CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
4.5 Filing/Reporting Obligations The disclosure requirements listed under 4.2 Material Shareholding Disclosure Threshold are applicable to the majority of derivatives. 4.6 Transparency Shareholders are not expressly required to disclose the purpose of their acquisition and their intention regarding control, but certain information on the inten - tions of the acquirer are required to be included in the takeover bid, including: • intentions related to the future business of the target company and, to the extent this is influenced by the takeover bid, intentions related to the future business of the acquirer; • strategic plans of the acquirer in relation to the target company and the potential consequences of the implementation of those plans on recruitment policies and the employment status of employees of the target company and the acquirer; and • intentions of the acquirer with respect to the man - agement board of the target company. The majority of M&A deals in Croatia are private deals, typically concerning acquisitions of shares in limited liability companies (which cannot be public), so in principle there are no statutory deal disclosure requirements. This being said, where a deal concerns a publicly list - ed company (whether the listed company is a target company or an acquirer or seller), inside information must be disclosed (made public) when required under Article 17 of the Regulation (EU) No 596/2014 (the “Market Abuse Regulation”). Information related to the financial instrument or an issuer is considered inside information if the following conditions are met: • it is precise; • it is not made publicly available; • it directly or indirectly relates to one or more issu - ers of the financial instruments or one or more financial instruments; and 5. Negotiation Phase 5.1 Requirement to Disclose a Deal
• if publicly available, it would likely have a signifi - cant impact on the price of the relevant financial instruments (noting that there is a likelihood of a significant impact if a reasonable investor would consider such information when making an invest - ment decision). In light of the above, and in reliance on the market sounding rules, it is rather unlikely that the target would be required to disclose information when first approached or when negotiation just commenc - es. Depending on the level of detail, the disclosure requirement may be triggered when a non-binding letter is signed or at any other point in the transaction when the above criteria have been met with respect to information. The signing of the definitive agreement would certainly trigger the disclosure requirement. 5.2 Market Practice on Timing When disclosure is mandated under the Market Abuse Regulation, there are essentially no deviations regard - ing market practice on the timing of disclosure and the legal requirements, as the Market Abuse Regulation requires that the disclosure is made as soon as pos - sible (provided that the available exceptions, including market sounding rules, can no longer be applied). 5.3 Scope of Due Diligence In Croatia, investors typically opt to conduct legal, financial and tax due diligence, although in recent years, separate environmental due diligence is also conducted in more transactions, distinct from the legal due diligence (this is becoming customary for acquisitions related to industries in which there is a higher likelihood of significant exposure in relation to environmental issues). The exact scope of the legal due diligence usually depends on the specifics of the target company, but in general it will cover corporate, commercial agree - ments, employment, regulatory, litigation, financing and real estate. If the transaction is structured so that there is a bid - ding process in which multiple potential buyers par - ticipate, then it is more likely that the data room will be pre-populated by the target/seller, and then updated on the basis of requests made by specific potential
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