CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
6.6 Requirement to Obtain Financing Private M&A deals are somewhat frequently financed by way of debt financing, and there is nothing prevent - ing the transaction being conditional on the acquirer obtaining financing, but in practice it is generally expected that such financing will be obtained (or that the acquirer already has the necessary funds and as a consequence the deals rarely include an exit possibil - ity where financing would not be obtained). Takeover offers subject to the Croatian Takeover Act cannot be conditional on obtaining financing since the acquirer is mandated under the law to deposit the required cash or alternatively provide a first call bank guarantee, in the amount equal to the amount required for payment for all the shares subject to the takeover offer. 6.7 Types of Deal Security Measures In principle, there are no restrictions on deal security measures in private M&A deals, provided that the par - ties agree on such mechanisms. In practice, the par - ties most commonly agree on contractual penalties for the party that fails to close the deal for a reason not specifically allowed under the definitive agree - ment. Non-solicitation provisions are also somewhat frequently used (but should also be assessed from a competition law perspective), as are provisions on material adverse changes. Deal security measures are far less scarce in trans - actions where the Croatian Takeover Act applies, as conditions in these deals are regulated under the law. 6.8 Additional Governance Rights If the bidder is not acquiring 100% ownership of the target, the bidder will usually aim to have a sharehold - ers’ agreement in place, regulating specific corporate governance issues that are not expressly dealt with under the Croatian Companies Act (or that may be regulated differently from the default statutory rule). Such provisions typically include: • the right of the bidder to appoint a particular num - ber of management board members (ie, directors) or supervisory board members (if the target com - pany has a supervisory board in place); • tag-along and drag-along provisions;
that any encumbered shares would not be subject to the takeover bid. 6.5 Minimum Acceptance Conditions The voluntary takeover bid may be subject to the mini - mum acceptance threshold, which cannot be lower than the controlling threshold. Where the Croatian Takeover Act is not applicable (ie, in private M&A deals), no minimum acceptance condi - tions are prescribed under the law, but the acquirers are typically interested in acquiring either the entire shareholding or either 95%, 90%, 75% or above 50% shareholding. This is because the default rule is that the shareholders’ meeting shall adopt decisions by simple majority (above 50%) of the votes cast, where the law or the Articles of Association do not provide for a higher majority. A vast number of shareholders’ meeting decisions require a simple majority, including most notably the adoption of annual financial state - ments, the distribution of profits, and the appointment and revocation of management board members. Decisions requiring a 75% majority of either the votes cast or capital represented at the shareholders’ meet - ing include a number of decisions that might be classi - fied as material in running the company’s operations, and most notably including decisions on each of the following: • amendments to the Articles of Association;
• share capital increase; • share capital reduction; • dissolution/liquidation of the company; • merger; and • transformation of corporate form.
Finally, only a handful of decisions require a majority above 75% – usually 90%, 95% or 100% under law – notably including decisions related to: • imposing additional obligations on the shareholder(s); • the company’s waiver of damage claims against its founders; and • the company’s waiver of damage claims against management board members.
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