BULGARIA Law and Practice Contributed by: Yordan Naydenov, Mihail Vishanin and Hristian Gueorguiev, Boyanov & Co.
Board, as the case may be) and is prohibited from participating in further deliberations or voting on the subject. However, disputes relating to conflicts of interest rarely end up in court. 9. Defensive Measures 9.1 Hostile Tender Offers Bulgarian law does not provide for the classification of takeovers as friendly or hostile. 9.2 Directors’ Use of Defensive Measures As mentioned in 8.1 Principal Directors’ Duties , the management body of the target company may not perform any acts aiming at frustration of the accept - ance of the tender offer or infliction of material diffi - culties or material additional expenses on the bidder. However, the directors are expected to issue a moti - vated statement on certain aspects of the tender offer, and as mentioned in 7.1 Making a Bid Public , the public company is to make a disclosure of such state - ment. In addition, the management body may seek a competitive tender offer containing more favourable terms. Hence, the management body has its means to oppose a takeover attempt, should, in its motivated view, this be in the interests of the company and the shareholders. 9.3 Common Defensive Measures The most common defensive measure is the entitle - ment of the management body to search for an alter - native, more favourable tender offer and to express negative views on the presented tender offer. 9.4 Directors’ Duties Upon enacting defensive measures, the directors must comply with the law. Within seven days after receipt of any tender offer, the management body of the affected company must present a reasoned opinion on the proposed transaction to the Financial Supervision Commission, to the bidder, and to the representatives of the employees, or, where there are no such representatives, to the employees them - selves, among other things, as to the repercussions on the company and the employees from accepting the tender offer and the strategic plans of the bidder
for the target company and their likely implications for the employees and the place of business. In taking defensive measures, the general obligations of the directors of due care and loyalty to the company and to the shareholders still apply. 9.5 Directors’ Ability to “Just Say No” The directors are not entitled to “just say no”. Howev - er, they can influence the takeover process by seeking an alternative, more favourable offer or by delivering a well-justified and convincing negative opinion on the takeover. Litigation relating to M&A deals is not frequent. Pru - dent parties, especially in private M&A deals, would typically agree on reasonable protective measures aiming at sparing unnecessary court disputes (eg, reasonable de minimis and basket amounts, obliga - tions to negotiate, etc). During recent years, we have been seeing more and more cases of representation and warranties insurance, thus further reducing, if not eliminating, the risk of litigation between the parties to the deal. Another factor that may influence a deci - sion to litigate is the cost. Apparently small amounts of damages, which could be even lower than the cost of the litigation (if not caught by a de minimis clause), would not justify the commercial and administrative effort to start a lengthy and expensive trial with uncer - tain outcome. The larger the damage (especially in a sizeable M&A transaction), the higher the likelihood of litigation, since the parties tend to accept the higher costs of those proceedings in such cases, yet, again, cases of M&A-related litigation in Bulgaria are very rare. 10.2 Stage of Deal Most litigations occur after closing. They are mainly connected with untrue representations and warranties, or with calculation of the price, in the cases in which adjustments may be applied. Potentially, a litigation is possible in case of breach of the pre-contractual obligations: in Bulgaria, parties (i) have the statutory obligation to conduct the negotiations in good faith, 10. Litigation 10.1 Frequency of Litigation
227 CHAMBERS.COM
Powered by FlippingBook