Revised Swedish Takeover Rules
14 December 2020
Authors: Mattias Friberg, Ola Åhman, Christoffer Saidac, Sanna Böris and Khaled Talayhan
The Swedish Corporate Governance Board (Sw. Kollegiet för svensk bolagsstyrning) has published a proposal for revised Takeover Rules for the Swedish regulated markets Nasdaq Stockholm and Nordic Growth Market NGM as well as revised Takeover Rules for the Swedish trading platforms Nasdaq First North Growth Market, Nordic SME and Spotlight Stock Market. The revised Takeover Rules are proposed to enter into force on 1 January 2021. The purpose of the proposed changes is mainly to adapt the Takeover Rules to the new EU prospectus regime and to codify the Swedish Securities Council’s (Sw: Aktiemarknadsnämnden) established practice within the field of takeovers.
The most noteworthy changes pursuant to the revised Takeover Rules are briefly presented below.
An Offeror May Normally Not Make Its Offer Conditional Upon the Future Financing of the Target Company
From the perspective of the Takeover Rules, it is not necessary for an offeror to have ensured access to credits for any refinancing of the target company’s debts upon the completion of a takeover. The revised Takeover Rules, however, accentuate that it is in the interest of an offeror to ensure before an offer being launched that the target company has financing in place after the completion of a takeover. It is further clarified in the revised Takeover Rules that the possibility of stipulating conditions for completion relating to the financing of the target company is very limited, as that would entail that the risks are borne by the target company’s shareholders.
New Prerequisites for Shortening the Timetable and Acceptance Period
Under the revised Takeover Rules, it is clarified that an offeror shall revise the final timetable to be set out in the offer document, should it be clear that the offer can be implemented within a shorter timeframe than has been indicated in the offer announcement. However, a consultation obligation has been codified in the revised Takeover Rules, whereby an offeror is now required to obtain the opinion of the target company’s board on a shortened timetable prior to implementing a significantly shortened timetable, and in the event that the offeror and the target company’s board have different views on such a shortened timetable, the Swedish Securities Council should be consulted.
On a related note, it has been clarified that an offeror may not unilaterally shorten the acceptance period, unless the offeror has explicitly reserved the right to do so and such shortening is announced no later than two weeks prior to the shortened acceptance period lapsing. Similarly to the consultation obligation described above, the offeror is also required to obtain the opinion of the target company’s board on a potential shortened acceptance period prior to implementing a significantly shortened acceptance period, and in the event that the offeror and the target company’s board have different views on such a shortened acceptance period, the Swedish Securities Council should be consulted.
Prior Transactions With Unlisted Shares as Consideration
The Takeover Rules have already previously stipulated that in the event that a prior transaction has taken place within six months prior to the announcement of the offer against consideration consisting of shares or other securities, the offeror must offer the same consideration in the offer if the offeror has acquired more than ten per cent of all shares in the target company through the prior transaction. In addition to this, it is now stipulated that if the consideration in the prior transaction consists of unlisted shares, the aforementioned applies regardless of whether the limit of ten per cent is exceeded through the prior transaction or not. The new rule will counteract circumventions of other provisions of the Takeover Rules, such as equal treatment in connection with the formation of bid consortiums. The statutory restrictions on public offerings of shares in private companies may in practice entail that it will not be possible to adhere to this rule. In this regard, it is clarified in the revised Takeover Rules that it is the responsibility of the offeror not to violate either of the two rules.
Furthermore, it is clarified that arrangements giving the offeror a financial exposure corresponding to a shareholding in the target company may be encompassed by the rules regarding prior transactions, thus setting a floor level for the consideration in the offer. Such an arrangement constitutes a prior transaction if it entails or results in the shares of the target company being divested to the offeror before or during the offer, or within six months after the initiation of the settlement of the offer, or gives the offeror the right to acquire shares in the target company. An example of such an arrangement is a financial contract where the offeror’s counterparty (e.g. a bank) ensures that it is able to fulfil its obligations under the contract (so-called hedging) by acquiring shares in the target company and where the bank is subsequently obligated to transfer the shares to the offeror, or such transaction takes place for other reasons. Furthermore, it is clarified that share acquisitions through capital insurance are typically encompassed.
Clarification Regarding Circumventions of the Rules Regarding Mandatory Offers
Pursuant to the Takeover Rules, an arrangement that is not strictly covered by the rules on mandatory offers may, irrespective of this, constitute a violation of good practice on the stock market, if the purpose of the arrangement is, in practice, to achieve a change of control, and it can therefore be regarded as a circumvention of the rules on mandatory offers. Pursuant to the revised Takeover Rules, examples of such arrangements include, situations where a shareholder with a shareholding representing less than thirty per cent of all votes in a company increases its exposure, for instance, by way of acquiring shares through a capital insurance or other arrangements where the shares are held by a third party who does not exercise the voting rights attached to the shares, whereby the shareholder gets an influence corresponding to thirty per cent or more of all votes, excluding passive shares.
Remuneration to the Members of the Target Company’s Board of Directors
A clarification is made in the revised Takeover Rules stating that only the shareholders of the target company may decide whether additional remuneration should be paid to the members of the target company’s board of directors for the work pertaining to an offer.
Adaptions on Account of the New EU Prospectus Regime
On account of the new EU prospectus regime, particularly in relation to statutory mergers and exchange offers, consequential adaptions have been made throughout the revised Takeover Rules for the purpose of updating legislative references and aligning rules regarding offer documents and similar documents with said regime. It is also worth noting that the previously somewhat unclear timing requirement for the publication of the merger document ahead of the general meeting resolving upon the statutory merger has been clarified to the effect that the merger document must be held available to the shareholders at least three weeks prior to the general meeting resolving upon the merger plan.
Conditions for the Completion Regarding the Obtaining of Regulatory Approvals
In the revised Takeover Rules, a clarification is made as regards conditions for completion concerning the obtaining of regulatory approvals. It is stated that the circumstances may in some cases be such that it is the parent company of the offeror or a co-offeror that needs to obtain a regulatory approval or who is affected by any conditions of such an approval. The revised Takeover Rules stipulate that a condition for completion regarding the obtaining of regulatory approvals covers such a situation. In other words, the term “offeror” in such a condition should not be construed so as to only include the company making the offer but it also includes, for instance, a parent company or a co-offeror.
Comment and Outlook
Apart from the adaptions to the new prospectus regime, most revisions are codifications of the already established practice of the Swedish Securities Council or mere clarifications. In other words, the revised Takeover Rules do not bring about any dramatic changes. The lack of significant amendments to the rules may be interpreted so that the Takeover Rules are at this point considered to be rather well developed. Therefore, the conclusion may be that the Swedish Corporate Governance Board is likely to continue to make relatively small amendments to the Takeover Rules from time to time – driven by the practice established by the Swedish Securities Council through its statements – and that more material changes, if any, are likely to come from the EU legislator rather than the Swedish Corporate Governance Board.