CMS Expert Guide to Public Takeovers in Serbia

Yes. Takeovers of listed companies are regulated by the Law on Takeovers of joint stock companies (“Official Gazette of RS”, nos. 46/2006, 107/2009, 99/2011 and 108/2016) (“TA”), whereby it addresses the transactions relating to the acquisition of control of Serbian joint stock companies as follows (i.e., target companies): 

• a public joint stock company incorporated under the laws of Republic of Serbia (“RS”), whose shares are traded on the Belgrade Stock Exchange (“Belex”) or a multilateral trading platform (“MTP”); and 
• a joint stock company incorporated under the laws of RS that has more than 100 shareholders on the last day of each of three consecutive months, as well as a total share capital to the value of a minimum EUR 3m. 

• Takeover offers; and 
• Acquisitions – see below under question 4. points 1), 2) and 3) (mandatory takeover offer). 

Prior to the filing of the request for approval of the takeover offer with the Securities Commission (“SEC”), the offeror is required to open a special-purpose securities account at the Central Securities Depository and Clearing House (“CSD”) via an authorised member of the CSD (a bank or brokerage company).  

The takeover offer procedure itself is usually performed by lawyers and the brokerage company in cooperation.  

• A mandatory takeover offer is required in the following cases: 

• if a person directly or indirectly, independently or acting in concert, acquires (in aggregate) shares in excess of 25% of the total voting rights in the target company – controlling threshold; 
• if a person, after reaching the controlling threshold referred to above and the announcement of the mandatory takeover offer / in situations that were initially exempted from this obligation, directly or indirectly, independently or acting in concert, acquires further shares in the target company and thus increases its participation in the total number of voting shares by more than 10% - additional threshold; and 
• if a person, after reaching the controlling threshold referred to above and after the announcement of the mandatory takeover offer / in situations that were initially exempted from the obligation, directly or indirectly, independently or acting in concert, acquires shares and thus increases its participation in the total number of voting shares by less than 10%, but so that in total its shareholding exceeds the threshold of 75% of the total voting shares - final threshold. 

Shareholdings of related persons and/or parties acting in concert must be taken into consideration when determining whether the mandatory takeover offer threshold has been exceeded or not. 

If a person is not required to make a mandatory takeover offer, it is still allowed to make a voluntary takeover, in which case all the provisions regulating mandatory takeover offers are to be applied. 

O  Exceptions to the requirement for a mandatory takeover offer:

• If the acquirer of a controlling interest acquires shares: 

1. through inheritance; 
2. through division of joint marital property; 
3. on a temporary basis only while engaging in the acquirer’s registered business activity or issuing or reselling securities on the market (provided that the voting rights conferred by such shares are not exercised); 
4. in the bankruptcy proceedings of the target company; 
5. in the status change (merger) procedure where only one of the companies involved in the merger procedure holds shares of the target company; 
6. through the procedure on change of the legal status of the target company; 
7. if no change of the control occurred as the result of a transfer of shares or the transfer of shares was made for the purposes of restructuring within a target company; 
8. if a new company is created by a status change (i.e. merger or by division), provided that the rights of dissenting shareholders of the remaining companies are protected; 
9. only to secure the claims of the offeror towards the target company, provided the creditor does not exercise the voting right attached to the acquired shares; 
10. by the RS, or persons acting in concert with the RS; 
11. after a completed takeover offer ,if  the shares are acquired as a result of a transfer of shares between the persons who acted in concert in the takeover offer; 
12. if by the acquisition of shares in the target company the acquirer holds the same (or lower) percentage of voting shares in the target company as other shareholders of the target company that announced the takeover offer; 
13. through a capital increase by means of subscription for new shares  or from the net assets of the target company (such as by capitalising reserves or non-distributed profits), subject to a shareholders’ meeting of the target company passing a resolution approving (by the majority of ¾ of the present non-conflicted votes) such capital increase without the obligation to launch the takeover offer; 
14. representing  more than 25% of voting shares of the target company prior to the entry into force of the TA; 
15. if an exception is provided by another law (such as on a privatisation).

• There is no obligation to launch a further mandatory takeover offer for a person that, after the completed mandatory takeover offer, holds at least 75% of the total voting shares. 
• When acquisition of the shares is undertaken according to the law in respect of a privatisation, the obligation to launch a takeover offer is not applicable when the Shareholders’ Fund acquires the shares, when the shares are acquired from the Shareholders’ Fund (or from the shareholders whose shares are offered jointly with the shares of the Shareholders’ Fund), from the Republic Fund for Pension and Disability Insurance of Employed Persons or the Republic Development Fund, from the Registry of Shares and Shareholdings (transferred upon the termination of the privatisation agreement) or from the RS, an autonomous province or a unit of local self-government. 
• Further exceptions to the obligation to make a mandatory takeover offer are provided by the TA (unless otherwise provided by an enactment of the Government) referring to the shares related to the legal succession of RS from the former Yugoslavia, shares issued by the bank if the legal owner of such shares is RS, shares issued by the banks or insurance companies for restructuring or similar purposes, or under the instruction of National Bank of Serbia, shares held and sold by the SCD, etc. 

Only in case of conditional takeover offers, it is possible to provide for  a minimum threshold (percentage of shares) which must be reached as a result of  the takeover offer. If the minimum threshold is reached, the offeror is obliged to acquire all the shares deposited pursuant to  the takeover offer(including those exceeding the threshold). The abovementioned could be a possible arrangement providing for the acquisition of 100% of the target company, but only in case of conditional takeover offers. 

Within its own parties (advisers, funders etc), an offeror may maintain confidentiality. However, the takeover offer is public, and the main aim of the TA is to provide transparency around the takeover offer process. 

TA regulates when a takeover offer must be made, as well as the exceptions to the obligation to make a mandatory takeover offer. Note, even if no obligation to make mandatory takeover offer exists, the offeror may make a voluntary takeover offer. Consequently, the rules of the TA on mandatory takeover offers shall be applied (please see above Question4).  

Further, the TA prescribes the detailed procedure of a takeover offer process, including its necessary elements, as follows:  

• Notice on takeover intent – Must be made public by an offeror, in at least one daily newspaper which is regularly distributed in the whole territory of the RS, within two business days of the day the takeover obligation occurred; 
• Application for the approval of the takeover offer – must be submitted to the SEC by the offeror, at the latest 15 business days of the day  the takeover obligation occurred; 
• Decision – SEC issues a decision (and notifies the CSD thereof) within 10 business days following the day of receipt of a duly submitted application; 
• Publishing the summarised text of the takeover offer – After receiving the decision of the SEC approving the takeover offer, the offeror must promptly publish the summarised text of the takeover offer (and any amendment) to the takeover offer in one daily newspaper regularly distributed in the whole territory of the RS, and optionally, also on the offeror’s website.  

The offeror shall promptly provide a copy of the published text of the takeover offer, (and any amendment thereof) to the SEC, to the target company, the Belex and/or MTF on which the shares of the target company are traded and the CSD. The CSD shall publish the takeover offer on its website. 

Only voluntary takeover offers may be subject to a condition – to a minimum acceptance threshold (percentage of shares) reached pursuant to the takeover offer. If the indicated condition is not met prior to the expiry of the period stipulated for its acceptance, the takeover offer is considered unsuccessful, and such takeover offer ceases to be binding upon the offeror. If a minimum acceptance threshold is reached, the offeror is obliged to acquire all the shares assented to  the takeover offer (including those, if any, exceeding the threshold).  

Prior to applying for the approval of a takeover offer, the offeror must secure the necessary funds to purchase the shares in one of the following ways: 

• deposit the money in a special-purpose account with a Serbian bank, and/or deposit any  securities to be issued as consideration in a special-purpose account with the CSD.  
• conclude a loan agreement with a Serbian bank (approved for the purpose of the purchase of shares); 
• provide an irrevocable bank guarantee (by a Serbian bank) on first demand, in the amount required for payment of all shares pursuant to the takeover offer.  

If the target company is considered liquid under the TA, an offeror must provide at least the higher price of: 

• the weighted average price of voting shares in the last six months preceding the date when the obligation to make a takeover offer occurred, determined based on a trading report from Belex/MTF, or  
• the highest price paid for the same shares by the offeror, or by persons acting in concert, over a period of 12 months before the date the obligation to make a takeover offer occurred (including the acquisitions pursuant to which an obligation for the offeror and/or persons acting in concert to make a takeover offer was triggered).  

If the target company is not considered liquid under the TA, or if the shares are not admitted to trading on a regulated market or MTF, an offeror must offer at least the highest price of: 

• the highest price paid for the same shares by the offeror, or by persons acting in concert, over a period of 12 months before the date the obligation to make a takeover offer occurred (including the acquisitions pursuant to which an obligation for the offeror and/or persons acting in concert to make a takeover offer was triggered); or 
• book value of voting shares determined based on the last annual financial statement of the target company; or  
• the estimated fair value of voting shares on the day of obligation to make a takeover offer occurred. 

No. All shareholders must be afforded equivalent treatment under the takeover offer, meaning that all shareholders must be able to sell their shares on the same terms and conditions and at the same price (i.e. for every share of the same class, the offeror must pay the same price). 

This is not regulated by the TA. However, the TA prescribes that from the moment the offeror incurs the obligation to launch a takeover offer, the target company and/or the CSD, shall allow the offeror, at its request, to inspect at least information related to shareholders and shares of the target company.

From the moment of publishing the notification of the intention to make a takeover offer, until the completion of the takeover offer, the management of the target company, unless with a prior approval of the Shareholders' meeting: 

1. may not increase the share capital by issuing new shares; 
2. is prohibited from making decisions to undertake extraordinary activities or decisions on concluding contracts that would significantly change the state of assets or liabilities of the target company, i.e., is allowed to undertake only regular activities related to the business activity of the target company; 
3. is prohibited from making a decision for the target company to acquire or dispose of treasury shares; 
4. is prohibited from publishing a takeover offer for another joint stock company  (including the offeror). 

Within the 10 days of publishing of the takeover offer, the management of the target company is obliged to publish its opinion on the takeover offer and to express their recommendation and support for the takeover offer or rejection thereof, in the same form as prescribed for the publishing the takeover offers (see q.7 above). The opinion must reflect on the takeover offer as a whole, especially the price per share offered, as well as the goals of the offeror and its intentions related to the target company. If the opinion contains false information or is misleading to the shareholders, the persons preparing the opinion may be held liable. Prior to publishing an opinion, the management of the target company must notify its employees within three days from the date when takeover offer was published. Employees are allowed to provide their opinion within five days of the day management notified them.  

Apart from the opinion, the management of the target company is prohibited from rendering any decisions from their sphere of authorisations which might in any way illegally prevent or burden the takeover or have harmful impact on the business activity of the target company in the long run. 

From the moment when the obligation to publish the takeover offer occurred, until the expiry of the offer period of the takeover offer, the offeror and the persons acting in concert are prohibited from acquiring voting shares of the target company, or to undertake to acquire them in any other way, except through the takeover offer. The offeror is further prohibited from disposing and undertaking an obligation to dispose of the voting shares of the target company. However, the offeror and persons acting in concert are allowed to dispose of the shares of the target company if the following conditions are met:   

• if they publicly disclose the intention not to complete the takeover offer for the target company, but to dispose of a certain number of shares instead, no later than 30 days before the intended disposal of the shares. Such disclosure must contain data on the number of shares held by the offeror and the persons acting in concert and the data on the number of shares they intend to dispose of; 
• if they publish without delay a notice of any disposal of the shares of the target company, containing information on the date of disposal, manner and price of disposal, the number of disposed shares and the percentage of the total issued shares with voting rights of the target company owned by the offeror and the persons acting in concert, after the disposal. 

The target company shareholders can withdraw  shares from the deposit account until the expiry of the takeover offer period. Exceptionally, a shareholder may withdraw the shares from the deposit even after the expiry of that period, if the offeror does not pay the price within the deadline stipulated for  payment.  

A shareholder is not entitled to commit not to withdraw its shares or otherwise waive its right to withdraw shares from the deposit account. The offeror may not refer to the shareholder's statement on the waiver of the right to withdraw shares from the deposit account. 

From the moment the obligation to publish a takeover offer arises, until the expiry of the offer period , the offeror and the persons acting in concert with the offeror shall not acquire voting shares in the target company and shall not make a commitment to acquire them in any manner other than under the takeover offer, and shall not dispose or commit to dispose of the voting shares of the target company (i.e. so the target company shareholders may not sell or agree to sell the shares to the offeror outside the takeover offer process).  

1. The target company, its shareholders, CSD business banks, investment companies as well as other natural or legal persons must disclose all documentation necessary for the SEC to undertake supervision in the procedure of determining the mandatory takeover offer or the acting in concert, as well as in the supervision of the takeover offer proceedings, at the request of SEC; 
   CSD and the target company are required to disclose all information on the ownership status of the shareholders, per the request of the SEC, and this information provided to the SEC and its employees is considered confidential, and could be used only within of the scope of authorisations of the SEC; and 
2. CSD will inform the offeror and the target company through its members about the receipt of shares of the target company and allow them to review the account balance of the deposited securities, notify them thereof, issue statements of such account, allow them to verify the determined outcome of the takeover offer, and assist them in such verification, in accordance with their operating rules and the law governing the securities market. 

The time duration of the takeover offer lasts, approx. two to three months (including the possible extensions of the takeover offer period). Principal stages of the process are the following: 

• Day T - Obligation to make a takeover offer; 
• Day T + 2 – Publication of a notification of intention to launch a takeover offer; 
• Day T + 15 - Request for approval of takeover offer (to the SEC); 
• Day T + 15 + 10 - Approval by the SEC; 
• Day T + 15 + 11 - Announcement of the summarised text of the takeover offer in a daily newspaper (target company’s website as optional), delivery of the announcement to the SEC, Belex, CSD; 
• Day T + 15 + 11 + 10 –the target company’s managing body opinion on the takeover offer (Employees are entitled to issue their opinion in the following 5 days); 
• Deposition of the shares – min. 21 days, max. 45 days (extendable up to a max. of 70 days in case of competing offers, or max. of 60 days if the takeover offer is amended); 
• Payment of the purchase price and transfer of shares through the CSD - 3 business days from the end of the takeover offer period; and 
• Announcement of a report on the takeover in a daily newspaper with a nationwide circulation, delivery of a report to the SEC, Belex and the target - 1 business day from the end of the period under point 8). 

• Documents on legal transactions on the basis of which the offeror and persons acting in concert have acquired shares of the target company in a period of one year prior to the obligation to make a takeover offer;  
• The bank guarantee or loan agreement, or the agreement on opening of a special-purpose account and evidence of payment of money, or depositing of securities for the payment of shares; 
• The contract with a member of the CSD on conducting the share depositing transactions; 
• Prior approval of the National Bank of Serbia, when shares of banks, financial leasing companies or insurance companies are the subject of the takeover offer; 
• A certificate from the regulated market or MTF, issued per the request of the offeror, of the average share price, volume of trading and the number of the trading days; 
• A study on assessment of fair value of the target company shares, prepared by an independent authorised auditor from the latest list of auditors determined by the SEC, and if the shares are not liquid; 
• A document demonstrating the payment of fees; 
• Other documentation required by the SEC. 

Yes. Any legal or natural person (except the members of the concert party of the offeror, or a person who acts on behalf of the offeror in the takeover offer) can make a competitive takeover offer after the publication of a takeover offer and within the offer period of the first takeover offer. The application for approval of a competing takeover offer must be submitted within one business day prior to the expiry of the offer period of the first takeover offer. The SEC will issue the decision on the submitted application on the same day. The competitor must make its competitive offer immediately upon the receipt of the decision issued by the SEC, and not later than on the last day of the offer period of the first takeover offer. It is possible to amend the competitive offer under the same conditions applicable to a first takeover offer (see below q.21). If the initial takeover offer is considered conditional (see above q.8), the competing offer may not be made for the acquisition of a larger number of shares (so, for example, if the initial offer was only for 75% of the issued shares, a competing offer could not be for more than that 75%). 

Offeror may withdraw the takeover offer in two circumstances:  

• in the event of the making of a competing offer at a higher price; or 
• in the event of the bankruptcy of the target company.  

A general rule is that the offeror is not allowed to change the takeover offer. However, modifications are allowed, but only for the purpose of an improvement to the takeover offer (i.e., increase of the offer price or withdrawal of the conditions (in case of a conditional offer). The offer price, however, cannot be lowered.  

The TA does not regulate the position and rights of the minority shareholders who do not accept the takeover offer. However, the Serbian Companies Act (“Official Gazette of RS” nos. 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018, 91/2019 and109/2021) prescribes that a person who, through a takeover offer, has acquired 90% of the shares in the target company is entitled to submit, within the period of three months from the end of the offer period of the takeover offer, a request for compulsory buy-out of shares to the CSD under the conditions of the takeover offer.  

In the case of a conditional takeover offer: if the minimum acceptance threshold is not reached, the takeover offer is to be considered unsuccessful, and the offeror is forbidden from buying any of the shares which shareholders of the target company have assented to the offer and transferred to the offeror’s account. The offeror shall return the shares to them at its own expense, within three business days from the receipt of confirmation of such outcome from the CSD. 

Delisting is not regulated by the TA itself. Relevant legal sources are the Law on the Capital Market (“Official Gazette of RS” no. 129/2021) and the Rulebook on the manner of termination of the status of a public company and the procedure for payment of dissenting shareholders in case of exclusion of shares from the regulated market, i.e., Belex/MTP (“Official Gazette of RS” nos. 10/2012 and 50/2012). 

For a company to de-list, a Shareholders’ meeting must first pass a resolution approving the removal of the shares from the regulated market, Belex/MTP (required majority is ¾ of the total amount of issued voting shares), while a higher majority can be prescribed by the Articles of Association of the target company). For the removal of shares to be allowed, the following conditions must all be  met:  

• public company has less than 10,000 shareholders; 
• in a period of three months prior to the date of the passing of the resolution, the turnover of the shares amounted to less than 0.5% of their total issued shares; and 
• for at least one of those three months the monthly turnover amounted to less than 0.05% of the total issued shares.  

To be valid, the resolution to delist must contain the irrevocable statement of the company to buy shares from the dissenting shareholders per their request, and the company must fully comply with the rules related to the rights of dissenting shareholders (right to be bought-out) .