MONACO Law and Practice Contributed by: Stephan Pastor, Emeline Elbaz-Mondeux and Coralie Trudon, CMS Pasquier Ciulla Marquet Pastor & Svara
9. Defensive Measures 9.1 Hostile Tender Offers
8.2 Special or Ad Hoc Committees There is no obligation under Monaco law to establish special or ad hoc committees to analyse business combinations. It is also not common for boards of directors to establish such committees in practice, in the event of a conflict of interest. This kind of issue is addressed by mandatory law provisions submitting, as the case may be, the completion of a deal such as a merger or a buyout to the prior approval of the shareholders, should one of the directors have direct or indirect interests in the bidding company. 8.3 Business Judgement Rule Although neither Monaco statute law nor case law expressly provide for a rule like the business judge - ment rule, Monaco courts are not likely to intervene in the board of directors’ judgement, as long as it is char - acterised that, as part of a deal, the directors acted reasonably and with a standard of conduct consistent with ensuring the pursuit of the corporate interest. 8.4 Independent Outside Advice Companies’ directors involved in a business combi - nation usually receive outside advice from lawyers and financial/strategic advisers, as well as certi - fied accountants, which is particularly necessary in Monaco to help directors go through the government authorisation process when performing a deal involv - ing foreign investors and/or directors. 8.5 Conflicts of Interest There are no legal provisions in Monaco expressly tackling the issue of conflicts of interest of sharehold - ers or advisers, unless they are considered as de facto directors ( dirigeants de fait ). In practice, however, it is highly recommended for shareholders and advis - ers to disclose a conflict of interest related to a con - templated deal, if only to maintain a degree of trust between the parties. Conversely, Monaco law contains provisions whereby when a director has a conflict due to a direct or indi - rect interest in another company, he or she should disclose it to the shareholders prior to the conclu - sion of the deal and obtain the prior approval of the shareholders’ general assembly. Any deal concluded without complying with this procedure is null and void.
Monaco law does not distinguish between a hostile and a friendly takeover. In any event, hostile offers are uncommon, since all companies are private, mostly small or medium-sized, and managed by their major - ity shareholders. 9.2 Directors’ Use of Defensive Measures Even though Monaco law does not expressly define defensive measures, in practice, when facing a hostile bid, the management or the board of directors of the target entity acts to attempt to protect its position in the company by implementing certain measures likely to impede the hostile bidder in taking control. These measures generally require the prior approval of the shareholders and may consist of an increase of share capital, the purchase of the target company’s shareholders’ own shares or seeking an alternative bidder. 9.3 Common Defensive Measures See 9.2 Directors’ Use of Defensive Measures . 9.4 Directors’ Duties If directors obtain the prior approval of the majority of shareholders to implement defensive measures when facing a hostile private bid, they have a permanent duty to act consistently with the corporate interest of the company, understood under Monaco law as the interest of the legal entity, pursuing its objectives in the common interest of stakeholders and with a view to ensuring the prosperity and continuity of the business. 9.5 Directors’ Ability to “Just Say No” Even where they are also majority shareholders, direc - tors cannot “just say no”, as they are bound by a gen - eral duty to act in the best interest of the company by considering all factors that may be impacted by the offer. For example, an unjustified refusal of a deal offer where the target company is in dire straits and is likely to benefit from a takeover offer could later make the directors liable towards the target entity’s creditors for its later insolvency.
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