The purpose of the Law dated 21 July 2012 on the mandatory squeeze-out and sell-out (The "Law") is to introduce within Luxembourg law the provisions of (i) a squeeze-out right in favour of Majority Shareholders (as defined below in paragraph 1.1 (i)), (ii) a sell-out right in favour of minority shareholders and (iii) some obligations in terms of notification and information for companies having their registered office in Luxembourg where some or all of their Securities1:
- are admitted to trading on a regulated market in one or more Member States; or
- have been, but are no longer, admitted to trading on a regulated market in one or more Member States, provided that the date on which the withdrawal from such a regulated market became effective does not go back more than five years, it being understood that Article 10 of the Law (Transitory provisions) provides that the squeeze-out/sell-out rights may, for a period of three years, be exercised for Securities on which the withdrawal from the regulated market goes back to 1 January 1991; or
- have been the subject of a public offering which gave rise to the obligation to publish a prospectus in accordance with Article 3 of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 or for which the obligation to publish such a prospectus has not been applied in accordance with Article 4, first paragraph of this Directive, and that the beginning of the offer does not go back more than five years.
Are excluded from the scope of the Law:
- companies whose object is the collective investment of retail deposits, submitted to the risk-spreading principle and whose shares are, upon holders' request, redeemed directly or indirectly, against these companies' assets (such as redemption at a value equal to or close to the net asset value); and
- takeover bids made in conformity with Directive 2004/25/EC of the European Parliament and Council of 21 April 2004 on takeover bids, until the expiry of any delay stipulated for the exercise of post rights to such an offer, i.e. under this Directive and law three months and during a period of six months from the expiry of this delay.
1. OBLIGATIONS OF NOTIFICATION AND INFORMATION
1.1. Any holder of Securities must notify the company and the Commission de Surveillance du Secteur Financier (the"CSSF") in the event that:
- it becomes a "Majority Shareholder" which is defined as any natural or legal person holding alone, or with persons acting together (agissant de concert), directly or indirectly, 95% of the capital carrying voting rights and 95% of the voting rights in a company; or
- it is a Majority Shareholder and falls below one of the thresholds qualifying as a Majority Shareholder; or
- it is a Majority Shareholder and acquires additional Securities of the company concerned.
The notification2 shall be made as soon as possible but not later than four trading days, the first of which shall be the day after the date on which the holder learns of the acquisition or the effective disposal, or of the possibility of exercising or no longer exercising the voting rights, or on which, having regard to the circumstances, it should have learned of it, regardless of the date on which the acquisition, disposal or possibility to exercise the voting rights takes effect.
The Law mentions the specific information which shall at least be inserted in the notification notwithstanding the fact that the CSSF may also request the Majority Shareholder to provide any relevant additional information.
1.2. Publication
Upon receipt of the notification but not later than three business days after such notification, the company shall publish the whole information included in the notification. The CSSF shall publish on its website, and for a minimum period of twelve months, a list of companies for which information has been validly notified.
1.3. Transitory provisions
The notification requirements (unless specifically excluded by the Law) also apply to shareholders which were existing Majority Shareholders when the Law entered into force. Such notification shall be made within the two months following the entry into force of the Law, i.e. by 1 December 2012 at the latest.
2. RIGHT TO SQUEEZE-OUT ("RETRAIT OBLIGATOIRE")
2.1 Principle
A Majority Shareholder may require the holders of the remaining Securities to sell those Securities following a bid.
When the company has issued several classes of Securities, the right to squeeze-out can only be exercised with respect to the class of instrument where the threshold of 95% has been reached, provided however that the two thresholds laid down for by the Law are also reached for the entire issued Securities, regardless of the class concerned.
2.2 Procedure
The Majority Shareholder shall first inform the CSSF of its intention to exercise its right to squeeze-out and shall commit to performing the transaction until completion. The Majority Shareholder wishing to exercise its right to squeeze-out shall ensure that it is in a position to provide the entire consideration in cash.
The Majority Shareholder shall forthwith inform the company and publish without delay its decision to squeeze-out. The CSSF shall determine the form and content of the information to be provided but this shall include at least:
- the identity and details of the Majority Shareholder;
- the name of the independent expert for the determination of the fair price;
- the methods of payment; and
- any other conditions the squeeze-out procedure is subject to.
2.3 Price
The right to squeeze-out must be exercised at a fair price ("juste prix") on the basis of objectives and appropriate methods as used in the case of transfer of assets.
The valuation report shall be drawn up by an independent expert appointed at the Majority Shareholder's discretion and paid by the Majority Shareholder. The expert must be independent of all the parties involved and have no conflicts of interest. He must have experience in valuing Securities and must carry out his report in accordance with objective and adequate methods.
Within the month following the notification, the Majority Shareholder shall communicate the proposed price as well as the valuation report of the Securities to the CSSF. The Majority Shareholder shall then communicate the proposed price to the company and publish it.
If there is no opposition against the proposed price by the other holders, the CSSF will accept this price as the fair price, which will be duly published on its website.
2.4 Opposition right
Within the month following the publication of the proposed price, each holder of the remaining Securities may oppose the squeeze-out project.
Such opposition must be notified to the CSSF which may decide upon proposal by the company among five candidate experts to appoint a new independent expert to establish a new valuation report and proposed fair price. The price will ultimately be determined by the CSSF.
2.5 Delivery of Securities
Securities covered by such a right to squeeze-out and which are not delivered at the final payment date at the latest shall be considered as being transferred ipso iure to the Majority Shareholder. The price shall then be deposited on the first business day following that date.
2.6 Exclusivity
Once a squeeze-out procedure has been launched, no sell-out procedure can be launched until the squeeze-out procedure has been completed.
3. RIGHT TO SELL-OUT ("RACHAT OBLIGATOIRE")
3.1 Principle
Minority shareholders have the right to force the Majority Shareholder to purchase their shares provided that the notification to be addressed to the CSSF with respect to the exercise of the sell-out right occurs at the date on which:
- the conditions stipulated above for the exercise of the sell-out right are fulfilled;
- the acquisition of the Securities by the Majority Shareholder has been published within the past three months; and
- the latest sell-out procedure was launched at least two years before the publication of the CSSF's decision with respect to the fair price.
3.2 Procedure
The holder of Securities shall notify the Majority Shareholder of its intention to exercise the sell-out right by registered letter. A copy of the letter shall be addressed to the CSSF and to the company.
3.3 Price
The determination of the proposed fair price is similar to that described above for the squeeze-out process. It should be noted that the fees of the expert shall also be supported here by the Majority Shareholder.
3.4 Opposition right
The opposition procedure is similar to that described above for the squeeze-out.
It should be noted that all holders of remaining Securities who challenge the proposed price shall be obliged to participate in the sell-out procedure.
3.5 Concomitant exercise of the squeeze-out right
Majority Shareholder may exercise its squeeze-out right until the date at which the fair price is published by the CSSF. In the latter case, the sell-out right and its procedure shall become void.
4. ROLE AND POWERS OF THE CSSF AND PENALTIES
The Law grants to the CSSF the authority and powers to ensure that the provisions of the Law are complied with. In particular, the CSSF may apply fines of up to 125,000 euros to persons who fail to comply with the notification and information requirements or who fail to provide the information requested by the CSSF.
Imprisonment and criminal penalties may also be triggered if inaccurate and incomplete information is deliberately communicated.
Footnotes
1. "Securities" means securities (valeurs mobilières) carrying voting rights in a company, included depositary receipts representing shares carrying right to give voting instruction.
2. Circular CSSF 12/545 includes the application form required for such notification.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
