AUSTRIA Law and Practice Contributed by: Clemens Hasenauer and Albert Birkner, CERHA HEMPEL
Break-Up Fees Sometimes also called inducement fees, termi - nation fees or drop-dead fees, these will conflict with the Takeover Act if the amounts involved are substantial such that they de facto exclude or materially impede competing offers (in particu - lar, if they are not limited to just compensating the bidder for their out-of-pocket costs but also have some penalty element). Standstill Obligations The Takeover Act essentially already foresees these, containing statutory rules prohibiting the launch of a new or modified offer once the ten - der offer is published (with only very few excep - tions) and a statutory waiting period in case the offer is unsuccessful (see 6.11 Irrevocable Com- mitments ). 6.8 Additional Governance Rights If a company’s shares are not held by a single shareholder but by two or more shareholders, it is very common to stipulate a governance struc - ture among unaffiliated shareholders that goes beyond the protection and instruments afforded under statutory corporate law. Typically, governance documents include a shareholders’ agreement, the articles of asso - ciation themselves and by-laws for the manage - ment board (and the supervisory board and/or advisory board, if any). In general, governance documents frequently contain: • rights to appoint and dismiss members of the supervisory and/or management board (and/ or advisory board, if any); • a catalogue of reserved matters with veto rights or qualified majorities;
In public takeovers, financing must be secured upfront – ie, a qualified independent expert must certify in advance that the bidder is able to finance the offer. 6.7 Types of Deal Security Measures The principle of freedom of contract granted by Austrian law enables transaction parties to seek any deal security measure as long as they do not violate moral principles ( Sittenwidrigkeit ). Pur - chasers frequently aim to negotiate a material adverse change (MAC) clause to protect them - selves against unforeseen occurrences that may adversely affect the target. Such clauses may become increasingly important if the length of the interim period between signing and closing is dependent on governmental decisions for which a longer decision-making process may need to be factored in. In particular, the actual practice applied by authorities on foreign investment regulatory screening has impacted the length of interim periods for recent M&A transactions. However, in situations where the Takeover Act applies, further limitations need to be observed. Exclusivity Agreements These are quite commonly sought after by a bidder from a core shareholder and should be legally feasible, particularly in a phase preced - ing a public tender, but arguably also during a tender process. Exclusivity arrangements with the target appear more problematic – particularly if the aim is to restrict the free business judge - ment of management acting in the best interest of all shareholders. Therefore, no-talk arrange - ments (lock-ups) typically risk being too restric - tive and thus void, while no-shop and market test provisions (if they just limit management to actively looking for other bidders) are arguably more likely to be upheld.
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