MALTA Law and Practice Contributed by: George Bugeja, Stuart Firman, Nicholas Curmi and Luke Hili, Ganado Advocates
maturity or expiration of the instrument, and (iii) the name of the underlying issuer. In addition, to the extent that financial instruments as referred to in 4.5 Filing/Reporting Obligations are concerned, the relevant voting rights relating to those instruments will need to be set out separately within the same disclosure form.
However, in the event of a takeover offer as regulat - ed under Chapter 11 of the Maltese Capital Markets Rules on takeover bids, a potential offeror shall inform the MFSA of a bid and announce its decision to launch it within seven days of acquiring a “controlling inter- est” (as defined in 6.2 Mandatory Offer Threshold ) in the target company. With respect to private entities, there are no such requirements. 5.2 Market Practice on Timing Market practice on the timing of disclosures is typi- cally aligned with the legal requirements, specifically those set out under the Transparency Directive and the Takeover Directive (as transposed into the Mal- tese Capital Markets Rules) and as described in 5.1 In a negotiated business combination in Malta, buy- ers typically conduct full-scope due diligence across legal, financial, tax, regulatory and operational areas. Legal due diligence covers corporate structure, key contracts, litigation, employment, data protection, IP and compliance matters. The legal due diligence pro- cess would include both a review of publicly available information (through searches in different registers maintained by public registries including the courts of law) and a review of information/documentation uploaded in a virtual data room. Requirement to Disclose a Deal . 5.3 Scope of Due Diligence Financial reviews typically assess historical perfor- mance, liabilities, cash flow and working capital. Tax due diligence evaluates tax positions, exposures, incentives and compliance. Regulatory reviews are essential in licensed sectors such as financial servic - es, telecoms and gaming. Depending on the business, buyers may also undertake commercial, IT, cyberse- curity, environmental and technical due diligence. 5.4 Standstills or Exclusivity Parties to a transaction are generally free to negotiate contractual provisions and safeguards pursuant to the principle of sanctity of contract. Exclusivity provisions are very common and are typically agreed upon at the very outset of a potential transaction, including (in the context of a takeover offer) as part of any memoranda
5. Negotiation Phase 5.1 Requirement to Disclose a Deal
Assuming that the transaction involves the acquisi- tion/disposal of financial instruments which fall within the scope of the MAR, the general rule is that a trans- action must be disclosed to the public as soon as it is deemed to constitute “inside information” as set out in Article 7 of the MAR, provided that the disclosure of such information can be delayed if the conditions set out in Article 17 of the MAR are met. In other words, negotiations may (and typically do) remain confidential until such time as disclosure is required pursuant to the MAR. It should be noted that the Maltese Capital Markets Rules also require an issuer to promptly make an announcement in the event that the board of direc- tors of the issuer is advised or otherwise becomes aware that a purchaser is being sought for a “sub- stantial shareholding” (ie, 10% or more) in the issuer, is advised or becomes aware of a firm intention to acquire or dispose of a substantial shareholding, or is advised or otherwise becomes aware that an offer has been made to acquire or dispose of a substantial shareholding. However, given the conflict between this requirement and the rules relating to disclosure of information in terms of the MAR, the authors are of the view that the MAR rules should apply irrespective of the local (home-grown) disclosure requirements. In other words, there is an argument that disclosure should not be required where the information in ques- tion is not considered to be inside information or, where it is considered to be inside information, where disclosure is being delayed in terms of the relevant provisions of the MAR.
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