bk_global_lboguide_rebranded.pdf - Global LBO Guide Global LBO Guide Table of Contents Argentina 3 Australia 15 Austria 30 Brazil 43 Canada 60 Chile.

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Unformatted text preview: Global LBO Guide Global LBO Guide Table of Contents Argentina ................................................................................................................................................ 3 Australia ................................................................................................................................................ 15 Austria ................................................................................................................................................... 30 Brazil ..................................................................................................................................................... 43 Canada .................................................................................................................................................. 60 Chile ...................................................................................................................................................... 73 Colombia ............................................................................................................................................... 86 Czech Republic ................................................................................................................................... 101 France.................................................................................................................................................. 116 Germany.............................................................................................................................................. 137 Hong Kong .......................................................................................................................................... 152 Hungary .............................................................................................................................................. 167 Indonesia ............................................................................................................................................. 181 Italy ..................................................................................................................................................... 190 Japan ................................................................................................................................................... 208 Luxembourg ........................................................................................................................................ 221 Malaysia .............................................................................................................................................. 235 Mexico ................................................................................................................................................ 245 The Netherlands .................................................................................................................................. 258 People’s Republic of China ................................................................................................................ 274 Peru ..................................................................................................................................................... 287 Philippines .......................................................................................................................................... 298 Poland ................................................................................................................................................. 311 Singapore ............................................................................................................................................ 326 Spain ................................................................................................................................................... 337 Sweden ................................................................................................................................................ 353 Switzerland ......................................................................................................................................... 366 Taiwan ................................................................................................................................................ 377 Turkey ................................................................................................................................................. 388 Ukraine................................................................................................................................................ 403 United Arab Emirates ......................................................................................................................... 414 United Kingdom.................................................................................................................................. 422 United States ....................................................................................................................................... 439 Venezuela............................................................................................................................................ 460 Baker McKenzie | i Foreword We are pleased to present the second edition of Baker McKenzie’s Global LBO Guide. With stronger investment pipelines and corporate balance sheets as well as improved financing accessibility and exit options, private equity firms are pursuing a greater number of targets in more sectors in more markets around the world. Drawing on our experience in all aspects of leveraged buyout transactions, this guide provides an overview of key considerations associated with private equity deal-making and fundraising in 34 jurisdictions. We are deeply indebted to everyone who has given so generously of their time, talent and expertise in producing this guide. It is the product of numerous contributions from our private equity lawyers across the globe and wouldn’t have been possible without their insight and analysis. Michael Fieweger Private Equity Group Chair August 2015 Baker McKenzie | 1 Editors’ Note The editors would like to thank various contributors who made this book possible, including: Argentina Australia Austria Brazil Canada Chile China Colombia Czech Republic France Germany Hong Kong Hungary Indonesia Italy Japan Luxembourg Malaysia Mexico The Netherlands Peru Philippines Poland Singapore Spain Sweden Switzerland Taiwan Turkey UAE Ukraine United Kingdom USA Venezuela Gustavo Boruchowicz, Roberto Grane and Francisco Fernandez Rostello Lawrence Mendes Gerhard Hermann, Wendelin Ettmayer and Stephanie Sauer Alexandre Pinto Alex Roberts, Peter Clark and Greg McNab Jaime Munro, Alberto Maturana and Carlo Perez Arizti Dorothea Koo and Tracy Wut Jaime Trujillo and Ricardo Trejos Tomas Skoumal and David Reiterman Alyssa Gallot, Francois-Xavier Naime, and Gonzague Basso Nikolaus Reinhuber, Gerald Schumann and Christoph Dachner Jason Ng and Michael Horman Viktor Sandor Zorad, Pal Takacs, Eszter Patyi and Simon Barnabas Mark Innis and Bruce Leishman Gianluca Benedetti, Rodolfo La Rosa and Luigi Rizzi Chris Hodgens, Ryutaro Oka, Tetsuo Tsujimoto and Gavin Raftery Laurent Fessmann, Bertrand Job, Romain Jacques, Ariane Spicq and Celine Reymond Brian Chia, Andre Gan and Ee Von Teo Erik Gutiérrez-Zuniga Kuif Klein Wassink, Heico Reinoud, Juliana Dantas and Laurens Linnewiel Oscar Trelles, Liliana Espinosa and Uldarico Ossio Elizabeth Opena Tomasz Krzyzowski and Sebastian Ponikowski Kelvin Poa, Alex Tan and Chloe Cheng Luis Casals, Rossanna D’Onza, Enrique Valera and Juanjo Corral Anders Fast and Emma Seth Martin Frey and Timo Leis Stephen Tan, James Hsiao and Alex Chiang Ismail Esin, Kursun Eren and Gul Incesulu Will Seivewright Olyana Gordiyenko, Viascheslav Yakmychuk and Zoryana Matviychuk David Allen and Alexandra Desberg Mike Fieweger Carlos Delgado and Pedro Crisafulli Edited by Christina Wilhelm and Madeleine McDonell All of the information included in this book is for informational purposes only, and may not reflect the most current legal and regulatory developments. This information is not offered as legal or any other advice on any particular matter. It is not intended to be a substitute for reference to laws, rules, regulations or forms. All laws stated as at 1 March 2015. The Firm and the contributing authors expressly disclaim all liability to any person in respect of anything, and in respect of the consequences of anything, done or not done wholly or partly in reliance upon the whole or any part of the contents of Baker McKenzie’s Global LBO Guide. No client or other reader should act or refrain from acting on the basis of any matter contained in this book without first seeking the appropriate legal or other professional advice on the particular facts and circumstances. 2 | Baker McKenzie Global LBO Guide - Argentina Argentina 1. What structures do private equity funds typically use to manage their funds? The legal structure most commonly used as a vehicle for private equity funds in Argentina is a foreign limited partnership managed by a general partner with a subsidiary of the foreign limited partnership registered in Argentina. The foreign limited partnership may also create an offshore special purpose vehicle (SPV) in a jurisdiction that has a double taxation treaty with Argentina through which the acquisition can be made. The structures typically used by private equity fund managers to manage Argentinean funds raised from their investor base are stock corporations (sociedades anónimas) (SA) or limited liability companies (sociedades de responsabilidad limitada) (SRL). 2. Do funds need to be licensed by any regulatory authority to conduct business in Argentina? Funds do not need to be licensed by any regulatory authority to conduct business in Argentina. However, if a private equity fund intends to publicly offer an investment in the fund in Argentina, it must have a license. Most private equity funds are created offshore and the fund’s promoter, principals and manager do not require a license unless they plan to make a public offering of the fund’s securities or partnership interests in Argentina. 3. Are there any approvals required for investments by foreigners in Argentina and, if so, what is the process? Foreign investment approvals The Constitution of Argentina, and the Foreign Investments law guarantee equal treatment for local and foreign investors. Generally, and subject to certain requirements for specific sectors (see below), foreign investors are not subject to any government restriction or limitation and may invest in Argentina without prior approval, under the same conditions as investors domiciled within Argentina. Foreign entities that intend to invest in Argentina will not be required to obtain any prior authorization in relation to the proposed investment, nor to register their investment with any specific authority. Foreign investors may carry out investments in manufacturing, mining, commerce, finance, services, production or any industry related to the exchange of goods and services in the same manner as domestic investors, without obtaining any prior government approvals (other than those also required for national individuals and companies). There are, however, certain restricted industries such as broadcasting. Permission for investment in those industries is decided on a case-by-case basis. Specific regulations may either prohibit foreign investment in a company in a restricted industry or require prior authorization for investment. Investments may be made in various forms, including: (a) foreign currency; (b) capital assets; (c) the proceeds of other investments; (d) proceeds that are subject to repatriation resulting from other investments made in the country; (e) capitalization of certain foreign credits; and Baker McKenzie | 3 (f) certain intangible assets. Note that a foreign corporate shareholder must, however, register with the Public Registry of Commerce (PRC) as a foreign shareholder to be permitted to hold shares in an Argentine company. (This requirement does not apply to individuals). The foreign company must file certain corporate and accounting documents with the PRC including: (a) articles of incorporation and bylaws; (b) a board of directors’ resolution stating the foreign company’s decision to act as a foreign equity holder of an Argentine company; (c) a power of attorney appointing legal representatives in Argentina; (d) financial statements; and (e) a certificate of good standing issued by the appropriate government authority - for the purposes of evidencing its existence and good standing under the laws of the country of its incorporation. In certain jurisdictions (e.g., in Buenos Aires, the jurisdiction most often chosen by foreign companies for registration), a foreign corporate shareholder must also fulfill additional requirements (e.g., evidence of ownership of non-current assets outside Argentina, identification of shareholders, etc.). Foreign companies incorporated in offshore jurisdictions may face a more cumbersome procedure and stricter scrutiny when seeking registration. Exchange controls It is important to point out that there are exchange control regulations to consider when undertaking a buyout. Flows of foreign currency into and out of Argentina must be registered with the Central Bank of the Republic of Argentina (Banco Central de la República Argentina) and settled through the Argentine foreign exchange market on entrance into, and exit from, Argentina. There are also anti money-laundering regulations that must be complied with. In general, foreign finance is subject to a minimum term of 365 days for the cancellation of the loan. Exchange control regulations designed to prevent speculative foreign capital inflows have established the obligation to make a 30% mandatory deposit for the term of one year with the Argentine financial entity that receives the funds (denominated in USD). This deposit is non-interest bearing and cannot be used as collateral for any transaction. Among the exemptions to the obligation to make this deposit, exchange control regulations include inflows of capital from equity holders holding at least 10% of the capital stock of the local company to be applied to capital contributions. The regulations also include additional formal requirements such as the simultaneous filing of the capital increase with the PRC and evidence to the local bank of completion of the capital increase registration process with the PRC within 540 calendar days. 4. Who are the relevant regulators in Argentina and how much interaction would one generally expect when undertaking a buyout? The key corporate regulators in Argentina are: (a) Central Bank of the Republic of Argentina (Banco Central de la República Argentina) which is in charge of the Foreign Investments Registry (Registro de Inversiones Extranjeras) and governs exchange control regulations and registration of foreign investments; (b) National Securities and Exchange Commission (Comisión Nacional de Valores) (CNV) which is relevant when acquiring a public entity; 4 | Baker McKenzie Global LBO Guide - Argentina (c) Public Registry of Commerce (Registro Público de Comercio) (PRC) which is the regulator for legal entities; (d) Federal Tax Authority (Administración Federal de Ingresos Públicos) (AFIP) which deals with tax implications in relation to acquisitions; (e) Antitrust Commission (Comisión Nacional de Defensa de la Competencia) (CNDC) from which prior approval must be obtained if certain thresholds are met; and (f) Secretariat for Industry, Trade and Small and Medium Enterprises (Secretaría de Industria, Comercio y PyMEs) that deals with specific regulations applicable to companies depending on the industry involved. When undertaking a buyout, the expected interaction of the regulators depends on the nature of the transaction, the business or industry of the target, and the parties concerned. 5. How are buyouts typically undertaken in the private and the public markets? In the private market, buyouts are typically undertaken by a negotiated acquisition between the parties. Sale and purchase documents and ancillary documents record the terms of the sale and acquisition and the rights and liabilities of the parties. In the public market, buyouts are typically undertaken by a public acquisition offer process. This applies to both tender offers and mergers. Any entity intending to launch a public offer bid (even if agreed with the board of the target company) must first obtain the approval of the CNV. 6. What is the typical corporate structure used when doing a buyout? Although acquisitions structures vary, the structure usually adopted when performing a buyout is: Private Equity Investor Management Investors Holding Company Equity Seller Purchase price Acquisition Company (SPV) Senior Debt Target Baker McKenzie | 5 Equity contributions may be injected into either the Acquisition Company or into the holding company (although most commonly the equity contributions are injected into the Acquisition Company). The holding and/or the acquiring companies may be foreign or local legal entities which will usually be in the form of either an SA or SRL. SAs and SRLs have different corporate requirements. For an SA, the minimum corporate capital amount is ARS 100,000 (approximately USD 11,111 at the current official exchange rate of ARS 9.00 per USD 1) and is represented in shares. The number of shareholders is not limited but must be at least two, and the exclusion of shareholders is not possible from a legal standpoint. There is no minimum capital amount requirement for an SRL and the capital is represented in quotas. The number of quota-holders must be between two and 50. The legal regime of an SRL is similar to that of an SA. However, an SRL’s filing requirements and maintenance expenses are lower. In relation to both types of entities, the equity holders’ liability is limited to the subscribed and paid-up shares or quotas. 7. What transaction documentation is usually prepared when undertaking a buyout? Corporate The following documents are usually prepared: (a) letter of intent/memorandum of understanding; (b) confidentiality agreement; (c) sale and purchase agreement: stock purchase agreement or bulk transfer agreement; (d) shareholders agreement; (e) services agreements; and (f) management agreement. The sale and purchase agreement and shareholders agreement must be executed in writing and notarized. Outgoing shareholders notify the board of the transfer of shares and it is recorded in the company’s books. For bulk transfers, a prior notification of the share transfer must be published in the Official Gazette. Banking The following documents are usually prepared: (a) loan agreement; and (b) security agreements including: (i) stock pledge agreement; (ii) surety/bank collateral; and (iii) mortgage agreements and pledge agreements (subject to the regulations of the Argentine provincial jurisdiction where the assets are located). 6 | Baker McKenzie Global LBO Guide - Argentina 8. What forms of buyer protection can a fund usually expect when undertaking a buyout and where does that protection come from? When undertaking a buyout, a fund can usually expect buyer protection to be reflected in the sale documents or in ancillary documents and other arrangements including the following: (a) non-compete and exclusivity agreements with the seller and key managers; (b) escrow/holdback or deferral of purchase price; (c) a price adjustment mechanism (common in Argentina); and (d) representations, warranties and indemnities. The amount to be held in escrow/holdback depends on the potential liabilities discovered during the due diligence process. This is therefore dec...
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  • Fall '18
  • Leveraged buyout, Private equity fund, Private equity firm, Baker McKenzie

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