidence to get the deal done – would not be accomplished and be derived in precisely the circumstances in which it should be robust. As a result, the Court therefore orders to pay the full EUR 30 million fee. So the break fee stipulation works under the circumstances without mitigation because of the Corona outbreak.
The Netherlands Commercial Court, continued
As already indicated above, the case is interesting because the verdict has been rendered by a Dutch state court in English and the proceedings where also in English. Not because of a special privilege granted in a specific case but based on an agreement between parties with a proper choice of forum clause for this court. In addition to the benefit to of having an English forum without mandatorily relying on either arbitration or choosing an anglophone court, it also has the benefit of it being a state court with the application of the regular Dutch civil procedure law, which is well known by it’s practitioners and reduces the risk of surprises of a procedural nature. As it is as such also a “normal” state court, there is the right to appeal and particularly effective under Dutch law access to expedited proceeding as was also the case in the example referred to above. This means a regular procedure with full application of all evidentiary rules may still follow, overturning or confirming this preliminary verdict in summary proceedings.
Novel technology in proceedings
Another first or at least a novel application is that all submissions were made in eNCC, a document upload procedure for the NCC. Where the introduction of electronic communication and litigation in the Dutch court system has failed spectacularly, the innovations are now all following in quick order and quite effective. As a consequence of the Coronavirus outbreak several steps have been quickly tried in practice and thereafter formally set up. At present this – finally – includes a secure email-correspondence system between attorneys and the courts.
And, also by special order of the Court in this present case, given the current COVID-19 restrictions the matter was dealt with at a public videoconference hearing on 22 April 2020 and the case was set for judgment on 29 April 2020 and published on 30 April 2020.
Even though it is a novel application, it is highly likely that similar arrangements will continue even after expiry of current emergency measures. In several Dutch courts videoconference hearings are applied on a voluntary basis and is expected that the arrangements will be formalized.
Eligibility of cases for the Netherlands Commercial Court
Of more general interest are the requirements for matters that may be submitted to NCC:
- the Amsterdam District Court or Amsterdam Court of Appeal has jurisdiction
- the parties have expressly agreed in writing that proceedings will be in English before the NCC (the ‘NCC agreement’)
- the action is a civil or commercial matter within the parties’ autonomy
- the matter concerns an international dispute.
The NCC agreement can be recorded in a clause, either before or after the dispute arises. The Court even recommends specific wording:
“All disputes arising out of or in connection with this agreement will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or “NCC District Court”), to the exclusion of the jurisdiction of any other courts. An action for interim measures, including protective measures, available under Dutch law may be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCCA”).”
The phrase “to the exclusion of the jurisdiction of any other courts” is included in light of the Hague Convention on Choice of Court Agreements. It is not mandatory to include it of course and parties may decide not to exclude the jurisdiction of other courts or make other arrangements they consider appropriate. The only requirement being that such arrangements comply with the rules of jurisdiction and contract. Please note that choice of court agreements are exclusive unless the parties have “expressly provided” or “agreed” otherwise (as per the Hague Convention and Recast Brussels I Regulation).
Parties in a pending case before another Dutch court or chamber may request that their case be referred to NCC District Court or NCC Court of Appeal. One of the requirements is to agree on a clause that takes the case to the NCC and makes English the language of the proceedings. The NCC recommends using this language:
We hereby agree that all disputes in connection with the case [name parties], which is currently pending at the *** District Court (case number ***), will be resolved by the Amsterdam District Court following proceedings in English before the Chamber for International Commercial Matters (“Netherlands Commercial Court” or ”NCC District Court). Any action for interim measures, including protective measures, available under Dutch law will be brought in the NCC’s Court in Summary Proceedings (CSP) in proceedings in English. Any appeals against NCC or CSP judgments will be submitted to the Amsterdam Court of Appeal’s Chamber for International Commercial Matters (“Netherlands Commercial Court of Appeal” or “NCC Court of Appeal”).
To request a referral, a motion must be made before the other chamber or court where the action is pending, stating the request and contesting jurisdiction (if the case is not in Amsterdam) on the basis of a choice-of-court agreement (see before).
Additional arrangements in the proceedings before the Netherlands Commercial Court
Before or during the proceedings, parties can also agree special arrangements in a customized NCC clause or in another appropriate manner. Such arrangements may include matters such as the following:
- the law applicable to the substantive dispute
- the appointment of a court reporter for preparing records of hearings and the costs of preparing those records
- an agreement on evidence that departs from the general rules
- the disclosure of confidential documents
- the submission of a written witness statement prior to the witness examination
- the manner of taking witness testimony
- the costs of the proceedings.
Visiting lawyers and typical course of the procedure
All acts of process are in principle carried out by a member of the Dutch Bar. Member of the Bar in an EU or EEA Member State or Switzerland may work in accordance with Article 16e of the Advocates Act (in conjunction with a member of the Dutch Bar). Other visiting lawyers may be allowed to speak at any hearing.
The proceedings will typically follow the below steps:
- Submitting the initiating document by the plaintiff (summons or request as per Dutch law)
- Assigned to three judges and a senior law clerk.
- The defendant submits its defence statement.
- Case management conference or motion hearing (e.g. also in respect of preliminary issues such as competence, applicable law etc.) where parties may present their arguments.
- Judgment on motions: the court rules on the motions. Testimony, expert appointment, either at this stage or earlier or later.
- The court may allow the parties to submit further written statements.
- Hearing: the court interviews the parties and allows them to present their arguments. The court may enquire whether the dispute could be resolved amicably and, where appropriate, assist the parties in a settlement process. If appropriate, the court may discuss with the parties whether it would be advisable to submit part or all of the dispute to a mediator. At the end of the hearing, the court will discuss with the parties what the next steps should be.
- Verdict: this may be a final judgment on the claims or an interim judgment ordering one or more parties to produce evidence, allowing the parties to submit written submissions on certain aspects of the case, appointing one or more experts or taking other steps.
Continuous updates, online resources Netherlands Commercial Court
As a final note the English language website of the Netherlands Commercial Court provides ample information on procedure and practical issues and is updated with a high frequence. Under current circumstance even at a higher pace. In particular for practitioners it’s recommended to regularly consult the website. https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
One of the most tricky steps in any M&A operation is when the issue of “warranties”, in particular with reference to the economic situation, the balance sheet and the financial position of the company or business (or of a branch), namely the so-called “business warranties“.
On one side, the buyer would like to “ironclad” his investment by reducing the risk of an unpleasant surprise to a minimum. The seller, by contrast, wishes to provide the least possible warranties, which often translate in a provisory restriction on the full enjoyment of the proceeds; the same may be essential for further investment.
It should be noted, first of all, that the term “warranties” is usually referred to, in a non-technical acceptation, to a complex set of contractual provisions containing:
- any seller’s statements about the health of the company or business (or branch of business) being transferred;
- any compensation obligations undertaken by the seller in case of “violation” (i.e. mistruth) of the assertions;
- any remedies provided to ensure the effectiveness of the indemnity obligations entered into.
While there are several reasons why this set is necessary, the most significant one is that in M&A contracts, statutory sale warranties only apply to the good sold; therefore, if the good sold is an equity investment, the warranties do not cover any of the company’s underlying assets; and even as they exceptionally do apply, short terms and strict limitations still justify an ancillary obligation designed to ensure the economic success of the transaction.
As confirmed by current practice, there is not a single M&A agreement that does not include a set of warranties.
In particular, representations typically incorporate the buyer’s due diligence, which for its part usually follows a non-disclosure agreement (NDA) to protect any information disclosed.
Any criticalities identified should be properly mentioned. Clearly, wherever a criticality arises, it may not necessarily trigger an indemnity obligation. It will be up to the parties to lay down the rules, as they may also provide that any related risk is to be borne by the buyer; this may be offset by a reduction in the price.
Some aspects of the compensation obligation will have to be carefully negotiated. The main ones are certainly:
- duration (e.g. longer for tax-related warranties);
- who is entitled to compensation (the buyer or the company; one or the other as the case may be);
- any deductions and/or limitations (e.g. tax losses);
- compensation cap;
- any possible deductible;
- the compensation procedure (e.g. application deadlines, settlement procedure, particular circumstances).
These are highly relevant aspects and should by no means be underestimated. As an example, it is obvious that if the compensation procedure is poorly regulated, all the previous efforts are jeopardised.
Finally, suitable measures to ensure an effective protection of the buyer must be provided. Among these, the most conventional tools are:
- the surety;
- the “independent contract of guarantee”;
- the escrow;
- the deferment of payment;
- the “earn-out”-scheme;
- the “price adjustment”;
- the letter of patronage;
- the pledge and/or mortgage.
These are more or less widely used instruments, each one with its pros and cons.
At this point, however, we would like to address a new tool with an insurance character, which has been being used recently: the so-called “Warranty & Indemnity Policies“.
With a W&I insurance policy, basically, the insurer assumes the risk resulting from breaches of warranties and indemnities included in an M&A contract upon payment of a premium.
It is obviously a key condition that the violation arose from facts preceding the closing and which were not known at that time (and, therefore, not highlighted by the due diligence carried out).
The insurance policy may be subscribed by the buyer (buyer side) or the seller (seller side). Usually the first option is preferred. These W&I insurance policies come with a number of advantages:
- a warranty is given even when the seller has been unwilling to commit himself contractually;
- the insurance policy usually does not provide for any recourse against the seller, other than in the case of malice, so that the seller is fully released;
- it is also possible to achieve a higher ceiling than that provided for in a purchase agreement;
- likewise, coverage may be provided for a longer period;
- it is easier to deal with the seller, especially if there are several and some are still part of the company, perhaps as members of the Board of Directors;
- compensation procedures become significantly easier, especially in cases where there are multiple sellers, including individuals;
- the buyer gains a higher certainty of solvency.
The cost of the insurance policy may be shared between the parties, eventually by discounting the purchase price, which the seller may be more willing to grant, considering that he will not be required to issue other warranties and can immediately use the proceeds of the sale.
Premiums are usually set somewhere between 1% and 2% of the compensation limit (with a minimum premium).
Besides the price, which makes the tool mostly suitable for operations of not modest entity, currently, the main limitation seems to be the commonly required deductible, equal to 1% of the Enterprise Value of the Target, which may be reduced to 0.5% in case of higher premiums. Keep in mind that the W&I insurance policy implies a review of the due diligence by the insurance company, which can translate into an actual intervention in the negotiation of the warranties.
Beyond this, this tool needs to be carefully evaluated: facing highly complex scenarios, it could be the ideal solution to solve an impasse in negotiations and make relations between professional investors and SMEs easier.
在意大利，收购交易(M&A)在大部分情况下通常是通过收购股权(“股票交易”)、公司或公司分支机构(“资产交易”)进行的。主要由于税收原因，股票交易比资产交易更为频繁，尽管资产交易可以更好地限制买方的风险。股票交易与资产交易之间的主要区别在于风险和买方与卖方之间的关系。
在意大利市场上更倾向于通过收购股权（“股票交易”）而非收购公司或公司分支机构进行收购（M&A）
在意大利，大多数情况下，收购交易(M&A)的执行是通过购买股份(“股票交易”)或购买公司与公司分支机构(“资产交易“)的方式进行的。其他的形式，如合并，则不那么常见。
通过购买被收购公司的股权或股份(“股票交易”)，买方间接获得公司的全部资产(资产、负债、关系)，从而承担与公司先前管理有关的所有风险。
通过收购公司或公司分支机构(“资产交易”)，买方获得一组为经营业务而组织起来的商品和关系（物业、工厂、员工、合同、信贷、债务等）。资产交易的好处在于，双方可以确定转让的范围，从而限制交易的法律风险。
尽管有这一优势，意大利的大多数收购业务都是通过收购股权进行的。2018年，被购买的股份(股权和股票)约为78400股，而被出售的股份约为35900股(资料来源:：www.notariato.it/it/news/dati-statistici-notarili-anno-2018)。应当指出的是，业务转让的数字还包括个体企业家所经营的迷你或小型公司，对于这些公司而言，股权交易的替代方案（尽管可行，但可以通过将公司转让给新公司和出售来实现）由于成本原因，在实践中不可行。
意大利收购业务的经济成本(M&A)
与购买公司（“资产交易”）相比，购买股份（“股权交易”）的主要原因是运营的税收成本考虑，让我们看看它们通常是什么。
在购买股份时，卖方应缴的直接税款按下列百分比计算:
- 如果卖方是一家资本公司（有限股份公司、有限责任公司、有限合伙股权责任公司），税率是资本收益的24％。但是，在某些条件下，c.d. PEX（参股豁免）章程仅对5％的资本收益适用24％的税率。
- 如果卖方是合伙企业（简单公司、普通合伙公司、有限合伙公司），则应对资本收益全额征税，但是在某些情况下，应纳税额限制为资本收益额的60％。在这两种情况下，适用税率是指为透明性分配收入的每个股东的边际税率。
- 如果卖方是自然人，则资本收益率为26％。
在收购股权时，通常向买方收取200欧元的注册税。
即使是在购买公司时，卖方应支付的直接税款也是根据资本收益计算的。如果卖方是资本公司，则税率是资本收益的24％。如果卖方是合伙企业（与自然人合伙人合伙）或个体企业家，则税率取决于卖方的收入。
在购买公司时，通常由买方支付的间接税款是根据分配给每一转让资产的价格份额计算的。价格是转让资产减去转让负债所得的金额。百分比因资产类型而异。总的来说:
- 流动资产征收3％的注册税;
- 商誉需缴纳3％的注册税;
- 建筑物需缴纳9％的注册税 (以及每笔固定金额50欧元的抵押和地籍税);
- 土地需缴纳9％至12％的注册税 (视买方而定)，抵押和地籍税的税额均为50欧元。
如公司由不同税率的资产组成，且双方同意一次性付款，而不区分单个资产的可归属价值，则应将最高税率适用于一次性付款。
应当强调的是，税务机关可以对双方的不动产和商誉进行估价，从而产生增税的风险。
股票交易和资产交易：面向第三方的风险和责任
在购买股份或股权（“股票交易”）时，买方间接承担所有与公司先前管理有关的风险。
另一方面，在收购公司或公司分支机构（“资产交易”）时，双方可以决定转让的范围(资产和关系)，从而在相互关系中确定买方所承担的风险。
但是，在与第三方的关系方面，有一些规则是当事各方不能违背的，这些规则对买卖双方的风险有重大影响，从而对双方之间的谈判协定有重大影响。主要内容如下:
- 雇员:与公司买家的雇佣关系继续存在。转让时，买卖双方应对雇员的所有索赔承担连带责任（条款2112 c.c.)。
- 债务：卖方有义务偿还直至转让之日的所有债务。买方有义务承担会计账目上产生的债务（条款2560 c.c.)。
- 债务和税务责任：卖方有义务支付转让之日之前的债务、税款和税务处罚。
- 除了会计账簿产生的与应付税款有关的义务外 (条款2560 c.c.)，买方还应承担税款和罚款，即使这些税款和罚款未出现在会计账簿中，也应遵守以下限制 (法令472 / 1997，条款14):
- 卖方事先执行的利益;
- 不超过所购买公司或公司分支机构的价值;
- 对于尚未存在争议的税收和罚款，责任只适用于与公司被出售当年及之前两年有关的税收和处罚;在公司被出售前两年之前的税收和处罚，其责任仅适用于该期间内有争议的税收和罚款;
- 在税务机关契约移转日期产生的债务范围内。税务局必须出具一份证明，证明存在争议和债务。申请后40天内未签发的否定证书可免除买方的合同责任:
- 合同：双方可以选择转让哪些合同。就转让的合同而言，即使未经第三方同意，买方也会接管不属于个人性质的经营合同(即卖方提供客观或主观上不可互换的个人性质的给付))。此外，如果有正当理由 (例如，买方由于其财务状况或技术能力不能保证能够履行合同)，第三方可以在3个月内退出合同(条款2558c.c.)。
一些应对风险的工具
为了应对由第三方责任引起的风险以及与收购相关的一般风险，可以使用各种谈判和合同工具。让我们来看一些例子。
在收购公司或公司分支机构(“资产交易”)时:
雇员：可以与雇员就合同条件的变更达成一致，并免除买卖双方的连带责任（来自条款2112 c.c.）。为了使协议有效，必须在“受保护”的基础上(例如在工会的协助下)与雇员达成协议。
债务：
- 通过相应降低价格将债务转移给买方；价格的降低还减少了运营的财政成本。如果发生债务转移，则可以根据债权人的要求获得卖方解除债务责任声明，以保护卖方 (来自条款2560 c.c.); 或者可以预计，买方将在公司转让（“关闭”）的同时偿还债务。
- 对于未转让给买方的债务，请从债权人处获得使买方免于承担责任的声明（来自条款2560 c.c.）
- 对于无法获得债权人解除声明的债务，应同意有利于卖方的担保形式（针对转让债务）或有利于买方的担保形式 (针对非转让债务)，例如，推迟部分价格的付款 (对买方有利)，部分价格的信托保证金 (“托管”)，银行担保或由股东承担。
债务和税务责任:
- 向税务局申请法令472/1997的条款14中关于未决债务和争议的证明；
- 通过相应降低价格将债务转移给买方；
- 商定有利于卖方的担保形式（针对转让债务）和有利于买方的担保形式（针对未转让债务或尚未解决的争议），例如上文所述的一般债务担保。
合同：针对转让合同:
- 检查卖方在转让之日之前所承担的给付义务是否已得到适当履行，以避免可能妨碍合同履行的第三方诉讼的风险;
- 至少对于最重要的合同(除非出于保密原因)，应寻求第三方对合同转让批准的确认。
在收购股份的交易（“股票交易”）中，买方间接承担与公司先前管理有关的所有风险，其中一些工具包括:
- 尽职调查。 对公司进行深入的法律、税务和会计尽职调查，以便在谈判和合同中预先评估并管理风险。
- 声明、担保(R&W)和赔偿。在收购合同(“股票购买协议”)中，预先就公司的情况向卖方提供一系列详细的声明和担保，以及在违约情况下的赔偿义务（“商业担保”：财务报表、参考资产负债表、合同、诉讼、环保法规、开展业务的授权、债务、信贷等）。声明和担保的谈判通常通过管理尽职调查的结果来实施（例如：尽职调查引起的争议不包括在声明、担保和赔偿中，各方在确定价格时须予以考虑）。在意大利的股票交易中，关于公司状况的声明和保证（“业务保证”）以及赔偿义务的规定是必要的，因为如果没有这些条款，如果公司的实际情况与购买时考虑的情况不同，买方则无法从卖方那里获得赔款或补偿（除非在极端情况下、极为罕见）。
- 为买方提供担保。保证买方在对方不遵守声明和担保的情况下获得有效补偿（或部分补偿）的工具。 其中包括：（a）延长部分金额的支付；（b）在声明和担保期间，以及在发生争议到确定争议的阶段，以信托保证金（“托管”）的形式支付部分金额； （c）银行担保； （d）W＆I保单，即涵盖在违反声明和担保的情况下买方所承担风险的最高赔偿额（特定风险除外）的保险合同。
其他影响股票交易和资产交易选择的因素
当然，通过股票交易或资产交易在意大利进行收购交易的选择，也取决于交易的税收成本以外的其他因素。以下是一些情况：
- 购买部分业务。 当资产交易不涉及卖方整个公司的购买而仅涉及其一部分（公司分支机构）时，则选择资产交易。
- 问题公司的状况。当目标公司的状况非常棘手，买方无法承担所有来自公司先前管理的风险时，就选择资产交易。
- 保留卖方的角色。当你想让卖方在被收购的公司中占有一席之地时，你可以选择股票交易。在这种情况下，除了在管理中发挥作用外，卖方通常会持有少数股份，并在一定时间后拥有退出条款（出售权和认购权）。这些条款通常将价格与未来的结果联系起来，因此，从买方的利益出发，可以激励卖方发挥管理作用；从卖方的利益出发，可以增强购买时未实现的利润前景。
A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.
One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:
- the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
- the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.
This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.
No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.
On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.
Indemnification
Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.
The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).
Termination by the agent
The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:
- reduction of the activities in disagreement with the contractual stipulation
- breach of exclusivity (territory and/or products), if so stipulated in the agreement
- determination of prices that makes the agency unfeasible and
- default on payment of the commissions
- force majeure
Termination without cause
Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.
Can principal avoid the indemnification?
The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:
- acts by agent causing disrepute of the principal
- breach of obligations related to the agency activities
- criminal conviction related to honor, reputation
These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.
As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.
Potential risk: configuring employment relationship
In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.
Agent vs. employee
For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.
The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.
The elements of an employment relationship are:
- Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
- Non-eventuality – exclusivity: the services are rendered in a regular basis;
- Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
- Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances
In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.
As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.
Needless to say, the result could turn into a considerable potential contingency.
The author of this article is Paulo Yamaguchi
The procedure to incorporate a foreign owned company in Spain is, in principle, easy and straight forward, however it is necessary to take into account certain new requirements derived from the tax and the anti-money laundering regulations, which could cause long delays in the incorporation process, even to EU and US companies, if they are not well advised and managed from the beginning of the procedure.
The first step consist in collecting information about the foreign shareholder, in order to be able to prove its legal existence and activities: the foreign shareholder(s) will have to grant before a Notary Public in its country of residence a power of attorney authorising somebody in Spain to obtain its tax identification number (“NIE”), and also represent it before the Spanish notary when signing the deed of incorporation. In case the foreign shareholder is an individual person, the NIE should be applied for before the Spanish police or the Spanish Consulate at the country where the investor lives.
If the shareholder is a corporation, apart from the Power of Attorney, it will have to obtain a certificate from its Companies’ Registry or Chamber of Commerce, stating its legal existence and main characteristics. This document is called “good standing certificate” (in the UK and US), “K-bis” (in France), “KvK” (in the Netherlands) or “visura” (in Italy). These two documents, the Power of Attorney mentioned in the above paragraph and the certificate from the Companies’ Registry, will have to be Apostilled or legalized by the correspondent Ministry, and Sworn translated into Spanish. Please note that we use to draft bilingual powers of attorney in order to avoid its sworn translation.
The foreign shareholder will have to prove that its income is obtained from legal activities in order to be able to open a bank account in the name of the new company. The main document to prove this could be the Corporate or the Personal Income Tax return filed in its country of residence, but there could be other means, especially in case of individual persons.
In case of a corporate shareholder, it will be necessary as well to declare, in principle through a public deed granted in Spain, who are the individual persons who, directly or through other companies, will hold more than a 25% interest in the new company to be incorporated. In case nobody holds more than a 25% (i.e. because there are 5 individual shareholders, holding each of them a 20%), it is declared that the effective control of the new company corresponds to its director.
At this stage, it is also necessary to mention that the person(s) who will be the director(s) of the new company, in case they are foreigners, will also need to obtain their personal “NIE”. The NIE should be applied for before the Spanish police (this could be done by a proxy duly authorised though a Power of Attorney granted by the foreign director) or before the Spanish Consulate nearest to the city where the investor lives. In order to be a director of a Spanish company it is not necessary to be a shareholder, nor to have residence and work permit in Spain (provided the foreign director does not live in Spain).
Meanwhile the necessary documents (Powers of Attorney, Companies’ Registry certificate, etc.) are being prepared by the foreign shareholder, the lawyer in Spain will apply for the new company’s name. It is advisable to point out that generic or usual names are not available quite often, therefore it is necessary to think in original names. Three different names could be applied for simultaneously.
The drafting of the company’s Articles of Association or By Laws could be very quick, except if the company is going to have several shareholders and they wish specific clauses. In this case, it is also advisable to draft a Shareholders Agreement. The Shareholders’ Agreement could just contain some basic rules on dedication, compensation, non-competition, etc. and some more sophisticated rules on the sale of shares (tag along and drag along rights). As regards the By-Laws, they should mention the company’s name, its activity or activities, address in Spain –which cannot be just a P.O. Box-, share capital, number of shares and its face value, and starting date for the fiscal year, among other standard clauses.
The management of the company could be organized through a sole director, two directors who could act jointly or separately, and in case there are more than three directors, they should organize themselves through a Board of Directors, being usual in this case to appoint a C.E.O. In order to be a director it is not necessary to be a shareholder. Under Spanish laws, the director(s) could be held liable for some company’s debts under certain circumstances which are legally defined. For this reason, it is necessary that the directors formally accept their appointment (personally appearing before the Notary or through a Power of Attorney).
Before the incorporation, it will be necessary that either the new company’s director (the person to be appointed) or the representative of the corporate shareholder appears personally before the bank where the company will have its first bank account and signs the correspondent documents (KYC regulation). Once the bank account is opened, the shareholder will have to send a bank transfer for the new company’s share capital. In Spain, the minimum share capital for a limited company (S.L.) is Euros 3.000, while for a “Sociedad Anónima” (S.A.) it is Euros 60.000, but only 25% should be paid off at the incorporation moment. It is interesting to note that contributions to the share capital could be made in cash – which is the most common operation, especially at the incorporation – or in kind, with any type of assets: real estate, machinery, goods, trademarks, etc. The money for the share capital should be sent to the new company’s bank account from an account owned by the shareholder (or from each account owned by each shareholder, should they be several ones), not by any other different person. Once the Spanish bank receives the transfer, it will issue a certificate, which is necessary in order to incorporate the company.
Once all the documents are ready, it is possible within very few days (almost immediately) to make the appointment with the Notary and sign the public deed of incorporation. This can be done at any notary in Spain, not being necessary that the notary practises at the same city where the company will have its corporate address. In order to summarize, the list of the necessary documents is:
- Power(s) of Attorney granted by the foreign shareholder(s), apostilled and sworn translated.
- Certificate regarding the legal existence of the foreign shareholder (only if it is a corporation), apostilled and sworn translated.
- Statement on who are the last individual shareholders holding more than 25% interest in the new company, directly or indirectly (only in case of corporate shareholders).
- NIE of the foreign shareholder(s).
- NIE of the new company’s director(s), should they be a foreigners.
- Certificate for the new company’s name.
- Articles of Association.
- Bank certificate regarding the contribution to the new company’s share capital.
The deed of incorporation is signed by the proxy (or the individual shareholder(s), should they prefer to personally appear before the notary) before the chosen public notary, being also necessary to sign an official form to report the foreign investment to a public registry depending on the Spanish Ministry of Finance.
Once the deed of incorporation is signed, the next steps consist in applying before the tax authorities to obtain the new company’s tax number (NIF / CIF) and filing the deed of incorporation before the Companies’ Registry. Some banks do allow new companies to operate once they have the NIF (which could be 2-3 days after the incorporation), while others request to wait until the deed of incorporation is filed at the Companies’ Registry (2-3 weeks).
An estimation of the necessary time to complete all the procedure is 30-45 days, but of course the main delay is related to speed of the foreign investor in obtaining the necessary documents.
Please note that if you wish to incorporate a foreign owned company in Spain it is always necessary to seek specific professional advice, as each case is different and regulations and the application of such regulations vary from time to time. The above article just explains the main steps and requirements for the incorporation of a company.
In all M&A operations one of the issues that deserves special attention as regards its analysis, ascertainment and negotiation is the tax liabilities. Even though the parties could agree on the amount of such contingencies, to negotiate the possible guarantees that the seller should grant in order to protect the buyer from a possible claim by the tax authorities, the term during which the guarantees should be in force, and to agree on the communication mechanisms between the parties (buyer and seller) and the legal defense strategies if such claim from the tax authorities arises, requires substantial negotiation efforts.
When the acquisition operation is formalized not through the purchase of shares, but through the purchase of the assets that form a business unit, the Spanish General Tax Law (“Ley General Tributaria” or “LGT”) provides a mechanism which implies an exception to the general principle provided by article 42 of the same law. Article 42 of LGT establishes the joint liability of the purchaser of a business unit for the tax liabilities of the selling company (“tax liability derived from company’s succession”). That is, in principle, according to article 42 of the LGT “the persons or entities that continue by any mean in the ownership or exercise of economic activities (the buyers) will be jointly liable with the previous owner for the tax liabilities derived from the exercise of such economic activities incurred by such previous owner”.
However, the joint tax liability of the buyer could be limited through the application before the tax authorities of the tax certificate regulated by article 175.2 of the LGT. This certificate should be applied for by the prospective buyer, with the authorization of the present owner (the seller), and, once issued, the tax liability of the buyer becomes limited to the debts, penalties and liabilities mentioned in the certificate. If the certificate is issued without mentioning any amount, or if the tax authorities do not issue it within a three months term from the application’s date, the applicant (the buyer) will be released from any tax liability derived from company’s succession.
The tax certificate for succession purposes includes the main taxes, as Value Added Tax and Corporate Income Tax, and can include as well debts derived from the withholding taxes on employees’ payroll, which in case of companies with a big number of employees could be of an outstanding amount. However, the buyer’s joint liability for salaries, related payroll amounts and social security contributions cannot be limited by such certificate, and such liability will always be joint with the business unit seller’s liability.
The application for the tax certificate should be filed before the acquisition of the business unit is completed, even if the issuance of the certificate takes place later tan the closing date (but of course, it is wiser to not close the acquisition before having the certificate). The certificate’s validity lasts for one year, as regards periodical tax obligations (for example, Value Added Tax, Corporate Income Tax and withholding taxes on salaries) and for three months as regards non periodical tax obligations.
It is very important to apply for the right tax certificate (“certificate for succession purposes according to article 175.2 of LGT”), and to not make a mistake and apply, for example, for the certificate regarding having fulfilled all tax obligations (“certificado de estar al corriente de las obligaciones fiscales”). Case law is plenty of judgments where a buyer applied for the wrong certificate, which showed no liabilities, and later on such buyer has been sentenced to pay the tax liabilities incurred by the previous owner of the business unit.
When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.
The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.
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Local legal advisors
The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.
Slowing down a bit to the benefit of certainty is a sound advice.
Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.
Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.
An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.
Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.
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Debt
Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.
As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.
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Tax/labor contingencies
Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.
Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.
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Material adverse change
Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.
Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.
In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.
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Guarantees and Indemnification
For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.
De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.
The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.
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Break-up Fees
A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.
Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).
In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.
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Recommendations
In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:
- Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
- Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
- On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
- Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
- MAC Clauses shall be clear, precise and objective; and
- However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.
The author of this article is Paulo Yamaguchi
当银行控股权或投票权达到至少10%或其他相关比例（20%、30%或50%）时，银行参股可被描述为“合格控股”。另外，获得（多数）管理委员会成员的任命权利，或对银行管理产生重大影响的手段，也都属于“合格控股”的范畴。
作为欧洲银行监事，欧洲中央银行（以下简称“欧洲央行”）负责批准对所有成员国银行合格控股的拟议收购。
为何收购合格控股需要获得提前批准？
审批程序旨在确保只有通过审核的合格股东可进入银行系统，以防止任何破坏银行系统运作的行为。
评估尤其旨在确保拟收购方拥有良好的信誉、具有必要的财务稳健性，并确保目标银行必须一直在其要求范围内，同时保证所使用的资金并不来源于犯罪活动。
谁可以获得合格控股？
通常来讲，所有符合评估标准的自然人或法人都可获得银行的合格控股。
评估标准有哪些？
评估标准统一按照欧洲标准。CRD IV列出了五点针对拟议收购的评估要求：
拟议收购方的声誉
拟议收购方是否诚实守信，比如，无犯罪记录或法庭诉讼？
另一方面则是收购方的专业能力，即他们在金融行业的管理、投资成绩。
拟议的新管理人员
的信誉和经验
收购方是否打算对银行的管理机构进行变更？
如果是，则必须对新董事会成员做出适当的评估。
收购方财务稳健
拟议收购方能否为该拟议收购提供资金，并且在可预见的未来保持良好的财务状态？
以确认谁将负责为目标银行的资本附加提供资金。
对银行的影响
银行是否依旧必须遵守审慎要求？
例如，银行不应该被置于压力之下，因为部分收购资金是通过债务融资。
另外，收购方的结构也不应过于复杂，否则会妨碍监管机构有效监督银行。
涉及洗钱或
恐怖主义融资的风险
是否可以证实所涉及资金与犯罪活动或恐怖主义无关？
审查还会评估该收购是否可能涉及或增加潜在的洗钱或恐怖主义融资的风险。
如何作出决定？
拟议收购方向目标银行的国家银行监管机构发出其希望获得合格控股的意向的通知。国家监管机构进行初步评估之后向欧洲央行提供一份提案草案。欧洲央行与国家监管机构合作，做出自己的评估。并将结果通知拟议收购方及参与评估的国家监管机构。
评估不应超过60个工作日。若需要其他信息，在某些情况下评估期限可延长20至30个工作日。
如果在同一时间，两个或以上收购方希望收购同一家银行会如何？
若欧洲央行同时收到多个合格控股意向通知，则必须平等对待。欧洲央行无权就倾向于哪个拟议收购方收购目标银行作出决定。欧洲央行的任务是确保所有拟议购方符合上述五个标准。若多个拟议收购方符合上述标准，那么关于谁将收购目标银行的最终决定将由银行所有者做出。
申请期间，欧洲央行可以提出其他要求吗？
是的，额外要求或是在各国监管当局的提议下或是欧洲央行自己认为有必要提出。然而，对拟议收购方提出的所有要求都必须与上述五条标准有关。若提出的要求会对拟议收购方产生不利影响，则须举行听证会，使拟议收购方有机会做出反应。
若申请人收到不乐观结果怎么办？
若拟议收购被拒绝或拟议收购方认为该收购决定并不乐观，拟议收购方可就该决定向欧洲央行行政审议委员会提出异议。若该程序结果不令人满意，则拟议收购方也可向欧盟法院提出上诉。
若两家银行合并将会如何？会引发合格控股评估吗？
是的，若合并导致一家银行在另一家银行持有10%以上，或CRD IV中规定的其他相关比例（20%、30% 或50%）股份或投票权，则会引发合格控股评估。但是，若合并不意味着收购合格控股权，则适用制度取决于该国家法律。部分欧盟成员国规定必须在合并前批准，而部分成员国并未做出该规定。
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