CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
9. Defensive Measures 9.1 Hostile Tender Offers
The Croatian Takeover Act reiterates the obligation of the directors (ie, the management board) to act in the best interest of the company during the takeover process. Furthermore, the management board of the target company is required to publish its opinion on the takeover offer within ten days from the date the offer is published. 8.2 Special or Ad Hoc Committees It is not common for the management of Croatian companies to establish special or ad hoc commit - tees in business combinations or when certain direc - tors are conflicted (nor do Croatian corporate laws expressly provide for such a possibility). 8.3 Business Judgement Rule The Croatian equivalent of the business judgement rule is the obligation for the management of the com - pany to act as prudent business people and to keep the business secrets of the company confidential. The management will not be in breach of this statutory duty if they reasonably believe that they are acting for the benefit and in the interest of the company, on the basis of appropriate information. This rule applies to any and all activities of the company and is not related exclusively to takeover situations. 8.4 Independent Outside Advice In Croatian practice, in a business combination sce - nario, directors usually seek financial and legal advice on various directors’ duties as well as the obligations for the company and directors stemming from the par - Court decisions on conflicts of interest of directors and shareholders (as well as advisers) are rather scarce in Croatia and fail to provide clear guidance on the interpretation of laws in this respect. Croatian corporate laws do contain provisions on conflicts of interest, primarily with respect to the company’s management, where the law requires the directors/management to obtain prior approval from the supervisory board of the company (or from the shareholders if there is no supervisory board) for par - ticular conflicting activities. ticular business combination. 8.5 Conflicts of Interest
Hostile tender offers are generally permitted under the Croatian Takeover Act but are not common, seeing as takeovers are rather scarce in general. The majority of deals are private deals, where hostile tender offers are not possible. 9.2 Directors’ Use of Defensive Measures In principle, directors are prohibited from using defen - sive measures under the Croatian Takeover Act. In this regard, unless they have the approval of the shareholders’ meeting, the directors of public target companies are not allowed to undertake the following activities in the period between the publishing of the notification that the obligation to undertake the takeo - ver has arisen and the publishing of the takeover offer: • increase the share capital of the target company; • conclude transactions outside of the target com - pany’s regular scope of business; • act in a way that might significantly jeopardise the future business of the target company; • decide on the acquisition or disposal of treasury shares; or • act with the aim of obstructing or preventing the takeover offer. This being said, seeking alternative (ie, competing) bidders is allowed and may be done without the Considering the limitations listed in 9.2 Directors’ Use of Defensive Measures , the most common defen - sive measures would be limitations on the transfer of shares or limitations regarding voting rights that may be included in the Articles of Association. This is espe - cially relevant for private deals involving limited liabil - ity companies, where the transfer of shares is often made subject to the consent of other shareholders (or a particular shareholder) or the target company. Such limitations may be imposed with respect to the transfer of shares in joint stock companies, where in particular situations the Articles of Association may also subject the transfer of shares to the consent of the target company. The Articles will typically list the approval of the shareholders’ meeting. 9.3 Common Defensive Measures
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