ARMENIA Law and Practice Contributed by: Varoujan Avedikian, Tamara Martirosyan, Sofya Sargsyan and Larisa Gevorgyan, Andersen Legal
3. Mergers and Acquisitions 3.1 Transaction Structures
It should be noted, however, that certain sectors are subject to licensing requirements under Armenian leg - islation. These sectors include, for example, banking and finance, telecommunications, pharmaceuticals and healthcare. In some instances, prior approval from the relevant regulatory authority may be necessary for acquiring a participation or shareholding in companies operating within these licensed fields. Therefore, FDI generally does not require review or approval by national authorities, except for invest - ments in industries considered strategic or sensitive from the perspective of public health, financial stability or national security, among other things. 2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate The Armenian government has stated that it maintains an open-door policy for FDI, especially for those com - ing from multinational companies. Additionally, three major legislative reforms are underway, particularly the overhaul of the Armenian Bankruptcy Code, the Arme - nian Company Law and the Law on Investments, with technical assistance provided by international devel - opment organisations. These reforms aim to stream - line processes, protect creditors, shareholders and investors, and bring these three important legal frame - works up to the level of international best practices. While there has been some discussion of introducing mandatory screening of FDIs in the Investment Law, as of the date of this note, no such policy decision has been formally adopted by the Armenian govern - ment. Even though the Armenian government officially states that it strives to ensure the protection of FDI from unlawful expropriation and other negative meas - ures, there are some ongoing arbitrations against the government regarding various violations of bilateral investment treaties, the latest being the case involving the Electrical Networks of Armenia, where the gov - ernment decided to appoint a public official as the administrator of the company.
M&As in the traditional sense are less common in the Armenian market compared to straightforward share or asset acquisitions. When M&A transactions do occur, they usually take the form of consolida - tion mergers, forward mergers or reverse mergers, as allowed under the Civil Code and the Law on Limited Liability Companies and Law on Joint-Stock Compa - nies. These structures can be used within corporate groups, for internal reorganisations or for third-party market acquisitions. In practice, most acquisition transactions are struc - tured as share or asset acquisitions. A share acquisi - tion is generally the most efficient method for gaining control of a company because it allows the buyer to keep existing licences, agreements and staff without needing to re-register assets or reassign contractual relationships. On the other hand, an asset acquisition may be preferred when the investor wants to cherry- pick specific assets or business lines and avoid taking on historical liabilities, although this approach often involves additional tax and registration burdens. Public M&A (mergers and acquisitions of listed enti - ties) is infrequent due to the small number of listed entities on the Armenian Securities Exchange. When applicable, acquisitions of public companies are reg - ulated by the Law on the Securities Market, which includes mandatory takeover, tender offer and disclo - sure requirements under the supervision of the CBA. Minority investments are typically structured either as direct share acquisitions or, following recent amend - ments to the Civil Code, as convertible debt instru - ments that allow the investor to delay equity entry until specific milestones are achieved. In these cases, the shareholders’ agreement is crucial in defining rights such as access to information, veto powers, reserved matters, tag-along and drag-along rights, and exit strategies, since Armenian company law offers statu - tory protections for minority shareholders. For foreign investors, a key consideration when entering an M&A transaction is structuring through a special purpose vehicle (SPV). Depending on the
16 CHAMBERS.COM
Powered by FlippingBook