Mergers & Acquisitions

The term “Mergers & Acquisitions”intends to cover different types of transactions which from a legal perspective do not have necessarily a common denominator. One may categorize them in three general categories each of them showing the following characteristics:

(a) Conversions where the company’s form changes but its legal personality remains unaffected (in Greek company law all commercial companies have legal personality). As a result no transfer of property takes place, company’s external relations with third parties are not influenced etc. Internally the company’s structure and the rights and obligations of its members experience more or less significant changes.
(b) Mergers and divisions in strict sense where at least one company ceases to exist and its assets and obligations are transferred uno actu (universal succession) to at least one company which already exists or is constituted. The absorbing company (or companies) substitutes the absorbed company (or companies) in all its rights and obligations (including pending litigation) and the members (shareholders) of the latter become members (shareholders) of the former.
(c) Asset and share deals where either company’s significant assets or even more company’s enterprise or sectors of it with all relevant assets and liabilities are transferred to a third party (potentially to a newly established subsidiary [spin off ]) under the regime of the common rules of the Greek private law or a change of control at shareholders’ level is effected through the transfer of a significant shareholding. The common characteristic of both cases from an economic perspective is the transfer (in broad sense) of the company’s enterprise or significant parts of it although the legal issues that arise are of different legal nature in each case: an asset deal (a special type of which is the spin off ) raises issues of creditors’ and minority shareholders’ protection similar to the ones in a merger. On the other hand, in a share deal the main legal issue is not a company law, but a pure contractual law one: the protection of the purchaser (of the shares) against potential defects of the company’s enterprise should the transaction be considered as a transfer of the company’s enterprise. A special type of share deal transaction is the change of control pursuant to a voluntary or mandatory takeover bid: this transaction refers to listed companies and is subject to special legislation.

What are the characteristics of share transfer deal?

Investments in Greek companies can be structured as share deal or as asset deal. Both types of transactions are significantly different in terms of their economic and legal effects under Greek Law. Against the background of the overall lower taxation, parties tend to prefer to structure the sale of a business as a share deal rather than an asset deal. The sale of a company by way of a share deal has in general no effect on the target company’s assets, liabilities, contracts, employees and governmental authorizations. Nevertheless in many cases there exist contractual change of control provisions and a share deal may trigger certain rights of the counterparties of the target company, most often a right to terminate the contract. This is very common in financing agreements. Also the change of control may also trigger duties to comply with certain antitrust requirements as well as requirements of regulated industries, such as in the banking, insurance or media sectors (prior approval by antitrust and supervisory authorities). Also there is a takeover bid law (Law 3461/2006) that applies to the acquisitions of listed entities.

The vast majority of Greek companies are non-listed entities, organized as sociétés anonymes. Despite the economic importance and frequency of the acquisition of shares in non listed sociétés anonymes, there is no specific statute governing such transactions. Share transfers are subject to the general provisions of the Greek Civil Code and the codified law 2190/1920 on sociétés anonymes. These rules are specified by case law.

Under Greek law, one of the main features of the share is its transferability and thus all shares are presumed to be capable of transfer. Under statutory provisions the transfer of shares in a société anonyme are not subject to any restriction and do not require the consent of the shareholders or the board of directors, unless:

When do we use the term spin off?

Normally the term “spin off” is used in Greece to indicate the transfer of a business sector from a tax law perspective. However, the term (“spin off”) may also be used to indicate cases of splits, demergers, divisions, transfer of business as a going concern etc.

From a tax law perspective a “spin off” is usually dealt as a transfer of a business sector. In view of the above, our comments below focus on tax related matters and on the implementation of corporate and civil law in cases where the relevant tax incentive laws apply.

The use of tax incentive laws (Laws 1297/1972, 2166/1993 and art. 52 of L. 4172/2013) is optional. If none of the tax incentives is applicable, all relevant taxes will be imposed on the transaction at stake.

What is a spin off and how is this transaction executed?

A spin off is a form of corporate transformation, where a company (transferring) transfers one or more business sectors or segments to another company (receiving) which may either already exist or may be newly incorporated for the purposes of the transformation.

The transferring entity continues to operate its remaining sector/sectors and acquires shares of the receiving company in which the business sector or segment is contributed. The receiving company issues new shares resulting from the share capital increase. Those shares will be depicted in the transferring entity’s balance sheet.

Which is the general legal framework for transformations of companies in Greece?

The Greek corporate legislation is being tidied up and the transformations framework could not be excluded. The most notable recent development is that the scattered corporate law provisions are being consolidated in a single law, with little matters remaining as they are, such as the tax incentives. The new transformations law (the “NTL”) has not been upvoted yet by the Hellenic Parliament, but it is expected to be soon and its entry into force will be as of 01.01.2019.

Other important provisions related to transformations that will remain valid as of 01.01.2019:

• “tax incentives” Law 2166/1993, which provides several tax and other incentives for business transformations (merger, split, spin-off), thus encouraging M&A activity;
• “tax incentives” Legislative decree 1297/1972, again referring to incentives to encourage business transformations. After several extensions to its date of expiration, it has been amended to not have an expiration date anymore, but its application has diminished in practice due to the predominance of the more flexible and business-friendly Law 2166/1993;
• “tax incentives”, “cross-border” Law 4172/2013, which is the latest Greek income tax code;
• “tax incentives”, “cross-border” Law 2578/1998, on tax incentives for cross-border mergers, divisions etc. of EU member-states companies. Notably, the said Law transposed into Greek Law the Council Directive 90/434/EEC, which has already been repealed by the Council Directive 2009/133/EC. Law 2578/1998 has been amended to incorporate provisions of the latter Directive;
• “tax incentives”, “sector only” Article 16 of Law 2515/1997, on mergers between credit institutions;
• “cross-border” Law 3777/2009 on cross-border mergers of limited liability companies (implementation of Directive 2005/56/EC, which has already been repealed by Directive (EU) 2017/1132, the latter already having been proposed to be amended); this law, having a slightly different scope, actually comes in addition to the provisions dealing with the societas europeae (Law 3412/2005, council regulation 2157/2001), which already allowed the eventual cross-border merger of limited liability companies. Notably, in case that the absorbing company has a permanent establishment in Greece as a result of the merger, then the tax benefits provided by Law 2578/1998 (articles 1-8) may apply.