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The Mergers & Acquisitions Review Law Business Research Tenth Edition Editor Mark Zerdin
The Mergers & Acquisitions
Review
Law Business Research
Tenth Edition
Editor
Mark Zerdin
The Mergers & Acquisitions
Review
Tenth Edition
EditorMark Zerdin
Law Business Research Ltd
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Acknowledgements
CONTENTS
Editor’s Preface ...................................................................................................xi Mark Zerdin
Chapter 1 EU OVERVIEW ......................................................................... 1Mark Zerdin
Chapter 2 EUROPEAN PRIVATE EQUITY ................................................ 9Benedikt von Schorlemer and Holger H Ebersberger
Chapter 3 M&A LITIGATION ................................................................. 19Mitchell A Lowenthal and Roger A Cooper
Chapter 4 PRIVATE EQUITY: AN OFFSHORE PERSPECTIVE............. 26Rolf Lindsay
Chapter 5 ARGENTINA ........................................................................... 30Santiago Daireaux and Fernando S Zoppi
Chapter 6 AUSTRALIA ............................................................................. 38Braddon Jolley, Sandy Mak and Jaclyn Riley-Smith
Chapter 7 AUSTRIA.................................................................................. 49Clemens Philipp Schindler
Chapter 8 BAHRAIN ................................................................................ 60Haifa Khunji and Natalia Kumar
Chapter 9 BELGIUM ................................................................................ 70Olivier Clevenbergh, Gisèle Rosselle, and Filip Jorens
Chapter 10 BRAZIL .................................................................................... 81Moacir Zilbovicius and Rodrigo Ferreira Figueiredo
iv
Contents
v
Chapter 11 BRITISH VIRGIN ISLANDS .................................................... 90Richard May and Richard Spooner
Chapter 12 CANADA ................................................................................. 99Robert Yalden, Emmanuel Pressman and Jeremy Fraiberg
Chapter 13 CAYMAN ISLANDS .............................................................. 113Suzanne Correy and Daniel Lee
Chapter 14 CHINA ................................................................................... 121Norman Zhong and Helen Fan
Chapter 15 COLOMBIA ........................................................................... 136Sergio Michelsen Jaramillo
Chapter 16 COSTA RICA ......................................................................... 151John Aguilar Jr and Marco Solano
Chapter 17 DENMARK ............................................................................ 158Sebastian Ingversen and Nicholas Lerche-Gredal
Chapter 18 DOMINICAN REPUBLIC ..................................................... 168María Esther Fernández A de Pou, Mónica Villafaña Aquino and Laura Fernández-Peix Perez
Chapter 19 ECUADOR ............................................................................ 178Daniel Pino Arroba and Fernanda Guzmán Amador
Chapter 20 FINLAND .............................................................................. 182Jan Ollila, Wilhelm Eklund and Jasper Kuhlefelt
Chapter 21 FRANCE ................................................................................ 194Didier Martin
Chapter 22 GERMANY ............................................................................. 210Heinrich Knepper
Chapter 23 GREECE................................................................................. 226Cleomenis G Yannikas, Sophia K Grigoriadou,Vassilis S Constantinidis and John M Papadakis
Chapter 24 HONG KONG ....................................................................... 236Jason Webber
Chapter 25 ICELAND .............................................................................. 245Hans Henning Hoff
Chapter 26 INDIA .................................................................................... 252Justin Bharucha
Chapter 27 INDONESIA .......................................................................... 268Yozua Makes
Chapter 28 ISRAEL ................................................................................... 280Clifford Davis and Keith Shaw
Chapter 29 ITALY ..................................................................................... 289Maurizio Delfino
Chapter 30 JAPAN .................................................................................... 301Hiroki Kodate and Yuri Totsuka
Chapter 31 LITHUANIA .......................................................................... 309Giedrius Kolesnikovas and Michail Parchimovič
Chapter 32 LUXEMBOURG ..................................................................... 314Marie-Béatrice Noble, Raquel Guevara and Stéphanie Antoine
Chapter 33 MALAYSIA ............................................................................. 327Rosinah Mohd Salleh and Norhisham Abd Bahrin
Chapter 34 MALTA ................................................................................... 343James Scicluna, Ramona Azzopardi and Rachel Vella Baldacchino
Contents
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Chapter 35 MAURITIUS .......................................................................... 355Muhammad Reza Cassam Uteem and Basheema Farreedun
Chapter 36 MEXICO ................................................................................ 365Luis Burgueño and Andrés Nieto
Chapter 37 MONTENEGRO.................................................................... 376Slaven Moravčević and Dijana Grujić
Chapter 38 MYANMAR ........................................................................... 386Krishna Ramachandra and Rory Lang
Chapter 39 NETHERLANDS ................................................................... 402Carlos Pita Cao and François Koppenol
Chapter 40 NIGERIA ................................................................................ 415Lawrence Fubara Anga
Chapter 41 NORWAY ............................................................................... 419Ole K Aabø-Evensen
Chapter 42 PANAMA ................................................................................ 454Andrés N Rubinoff
Chapter 43 PERU ...................................................................................... 463Carlos Arata
Chapter 44 PHILIPPINES ......................................................................... 472Philbert E Varona, Maria Jennifer Z Barreto, Hiyasmin H Lapitan, Patricia A Madarang and Javierose M Ramirez
Chapter 45 PORTUGAL ........................................................................... 481Francisco Brito e Abreu and Joana Torres Ereio
Chapter 46 QATAR ................................................................................... 494Michiel Visser, Charbel Abou Charaf and Eugenia Greco
Contents
vii
Chapter 47 ROMANIA ............................................................................. 506Andreea Hulub, Alexandra Niculae and Vlad Ambrozie
Chapter 48 RUSSIA ................................................................................... 518Scott Senecal, Yulia Solomakhina and Ekaterina Abrossimova
Chapter 49 SERBIA ................................................................................... 539Matija Vojnović and Luka Lopičić
Chapter 50 SINGAPORE .......................................................................... 548Lim Mei and Lee Kee Yeng
Chapter 51 SLOVENIA ............................................................................. 556David Premelč, Bojan Šporar and Jakob Ivančič
Chapter 52 SPAIN ..................................................................................... 566Christian Hoedl and Javier Ruiz-Cámara
Chapter 53 SWITZERLAND .................................................................... 580Lorenzo Olgiati, Martin Weber, Jean Jacques Ah Choon, Harun Can and David Mamane
Chapter 54 THAILAND ........................................................................... 591Pakdee Paknara and Pattraporn Poovasathien
Chapter 55 TURKEY ................................................................................ 600Emre Akın Sait
Chapter 56 UNITED ARAB EMIRATES ................................................... 609DK Singh and Stincy Mary Joseph
Chapter 57 UNITED KINGDOM ............................................................ 621Mark Zerdin
Chapter 58 UNITED STATES................................................................... 639Richard Hall and Mark Greene
Contents
viii
Chapter 59 UZBEKISTAN ........................................................................ 679Shuhrat Yunusov, Ulugbek Abdullaev, Khilola Sattarova and Diyora Abdurakhmanova
Chapter 60 VENEZUELA ......................................................................... 686Guillermo de la Rosa, Juan D Alfonzo, Nelson Borjas E and Domingo Piscitelli N
Chapter 61 VIETNAM .............................................................................. 698Hikaru Oguchi, Taro Hirosawa and Ha Hoang Loc
Appendix 1 ABOUT THE AUTHORS ...................................................... 709
Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS ....... 749
ix
Contents
xi
EDITOR’S PREFACE
The past year has seen a boom in dealmaking, with many markets reaching post-crisis peaks and some recording all-time highs. Mega-deals have been at the heart of the expanding market, with companies tapping into cash piles and cheap debt to fund transformational deals. Looking behind the headline figures, however, a number of factors suggest dealmaking may not continue to grow as rapidly as it has done recently.
In Europe, the European Central Bank was forced to start a programme of quantitative easing in the wake of consistently low growth, a full seven years after the Bank of England and the Federal Reserve undertook their programmes. US interest rates have also tightened for the first time since the financial crisis, contributing, according to some commentators, to the wobbly US markets that marked the start of 2016. Yet this uncertainty has now seemingly passed, and the Federal Reserve is contemplating raising rates further. Meanwhile, eurozone and UK interest rates look likely to remain low for some time to come due to continued slow growth and low inflation in the region. How the markets react to this bifurcation of monetary policy across the Atlantic will shape dealmaking in the year to come.
Elsewhere, there have been some concerns that falling commodities prices (particularly that of oil) have been driven by a fall in market confidence. However, it seems that this view is somewhat simplistic. It is more likely that prices have fallen due to excess capacity that built up to service Chinese industrialisation and somewhat weak growth figures. The recent uptick in prices should be seen as an indicator that perhaps the market overreacted and fundamentals remain strong.
Perhaps one of the biggest factors that poses a threat to dealmaking in 2016 is the political uncertainty affecting much of the world. In the UK, the first half of the year was clouded by the referendum on the UK’s continued membership of the EU, and in the US, the presidential election result is likely to have a considerable impact on markets. It is hoped that the resolution of this uncertainty in the second half of the year will foster an environment in which markets can thrive.
Editor's Preface
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I would like to thank the contributors for their support in producing the 10th edition of The Mergers & Acquisitions Review. I hope that the commentary in the following chapters will provide a richer understanding of the shape of the global markets, together with the challenges and opportunities facing market participants.
Mark ZerdinSlaughter and MayLondonAugust 2016
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Chapter 23
GREECECleomenis G Yannikas, Sophia K Grigoriadou,
Vassilis S Constantinidis and John M Papadakis1
I OVERVIEW OF M&A ACTIVITY
Greece is ‘living’ through its sixth year of deep recession and increased levels of unemployment, meaning that the country’s financial recovery is still non-existent. Significant structural problems remain in the Greek economy, but, equally importantly, instability has to be overcome. Following two general elections and one referendum during 2015, the coalition government of the radical left Syriza and the conservative right Anel reached an agreement with the EU Institutions (Institutions) in July 2015 signalling some new funding for the state, but also several new measures (mainly tax-oriented) that will probably impact the Greek economy and society. Although the revival of ‘Grexit’ scenarios was pushed back for some time, the lengthy negotiations between the government and the ‘Quartet’ representatives for the appraisal of the implementation of the third memorandum of understanding/agreement of last July, lasting for over seven months have again left the discussion over the matter open. Increases on taxation and the launch of a new social security system introduced in May 2016 are only causing the situation and the overall investment environment in Greece to deteriorate.
Enterprises remain conservative, maintaining cost-reduction measures on the one hand, and trying to build more efficient corporate structures (e.g., through internal restructuring) and to obtain a more outward focus on the other.
At the same time, the government has started to make some progress with the privatisation procedures already announced as part of the policy framework. After significant delays, the implementation of several ‘past due’ projects in the area of privatisations, such as Ellinikon and the privatisation of Piraeus port, has started. In addition, as part of the
1 Cleomenis G Yannikas, Sophia K Grigoriadou and Vassilis S Constantinidis are partners and John M Papadakis is an associate at Dryllerakis & Associates.
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July 2015 deal, a new ‘hyper-fund’ has been created aiming to promote privatisations in a much wider spectrum compared with what was planned some years ago. However, it remains to be seen how the government will finally treat this politically sensitive situation.
In addition, Greece has been heavily involved into the ‘refugee crisis’, which impacted significantly an economy and society under pressure, adding further problems to be managed by the government and Greek society, and also creating an odd environment in the country.
The private sector, to the extent that it is not dependent on the state, has shown it is capable of surviving, despite the difficulties. If the public sector stops draining the economy once the economy stops shrinking, it should be able to grow rapidly and recover relatively quickly.
II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A
The Greek legal framework of M&A mainly includes the following:a the Codified Law 2190/1920, on public limited companies,2 which was radically
amended in 2007 (Law 3604/2007), and most recently amended by Law 4308/2014 and Law 4336/2015 (regarding annual financial statements and audits);
b Law 4172/2013, (tax incentives for business transformations);c Law 2166/1993, (tax and other incentives for business transformations (e.g., merger,
split, spin-off);d Law 1297/1972, (incentives for business transformations);e Law 3049/2002 on privatisations, and Law 3985/2011 and Law 3986/2011 on the
Privatisation Fund;f Law 3864/2010 on the Hellenic Financial Stability Fund;g Law 3777/2009 on cross-border mergers of limited liability companies
(implementation of Directive 2005/56/EC);h Law 3401/2005 on prospectuses in the case of public offers of securities
(implementation of Directive 2003/71/EC), which was amended by Law 4374/2016 (adopting EU Directives 2013/50 and 2014/51);
i Law 3461/2006 on public takeovers (implementation of Directive 2004/25/EC);j the Athens Stock Exchange Regulation; andk Law 3959/2011 on Greek merger control provisions.
III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT
Following a legislative initiative in 2012 to introduce a new corporate form called a ‘private corporation’ (IKE), this new form is gradually replacing the form of companies with limited companies (EPEs), which were not particularly attractive to the Greek business community due to certain inflexibilities of its mechanisms. The IKE does not have a minimum share
2 Sociétés anonymes, not to be confused with listed companies.
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capital requirement, and it provides for a certain elasticity regarding the management and the shareholders’ relations, etc. Recent statistic figures show that the IKE is welcome in the market and has prevailed over the old EPE form.
Requests from the business community refer to more important measures that need to be taken to increase the competitiveness of Greek enterprises in their daily operations, such as the fast-track permit procedures.
In the field of corporate governance, following a legislative amendment in 2010, listed companies have to implement a corporate governance code. In the absence of any such template code in Greece, the Hellenic Federation of Enterprises (SEV) took the initiative to draft a model Corporate Governance Code, which allows flexibility for companies to adopt it accordingly. In terms of developments, the Hellenic Council of Corporate Governance (HCCG) is the new body jointly created by the Hellenic Exchanges and the SEV, which now bears the burden of monitoring the market conditions, interacting with the international environment and improving the proposed corporate governance practices. The combination of institutional profile and market awareness are promising indications for the future. The HCCG has recently concluded the first revision of the SEV’s Code, and the revised, currently applicable Code has now been renamed the Hellenic Corporate Governance Code.
IV FOREIGN INVOLVEMENT IN M&A TRANSACTIONS
As previously mentioned, the business environment in Greece is unfortunately characterised by bureaucracy, administrative procedures and actual disincentives for foreign investors. Despite several efforts to the contrary and a ‘fast-track’ procedure to attract strategic investments through the ‘Enterprise Greece AE’ vehicle (public entity, previously ‘Invest in Greece AE’), the results so far are not that encouraging.
Other than that, within the privatisation programme run by the Hellenic Republic Asset Development Fund, one could mention the signing of the concession of 14 regional airports to the German-led consortium FRAPORT-Copelouzos, and the still-ongoing regulatory and merger control review of the acquisition by Azerbaijan’s SOCAR of a 66 per cent stake in the state-controlled Greek gas operator DESFA SA. The new government’s approach versus privatisations is eagerly anticipated, given that it has repeatedly expressed its objections to many of them, such as the Public Power Corporation.
V SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES
There have been only a few deals in M&A during the past 12 months, some of which were in the insurance sector, where consolidation is taking place. The same is occurring with retailers (supermarkets), which are also consolidating under several schemes to achieve best cost structure and more efficient operations.
The real estate sector continues to suffer severely from the effects of the crisis. It is worth mentioning, however, that there have been important developments in this sector: the Hellenic Republic Asset Development Fund, which is in charge of running and executing all intended privatisation projects, has launched several real estate projects. Highlights include the former Hellinikon airport area: this giant project, which entails the design and implementation of the site development process of what is said to be ‘one of the largest
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urban regeneration programmes worldwide’, will take at least 15 years to be fully completed. This project has been awarded to Lamda Development, and some of the latest moves by the government indicate that the project will probably progress during the next few months.
VI FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS
As far as mergers are concerned, there is no practical need for financing, since they are implemented through an exchange of shares. Regarding acquisitions, there can either again be an exchange of shares (which was the case in several past deals, especially in the banking sector) or a cash consideration, in which case financing is required. Such financing normally takes the form of one of the two following alternatives.a Self-funding by the shareholders of the acquiring company: the procedures for an
increase in share capital are rather formal, as per the EU directives, especially when made in cash. A main point of interest is the price offered for the new shares to be issued (which cannot be less than market value), because this is linked with the valuation of the company and determines the balance between shareholders.
b Bank financing, which can either be in the form of a classic bank loan or that of a bond loan (common or convertible) issued by the company: experience shows a tendency in favour of bond loans due to their favourable tax and other treatment, as well as due to the easy transfer of bond titles, if needed. It cannot be ignored that, contrary to the recent past, the severe financial situation has heavily affected and practically eliminated bank financing for M&A.
In a case of intragroup financing, attention should be drawn to the applicable provisions of Law 2190/20 regarding ‘related party’ agreements. In any case, one must also be cautious about the arm’s-length principle, which has been recently introduced as mandatory by virtue of market policy provisions.
VII EMPLOYMENT LAW
Employment legislation has not been further developed during 2015 and Q2 2016 as far as M&A is (directly) concerned.
On the one hand, there is still a plethora of special provisions of law regarding mergers, restructurings, etc., of state-owned enterprises (SOEs) and within the banking sector. Numerous provisions have been further instituted on an ad hoc basis to regulate the employment relations of specific state organisations (see, for instance, Article 3 of Law 4138/2013 for the merger of local development organisations). However, no generally applicable rule can be derived therefrom that would be of any interest for the private sector; in the past, Greek governments very often established special legislative texts for M&A of SOEs due to their politically sensitive nature.
On the other hand, as a general rule, in the case of a merger there is a full succession of the surviving (absorbing) entity regarding all the rights and obligations of the merged company. Accordingly, the latter becomes fully liable for any and all labour obligations of the former. In the case of acquisitions, there are protective provisions regarding ‘transfer of business’ (implementation of European law), which provide that both the transferor and the transferee shall be jointly and severally liable in respect of labour obligations that existed at the date of transfer. It is worth mentioning that the means of transfer (i.e., if it takes place via
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a contract – even an invalid one – or by law, or even by a simple assignment of the operation of the business without transfer of tangible or intangible assets) is irrelevant, but the transfer and succession in the employer’s position is examined on a case-by-case basis.
Since 2010, it has been expected that the downturn in the Greek market and the crisis in the Greek economy would generally give rise to significant changes in employment law, which might not refer directly to M&A topics, but which would nevertheless have an impact, since a labour perspective is generally a critical point of assessment in an M&A deal. As part of the agreement for the financial support of the country, Greece undertook to proceed quickly with radical changes in many sectors of the Greek economy and in the labour market. The main areas that have been affected from a labour law perspective are as follows:a restrictions in the system of collective labour agreements or negotiations, and the
introduction of a more flexible regime;b abolishing the procedure of referring collective labour disputes to the organisation for
mediation and arbitration;c increasing the thresholds in the case of group dismissals;d decreasing severance pay and allowing its repayment in instalments;e introducing more flexible employment terms (sub minima) for workers under the age
of 25; f extending probationary periods, facilitating greater use of part-time work, moderating
wages for overtime and introducing remuneration connected to the productivity of the business; and
g keeping salaries temporarily frozen (initially) for three years after the conclusion of said memorandum.
There are quite a few of examples of the implementation of the above-mentioned guidelines during the past five years. For instance:
The Ministers’ Council issued Act No. 6/2012, which instituted an obligatory decrease of 22 per cent to the minimum wages under the national collective labour agreement, and abolished the possibility of unilaterally resorting to arbitration in cases where collective bargaining fails. Law 4093/2012 further reduced the termination severance (mainly by preventing the accrual of seniority rights after November 2012), facilitated the split of annual leave, decreased the requirements for the operation of temporary work agencies and instituted a number of additional favourable provisions for the labour market. Most importantly, however, Law 4093/2012 abolished the system of determining the minimum wage through the collective bargaining procedures by introducing the minimum wage itself. Finally, it vests the government with the power of adjusting the minimum wage.
In general, the purpose of the above amendments is to reduce the cost of labour and make the Greek employment market more competitive. On the other hand, various provisions have been instituted to protect vulnerable groups, such as older employees. Thus, it is obvious that due to the financial support of EU Member States and the International Monetary Fund, Greece has been obliged to proceed more quickly to implement those measures to ensure the ‘flexicurity’ of the employment market.
However, based on the experience of recent years, the measures implemented so far have not efficiently serve these purposes. The above situation, apart from rendering any reforms ineffective, has made it unclear whether each provision of this multitude of recent laws affecting the employment terms in the public and private sector would survive if contested before the Greek courts. There have already been various judgments of first instance courts
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(within the frame of injunction measures) that considered certain provisions concerning public sector employees as being contrary to the provisions of the Greek Constitution and European law. In addition, such legislative initiatives of the government have raised multiple concerns by the Committee on Freedom of Association of the International Labour Organization’s governing body, especially as to what regards the weakening and eventually abolishment of collective bargaining rights and the overall scope of collective bargaining laws.
In 2014, the Administrative Supreme Court found certain provisions of Ministers’ Council Act No. 6/2012, and in particular the ones requiring the consent of both parties (employer and trade union) for the initiation of an ‘intermediation and arbitration process’, as non-compliant with the constitutional provisions, which led to the ‘reinstatement’ of the previous regime of unilateral application of the interested party (Law 4303/2014). However, such change has not yet resulted in any ‘trend’ for addressing collective labour disputes with the relevant organisation (OMED, the Greek mediation and arbitration service).
i Recent developments in labour law
In 2015Following the general elections of early 2015 and the formation of a coalition government led by the radical party, Syriza, an agenda of reinstating most of the changes made in the previous years in the sector of employment environment (e.g., minimum monthly salary of €751 as well as the restoration of collective labour agreements and the respective negotiation process through the Organization for Mediation and Arbitration) was introduced, but was quite quickly abandoned, especially after the July 2015 deal with the Institutions. As a result, no significant changes to the employment regime in Greece were established during 2015.
In 2016The government launched a dialogue regarding the introduction of a new social security system, which was however rejected by, inter alia, the trade unions and professional associations. The draft bill comprised several structural changes in the area of social security, with the major ones being to have all social security funds and organisations merged into one, and the implementing to all categories of employees, self-employed and other professionals a uniform treatment as to what regards the calculation of their contributions based on their annual or monthly income falling within the range of 25 to 36 per cent. There was a variety of reactions about this restructuring of the social security concept (e.g., Greek lawyers abstained from their duties for almost six months), but the government managed to pass the legislation (Law 4387/2016). In terms of employment, a direct impact of the recent Social Security Act is on employees being subject to more than one social insurance organisation (e.g., through being employees and self-employed at the same time), who are now required to pay more (approximately double) social security taxes without being entitled to additional pension amounts.
VIII CIVIL PROCEDURE CODE
One of the first measures adopted by the parliament directly after the conclusion of the July 2015 agreement with the Institutions was the adoption of a new Civil Procedure Code. Law No. 4335/2015 has introduced amendments in most areas of civil disputes, aiming to expedite the process up to the hearing of cases (which, prior to this change, could take more than three to four years). The new Code provides that the whole process starts with the filing
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of a claim, without setting a more specific date for its hearing, which will take place within a maximum of 160 days from its submission. The process is concluded without a real hearing, and based only on documents and affidavits of the parties, while the presence of barristers is no longer necessary and grounds for the deferral of a hearing are practically abolished. Furthermore, the new Code has adopted a much quicker process for the enforcement of judicial decisions and a swift procedure for the collection of debts. The new Code came into force on 1 January 2016.
IX TAX LAW
Following the complete replacement of the Code of Income Taxation (CIT) and the introduction of a new Code of Fiscal Procedure, both of which came into force on 1 January 2014, as of 1 January 2015, the newly introduced Greek Accounting Principles (Law 4308/2014) abolished the Code of Transactions Tax Reporting, which replaced the Code of Books and Data a few years ago.
2015 was also a very busy year for the General Secretariat of Public Revenues, which started issuing the long-awaited circulars required for the implementation of the new CIT.
During 2016, more changes have been introduced in the tax legislation, mostly aiming at more collection of public revenues but also towards the adoption of EU rules.
The most important tax issues are as follows.
i Transfers of shares
From 1 January 2014 onwards, any capital gain that derives from the transfer of shares of non-listed companies is subject to a 15 per cent tax if the transferor is an individual (Articles 42 and 43 CIT). In the case of legal entities, the capital gain shall be added to the gross income and, should there be a profit form the business activity, it shall be subject to the tax rates that apply to income from business activities (i.e., 29 per cent). For the calculation of the capital gain, the acquisition cost is deducted from the price.
The aforementioned tax is imposed on the transfer of shares of listed companies as well only if the transferor participates in the share capital of the company with a stake of at least 0.5 per cent. In any case, a tax on stock market transactions is imposed as well.
ii Corporate income tax rate
The corporate income tax rate of public limited companies, limited liability companies, private capital companies and Greek branches of foreign corporations and, in general, of any company that maintains double-entry accounting books, which was raised from 20 per cent to 26 per cent for fiscal year 2014 onwards, was further raised to 29 per cent for fiscal year 2015 onwards (Article 58, Paragraph 1 CIT).
iii Taxation on dividends
For profits distributed until 31 December 2016, a withholding tax of 10 per cent is applicable on dividends. From 1 January 2017 onwards, the withholding tax will be raised to 15 per cent.
The said withholding tax exhausts the tax liability provided that the taxpayer is an individual (Article 36 Paragraph 2 CIT) or a legal entity that is non-Greek resident and does
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not have a permanent establishment in Greece (Article 64 Paragraph 3 CIT). Under specific conditions, which are set out by Article 63 CIT, intragroup dividends may be totally exempt from the said withholding tax.
Dividends distributed to Greek legal entities or legal entities with permanent establishment in Greece are subject to withholding tax of 10 per cent (an exemption under the conditions of Article 63 CIT may apply for intragroup dividends). However, their income from dividends is added to their annual gross income and taxed as a profit at a rate of 29 per cent. In such a case, the tax withheld is credited against the tax payable.
Pursuant to Article 48 CIT, the intragroup dividends received by a legal entity that is a tax resident of Greece are totally exempt from tax, provided that: a the recipient holds a minimum participation of at least 10 per cent of the value or
number of share capital or core capital or voting rights of the legal entity that makes the distribution of profits;
b the aforementioned minimum participation is held for at least 24 months; andc the legal entity that makes the distribution of profits:
• has a legal status that is included in the list of EU Directive 2011/96/EC;• is a tax resident of an EU Member State, in accordance with the laws of that state,
and may not be considered as a tax resident of a third country (non-EU Member State) by virtue of the double taxation treaty that has been signed with that third country; and
• is subject to one of the taxes listed in EU Directive 2011/96/EC.
For fiscal year 2016 onwards, for intragroup dividends to be exempt from taxation, in addition to the current applicable conditions a new condition has been introduced by virtue of which intragroup dividends are exempt from taxation to the extent that the respective dividends have not been deducted by the subsidiary (Directives 2014/86/EU and 2015/121/EU).
However, according a recent amendment of the tax legislation, the aforementioned exemptions (of Articles 48 and 63 CIT) shall be alleviated in cases where it is considered that a ‘non-genuine arrangement’ exists (i.e., an arrangement that has not been put into place for valid commercial reasons reflecting the economic reality).
iv Transfer pricing (TP)
The new CIT and the Code of Fiscal Procedure include transfer-pricing provisions that have some differences as compared to the previous legal framework, and are applicable for fiscal years starting as of 1 January 2014. It is to be noted that under the new legal framework, an advanced pricing agreement may be established with the Greek Ministry of Finance.
Taxpayers having intragroup transactions exceeding the thresholds provided in the above legislation have two main obligations: preparation of a TP report for the documentation of intragroup transactions within four months as of the end of the fiscal year (the report is submitted to tax authorities upon request and within 30 days as of such request), and the filing of a summary information table within four months as of the end of the fiscal year. TP legislation provides serious penalties for the violation of TP legislation and for the failure to comply with the above obligations. There are also new penalties provided for the inadequacy or inaccuracy of the summary information table and TP report. Finally, the new TP legislation specifically refers to the OECD Transfer Pricing Guidelines for the documentation of intragroup transactions.
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v Losses
In accordance with the new CIT, losses incurred abroad cannot be used against profits of the same tax year or against future profits, unless there is income that derives from other EU or EEA Member States and there is no provision in a double taxation treaty that provides a tax exemption for it. If, during a fiscal year, direct or indirect ownership of the share capital or voting rights of a company is changed by more than 33 per cent of its value or number, the transfer of losses ceases to apply as regards losses incurred during that fiscal year and the previous five years, unless it is proven by the company that the change of ownership has been exclusively made for commercial or business purposes, and not for tax avoidance or tax evasion purposes.
vi Deductibility of interests – thin capitalisation rules
According to the CIT, interests are not recognised as deductible business expenses to the extent that the surplus of the interest expenses against income from interest exceeds a rate of 40 per cent of taxable profits before interest, taxes, depreciation and amortisation (EBITDA) regarding fiscal year 2016. The aforementioned rate shall be further reduced to 30 per cent regarding fiscal year 2017.
However, interest expenses shall be recognised as fully deductible business expenses up to the amount of €3 million net-registered interest expenses per year for fiscal year 2016 onwards. Any interest expense that is not deductible pursuant to the aforementioned rules shall be carried forward with no time limit. This does not apply to credit institutions, or to leasing and factoring companies.
vii The new CIT definitions and provisions
The new CIT introduces certain new definitions and provisions, the most important being a term for ‘legal entity’ and ‘legal form’, and the introduction of the ‘true place of exercise of management’ criterion.
The Code of Fiscal Procedures introduces definitions of tax avoidance and tax evasion.
viii Statute of limitations
Under certain conditions, the statute of limitations has been further extended from 31 December 2016 to 31 December 2017. Nevertheless, under special circumstances, books and records of the fiscal year 1998 shall be kept as well until 31 January 2019.
X COMPETITION LAW
Merger control provisions are included in Law 3959/2011 regarding Protection of Free Competition (Articles 5 to 10) and are enforced by the Hellenic Competition Commission (HCC), an independent administrative authority.
The Greek merger control system provides for pre-notification to the HCC (30-day deadline) in cases of concentration where the following two thresholds are cumulatively met: all participating enterprises have an aggregate worldwide turnover exceeding €150 million, and each of at least two of them has a national (Greek) turnover of at least €15 million. In such a case, the transaction cannot be completed without the clearance of the Competition
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Commission. The latter theoretically has the power to block the transaction (but has not blocked any application to date).
There is currently no post-notification obligation for ‘minor’ mergers under Greek law.
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Appendix 1
ABOUT THE AUTHORS
CLEOMENIS G YANNIKASDryllerakis & AssociatesCleomenis G Yannikas is active in the fields of corporate law, mergers and acquisitions, competition law and investment incentives, and has experience in major M&A and project finance deals with an international profile. He is a graduate of the Athens University Law School, a member of the Athens Bar and the European Academy of Law, and is qualified to practise before courts of appeal in all jurisdictions. He is an author and contributor to several local and international publications on corporate law, investment incentives and competition law. He speaks Greek, English and German.
SOPHIA K GRIGORIADOUDryllerakis & AssociatesSophia K Grigoriadou is active in the fields of M&A, privatisations, international transactions and public contracts, and specialises in tax law (VAT, tax withholding, stamp tax, capital concentration tax, consumption tax, import duties, third-party taxes, and the Books and Data Code). She has experience in major privatisations, M&A and project finance deals.
Ms Grigoriadou is a graduate of the Thessaloniki University Law School, and the Université de Misericorde, Fribourg, and is a member of the Athens Bar and the IFA. She is qualified to practise before all courts of all levels of jurisdiction. She speaks Greek, English and French.
VASSILIS S CONSTANTINIDISDryllerakis & AssociatesVassilis S Constantinidis is active in the fields of M&A, employment law, commercial law, intellectual property, litigation and arbitration. He is specialised in employment law, having extensive experience in all HR issues (including code of conduct policies, data protection policies, employers’ handbooks, business-level CLAs, individual employment contracts of any kind). He has worked for 18 years as an in-house lawyer and legal director in the holding company of Boutari Group, Mythos Brewery SA (part of S&N and subsequently Carlsberg
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Group), and was also in charge of the HR and corporate affairs department, contributing to several international projects of Carlsberg Group. Mr Constantinidis is a graduate of the Athens University Law School, and is a member of the Athens Bar. He is qualified to practise before all courts of all levels of jurisdiction. He speaks Greek, English and French.
JOHN M PAPADAKISDryllerakis & AssociatesJohn M Papadakis is active in the fields of tax law, accounting law and commercial law, having assisted both in tax litigation and tax planning issues, including intragroup transactions and transfer pricing. He also advises on day-to-day commercial law issues, such as customer contracts and agency agreements.
He is a graduate of the Democritus University of Thrace Law School and holds an LLM in commercial law from the same university. He is a member of the Athens Bar and is qualified to practise before first instance courts of all jurisdictions. He speaks Greek, English and German.
DRYLLERAKIS & ASSOCIATES5 Chatzigianni Mexi Street115 28 AthensGreeceTel: +30 211 000 3456Fax: +30 211 000 5200 [email protected]@[email protected]@dryllerakis.grwww.dryllerakis.gr
