ZAMBIA Law and Practice Contributed by: Emmanuel Manda, Simon Kapampa, Innocent Mung’omba and Kaluwe Libeleki, Musa Dudhia & Co.
contrary indication is provided for in the articles of association. However, the articles of association of a private company cannot impose any restriction on the transferability of shares after they have been issued, unless all the shareholders have agreed in writing. 5.5 Definitive Agreements The usual practice in Zambia is to have the tender offer terms and conditions documented. For publicly traded companies, the Takeover Rules require that the offer document should contain all such information as is necessary to enable offeree shareholders to reach a properly informed decision. 6. Structuring 6.1 Length of Process for Acquisition/Sale The timeline for acquiring or selling a business in Zambia depends on various factors, including the structure/complexity of the transaction, the type of company (ie, whether it is a private company or public company), sector-specific regulatory approvals and the extent of due diligence to be undertaken. How - ever, the process generally takes anywhere from five Zambia has a mandatory offer threshold under the Takeover Rules, regulated by SEC. A mandatory offer must be made by any person who acquires more than 35% of the voting rights of a listed company or by any person or persons who hold between 35% and 50% of the voting rights of a company and acquire more than 5% of the rights of the company in any 12-month period. 6.3 Consideration In Zambia, both cash and shares are used as con - sideration in M&A transactions. This notwithstanding, parties, more often than not, prefer to use cash as consideration as opposed to shares. Tools that are used to bridge value gaps between par - ties include, inter alia, earn-outs, where a portion of the purchase price is contingent on the target achiev - ing certain financial or operational milestones post- closing, and escrow arrangements, where a portion to nine months to be completed. 6.2 Mandatory Offer Threshold
of the purchase price is held in escrow and released based on agreed performance criteria. 6.4 Common Conditions for a Takeover Offer The Takeover Rules do not restrict the use of offer conditions. Common offer conditions include mini - mum acceptance conditions, where the offer is con - ditional upon acquiring a specified percentage of shares, regulatory approvals, due diligence comple - tion, and shareholder and board approvals. 6.5 Minimum Acceptance Conditions The minimum acceptance condition in a tender offer is typically set based on the relevant control thresholds under the Securities Act, the Companies Act and the Takeover Rules. Most bidders set the minimum acceptance condition at: • 50% +1 of voting rights (Simple Majority Control), to ensure the bidder gains effective control over the target, allowing the passage of ordinary resolu - tions at shareholder meetings; • 75% of voting rights (Special Resolution Control), to allow the bidder to approve special resolutions; or • 90% of voting rights (Compulsory Squeeze-Out Threshold). If the bidder secures 90% or more of the shares, it can trigger the compulsory acquisi - tion (squeeze-out) process under the Companies Act. 6.6 Requirement to Obtain Financing There are no restrictions prohibiting the placing of a condition on the bidder obtaining financing. 6.7 Types of Deal Security Measures Deal security measures that a bidder can seek include, inter alia, exclusivity agreements, where the target agrees not to solicit or engage with other potential buyers for a specified period, break fees (termination fees) payable by the target if it terminates the deal due to certain conditions (eg, accepting a higher compet - ing bid), and no-shop clauses, preventing the target from actively seeking alternative bids. However, in the recent past, it has become more common for deals to be undertaken via an auction process with multiple
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