GREECE Law and Practice Contributed by: Stathis Orfanoudakis, Theodore Konstantakopoulos and Yolanda Antoniou-Rapti, Zepos & Yannopoulos
as a standalone business or be absorbed by the acquiring group). The stock component of the consideration is heavily negotiated by the founders, who are the main recipients of such stock together with any other key executives or employees. On the other hand, venture capitalists are generally less keen to acquire stock as part of a secondary sale. 4.4 Liquidity Event: Certain Transaction Terms In a sale of a company, all selling shareholders – including founders and venture capital inves- tors – are requested to provide representations and warranties regarding title to shares and non-encumbrance thereof, as well as capacity to enter into the respective transactional docu- mentation. The remaining so-called business warranties are then expected to be provided by the founders and/or any other key selling stake- holder involved in the company’s management/ operation. The extent of the business warranties – as well as any specific indemnities addressing “red flags” identified during the buyer’s due diligence – are the focal point of negotiation between the two sides, along with any limitations of liability of the parties standing behind the warranties for potential breaches thereof. By way of example, tax matters are frequently addressed through an indemnity (especially as regards companies with many years of operation), given that the Greek tax regime is quite complex and the potential exposure may be significant. Mechanics for gradual release of the purchase price, such as an escrow/holdback, are also frequently used as a means of risk allocation between the parties. Right before the COVID-19 outbreak, an upsurge in warranty and indemnity
(W&I) insurance policies was also noticed. After a relative downturn, we are now seeing contract- ing parties opting for W&I insurance more fre- quently – although these are usually in cases of larger transactions, provided the agreed trans- action timeline permits it.
5. Spin-Offs 5.1 Trends: Spin-Offs
There is a clear trend towards consolidation of business activities and Greek companies are now focusing on their core operations. This, in turn, has led to more spin-offs, particularly in the case of larger corporate groups with multiple operations. Spin-offs are now being utilised as a means of unlocking value, as well as attracting investor interest, and there have been quite a few M&A transactions in the past couple of years (espe- cially auctions) in which the spin-off of a non- core business was either performed at a pre- liminary stage of the transaction (or even at the structuring phase) or designated as a condition precedent for the completion of the transaction. 5.2 Tax Consequences Structuring a spin-off as a tax-free transaction is feasible in Greece. Greek tax legislation provides various regimes for implementing a tax-neutral spin-off in compliance with the respective tax incentives laws, such as Legislative Decree 1297/1972, Greek Law 2166/1993 and Greek Law 4172/2013 (the “Greek Income Tax Code”). 5.3 Spin-Off Followed by a Business Combination Spin-offs followed by business combinations are possible and rather frequent in the Greek mar- ket, whether as part of a multi-tiered corporate
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