BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale and Marah Smith, Walkers
ing rules have been complied with and approvals obtained. 6.2 Mandatory Offer Threshold There are no requirements under Bermuda law for a mandatory offer threshold. Please see 5.5 Definitive Agreements regarding the require - ments for tender offers. 6.3 Consideration There are no restrictions under Bermuda law on the type of consideration that can be offered or the combination of different types of consid - eration (eg, shares and cash). A wide variety of consideration structures have been seen of late, involving combinations of shares in either the surviving or amalgamated company (or its par - ent), cash or promissory notes. 6.4 Common Conditions for a Takeover Offer There is no specific takeover code in Bermuda and there are no specific Bermuda law require - ments restricting the use of offer conditions. Conditions for a takeover offer would be subject to the commercial requirements of the bidder (and the target if a recommended offer). 6.5 Minimum Acceptance Conditions Please see 2.1 Acquiring a Company regard - ing the applicable acceptance thresholds for a tender offer under Section 102 of the Companies Act. 6.6 Requirement to Obtain Financing Any requirement to obtain financing would need to be set out in the plan of amalgamation or merger, but it is common for transactions to be conditional upon financing being obtained and upon evidence being provided, in the form of a commitment letter or similar. Rarely, pre-funded
escrow accounts may be required to evidence the availability of the consideration. 6.7 Types of Deal Security Measures There are no prescribed rules under statute or common law with respect to deal security meas - ures in a transaction. However, many Bermuda companies are based in the United States or Europe, and the influence of the laws of the rel - evant jurisdiction is often felt. It is very common for the transaction agreement to be governed other than by Bermuda law, in which case the availability of deal security measures may be lim - ited or restricted in accordance with the relevant laws. In Bermuda, the measures most often seen are as follows. Break Fees Break fees are becoming increasingly standard in transaction agreements. For example, in the case of a proposed amalgamation or merger, the agreement and plan of merger/amalgama - tion may include a provision for a fee to be paid to the original bidder if the board of the target company changes its recommendation and supports a competing bid where the acquisition takes place within a certain period of time from the date of the agreement. When the board of a target is considering whether or not to agree to accept a break fee provision, care must be exercised to ensure that the directors’ fiduci - ary duties at statute and common law are being properly discharged. This will depend on the cir - cumstances of the transaction and the overall deal terms, taking all factors into consideration. As a matter of practice, break fees in transactions involving Bermuda companies operating in the North American market tend to range from 1% to 4% of the amalgamation or merger considera - tion. If the Bermuda court were to determine that a particular break fee was excessive and did not
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