CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
6.5 Minimum Acceptance Conditions While the bidder may determine the minimum accept - ance threshold in its voluntary takeover offer, the man - datory takeover offer shall be unrestricted and uncon - ditional in this respect. The thresholds usually considered by bidders are: • over 50% of voting rights (simple majority), which usually enables the shareholder to make simple majority decisions such as the appointment of board members or dividend distributions; • two-thirds of voting rights, which usually enables the shareholder to make decisions such as increas - ing the registered capital and issuance of new shares; • three-quarters of voting rights, which usually ena - bles the shareholder to make even more serious decisions such as decisions on mergers; and • 90% of voting rights, which gives the shareholder the right to start a squeeze-out process (while also giving the minority shareholders the right to sell their shares to the majority shareholder). 6.6 Requirement to Obtain Financing It is legally possible to structure a private M&A trans - action so that the settlement is dependent on the pur - chaser obtaining the financing. However, this is usu - ally not accepted by the seller. Quite to the contrary: sellers usually seek some sort of reassurance that the purchaser has secured the financing before entering into the later stages of the negotiation, prior to enter - ing into binding agreements at the latest. For public offers, financing shall be secured upfront and the Czech National Bank may request the bidder to prove that it has sufficient funds to finance the bid. 6.7 Types of Deal Security Measures The bidder may generally seek any kind of deal secu - rity measure that is commercially negotiable. The gen - eral freedom of contract applies. A notable trend that has gained momentum since the COVID-19 pandemic is the increasing frequency with which purchasers are negotiating material adverse change clauses, more often than they did before the pandemic, to pro - tect themselves against unforeseen events that may
adversely affect the target (including disruptions such as the COVID-19 pandemic). 6.8 Additional Governance Rights Where there is a multitude of shareholders, it is com - mon to extend the protection and instruments afford - ed under statutory corporate law either by entering into a shareholders’ agreement or at least by extend - ing the articles of association. These documents usu - ally contain clauses addressing the right to appoint/ dismiss board members, reserved matters with veto rights of the minorities, restrictions on share transfers, anti-dilution protection, escalation/deadlock clauses and exit rights. 6.9 Voting by Proxy Shareholders may vote by proxy and this is common practice. Simple written power of attorney is usu - ally sufficient. In some cases, a certified signature of the shareholder on the power of attorney is required (ie, notarised and apostilled or even super-legalised, where applicable). Even though it is generally possible for a shareholder to give power of attorney to a board member, this is not common practice at public companies. Public companies usually offer their shareholders long-dis - tance voting (eg, per rollam voting, voting via email or post). Proxy fights are practically non-existent. 6.10 Squeeze-Out Mechanisms A squeeze-out mechanism is available for joint-stock companies (but not for limited liability companies). Once the shareholding of a single shareholder (as opposed to a group of shareholders, even if they are members of one and the same group of companies) reaches 90%, that shareholder has a right (but not the obligation) to buy out the minority shareholders. The same result can be achieved by transferring assets to the majority shareholder. The only substantial dif - ference is that the target company is consequently liquidated. The minority shareholders are entitled to receive fair compensation for their shares. However, disputes over whether compensation was fair do not in and of themselves lead to cancellation of the squeeze-out process.
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