Private M&A

Acquisitions and disposals can be either structured as asset deals or shares deals, depending on the interest of the potential buyer or the seller’s intention. Shares deals are usually preferred against a transfer of business structure, as the latter entail the joint liability of both the seller and the buyer for liabilities that relate to the specific business and have been created until the date of the transfer (article 479 of the Greek Civil Code). Nevertheless, a transfer of business can also be effected through a corporate transformation, which is more tax efficient and easier to complete as it entails the universal succession of the transferor by the transferee by operation of law.

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There is no special legislation on M&A activity in Greece.

However, in relation to M&A transactions, the following laws generally apply:

• for corporate aspects of transactions: Law 4548/2018 on Reform of the law of Sociétés Anonymes, Law 4072/2012 on private companies and Law 3190/1955 on limited liability companies (Greek Corporate Law);
• for competition law issues: Law 3959/2011 on competition (Greek Competition Law) and Regulation (EC) 139/2004 (the EC Merger Regulation);
• for takeover bids in listed companies: Law 3461/2006 transposing Directive 2004/25/EC into Greek law (Greek Tender Offer Law);
• for disclosure obligations in case of acquisition of significant holdings in listed companies: Law 3556/2007 transposing Directive 2004/109/EC into Greek law (Greek Transparency Law);
• Law 4601/2019 on corporate transformations (Greek Corporate Transformations Law);
• the Income Tax Code (Law 4172/2013), which provides tax incentives in certain M&A cases; and
• other special provisions of civil, commercial and tax law.

Pursuant to article 3 of Regulation 593/2008 on law applicable to contractual obligations (the Rome I Regulation), parties are free to choose the law applicable to their agreement. To the extent that the agreement refers to rights in rem on assets, including shares, which are considered located in Greece, such rights will be governed by Greek law. In light of this, the transfer agreement is most commonly governed by Greek law irrespective of the law chosen by the parties for the sales and purchase agreement.

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There is no distinction under Greek law between legal and beneficial title. M&A transactions in Greece refer to the acquisition of ownership over the shares or assets sold.

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This is not necessary or required by law, unless there is an erga omnes enforceable obligation included to this effect in the target company’s articles of association. The Greek Corporate Law explicitly permits these clauses to be included in a company’s articles of association.

However, in the case where the buyer acquires 95 per cent of the capital of the target company, minority shareholders have the right to sell their participation to the buyer within five years period of the date the buyer reached 95 per cent.

In cases where the target company is a listed company, the buyer acquiring a third of the capital of the target company is obliged to launch a mandatory tender offer with consideration thresholds provided for by law pursuant to the Greek Tender Offer Law. In the case of a Greek law tender offer, minority shareholders have a sell-out right after the buyer has reached 90 per cent, and the buyer, respectively, has a squeeze-out right.

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In all cases of a business transfer either effected by a universal succession pursuant to the Greek Corporate Transformation Law or special succession (ie, pursuant to the Greek Civil Code by assigning each of the rights and assuming each of the liabilities of a specific business), the transferee (or the absorbing company or the new company, as the case may be) will acquire by operation of law all liabilities referring to the specific business pursuant to article 479 of the Greek Civil Code, in the case of a special succession transfer of business (as article 479 of the Greek Civil Code provides for the joint liability of both the seller and the buyer for liabilities that relate to the specific business and have been created until the date of the transfer) or the relevant provisions of the Greek Corporate Transformation Law, in the case of a transfer of business by universal succession. The transfer of all assets that refer to a specific business applies, as well, in the case of a corporate transformation, whereas in the case of transfer of business by special succession, assets can be excluded from the transfer.

With respect to consents required, in case of corporate transformations only the approval by the Ministry of Development for the perfection of the corporate transformation is required, following its approval by the general meeting of shareholders of the companies involved. In case of a transfer of business through special succession consents must be requested by the creditors before the assumption of the relevant liabilities and notifications must be made to the holders of the rights assigned thereunder. Furthermore, new regulatory approvals (to the extent applicable and necessary for the business transferred) should be sought, whereas in case of universal succession, all administrative licenses are by law transferred to the absorbing company or the new company. See question 33 regarding the employees of the business transferred and question 6 for regulatory approvals required in case of a target company that is a regulated entity subject to a special regime.

Furthermore, and subject to the applicable thresholder triggered, an anti-trust clearance pursuant to Greek Competition Law should be granted before closing. In particular, according to Greek Competition Law, an undertaking acquiring sole or joint control must notify the Hellenic Competition Commission of the concentration within 30 days from the conclusion of the agreement or the announcement of the bid, the exchange offer or the acquisition of controlling interest in the target, where the following conditions are cumulatively met:

• the aggregate worldwide turnover of all undertakings concerned is at least €150 million; and
• the total turnover in the Greek market of each one of at least two of the undertakings concerned exceeds €15 million.

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Prior approval must be obtained to acquire holdings in:

• credit and financial institutions by the Bank of Greece or, in the case of one of the four systemic Greek banks, by the European Central Bank;
• insurance companies by the Bank of Greece;
• investment firms or other entities supervised by the Hellenic Capital Market Commission;
• gaming companies by the Hellenic Gaming Commission; and
• certain energy companies by the Regulatory Authority for Energy.

In principle, there are no provisions or restrictions on foreign ownership in Greece. Cross-border mergers between limited liability companies governed by EU law are regulated by Directive 2005/56/EC of the European Parliament and of the Council, which has been transposed into Greek law by virtue of Law 3777/2009.

In view of the absence of relevant special provisions, mergers between a Greek legal entity and an entity governed by the law of a non-EU member state will also be accepted, with the application by analogy of article 45 of Greek Corporate Law on minority shareholders’ right to request that the société anonyme buys their shares. However, article 25(1) of Law 1892/1990 prohibits:

• any transaction inter vivos (ie, between the living) by which an individual or legal entity of a nationality or registered seat outside the European Union or the European Free Trade Association is granted an in rem or in personam right on real estate in border areas; and
• any transfer of shares or corporate units or any change of the shareholders or partners of any type of company that owns real estate in such areas.

Finally, certain sectors may have restrictions on foreign ownership (eg, the provisions governing the gas market applied to the privatisation of the Hellenic Gas Transmission System Operator SA as the Greek independent gas transmission operator).

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No, unless there is a provision to this effect included in the target company’s articles of association. Such restrictions cannot be included in the articles of association of a listed company.

In the case of corporate transformations, the approval by the general meeting of shareholders of the companies involved is required.

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See question 6. Fees may be paid to certain authorities for the review of the cases brought before them.

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A legal and a financial adviser with respect to the legal and financial due diligence and the structuring of the financial and legal aspects of the acquisition, respectively, are usually engaged. To the extent required owing to the nature of activities of the target company, a technical adviser may also be appointed. Terms of engagement are determined on an ad hoc basis, apart from clauses that are dictated by mandatory provisions of law that cannot be contractually derogated or that apply by operation of law without them being included expressis verbis in the terms of engagement.

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Counterparties are obliged (in case of Greek law-governed agreements) to negotiate in good faith.

In particular with respect to directors of the target company, they have a duty of care towards the company as a legal entity which also applies to M&A transactions. In particular, for listed companies, Greek Law 3016/2002 on corporate governance provides that directors have a duty to promote the long-term value of the company. In view of this, arguably, in the case of a tender offer, directors should accept the highest offer. In the above context, pursuant to the Greek Tender Offer Law, the directors of the target company must draw up and publish their justified opinion on the tender offer, as well as any amended or competitive bids. Such opinion must be accompanied by a detailed report from the company’s financial adviser.

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Documents entered into vary depending on the stage of the transaction, the structure of the acquisition and the nature of the asset or business acquired. Preliminary agreements may include a non-binding memorandum of understanding outlining the mutual understanding of the parties on the structure of the acquisition, a confidentiality undertaking regarding the secrecy of commercially or otherwise sensitive information; in some cases, an exclusivity agreement by which the target is legally committed to the potential buyer not to deal with competing buyers for a period during which only the potential buyer can conduct due diligence and decide on the acquisition.

Main documentation for the acquisition or disposal includes a sale and purchase agreement or an asset transfer agreement, a shareholders’ agreement, in case the buyer does not acquire 100 per cent of the capital of the target.

In the case of acquisitions made under a special regime (namely, pursuant to a corporate transformation or a Greek law tender offer), the documentation provided for by such special regulation will also be used (for example, in case of a Greek law tender offer, an information memorandum that is approved by the Hellenic Capital Market Commission must be published by the issuer, whereas in the case of corporate transformations, parties involved issue the draft and the final merger or spin-off agreement, the latter mandatorily being a notarial deed).

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There are no formalities for documents executed by foreign companies. Pursuant to Regulation (EU) 910/2014 of the European Parliament and of the Council, a qualified electronic signature, namely an advanced electronic signature (ie, an electronic signature that is uniquely linked to the signatory, capable of identifying the signatory, created using means that the signatory can maintain under its sole control and linked to the data signed therewith in such a manner that any subsequent change of the data is detectable), which is based on a qualified certificate and created by a qualified electronic signature creation device has the equivalent legal effect of a handwritten signature. However, this framework is uncommon in practice. Further, in cases where contractual type is not mandatory for the execution of documents, the exchange of PDF documents via email will suffice in order for them to be considered binding and enforceable.

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No legal requirements exist for the performance of due diligence in Greece. A typical buyer will arrange for legal, accounting and tax due diligence exercises before deciding on an acquisition. Depending on the type of activity with which the target is engaged, a technical or an environmental due diligence exercise may also be advisable. In any event, due diligence is based on the buyer’s risk profile. Sellers may also provide due diligence reports to prospective buyers, most frequently in cases of a bidding procedure or in order to ensure a time-efficient sale. Buyers may rely on due diligence reports produced by the seller, to the extent that the advisers have consented to such reliance and the buyer’s internal policies permit it to rely on an adviser whose duty of care is primarily owed to the seller.

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In the case of Greek law-governed agreements, parties are by law obliged to act according to boni mores and transactions usage. Pre-contractual liability applies to losses caused to one counterparty by the other counterparty’s wilful misconduct or negligence. Any restriction of these liabilities is subject to the generally applicable limitations on Greek law liability restrictions (see question 28).

The joint liability of the transferor and the transferee in case of transfer of business by special succession cannot be waived.

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The recently set up Greek commercial registry includes information on the target company’s articles of association, its representation, financial statements published and good standing. Certificates can be issued on these matters upon request.

There are also publicly available records in land registries and cadastres on rights in rem effected on real estate properly and assignments on business receivables. Search and review are publicly accessible provided that one knows the particulars of the assets under review and their owner.

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In the case of Greek law-governed contracts, such knowledge may eliminate the buyer’s ability to seek compensation for losses arising from breach of representations and warranties provided by the seller.

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Buyers use financial advisers to help them determine which pricing method is in their best interest. The same applies for the seller.

In the case of acquisition through a Greek law tender offer, a minimum consideration is provided for by the Greek Tender Offer Law and, in case of corporate transformation, the share exchange ratio and the relevant cash consideration (where applicable) is confirmed by a fairness opinion provided to the companies involved in the corporate transformation.

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The vast majority of acquisitions and disposals involve cash consideration. There is no generally applicable limitation that prohibits a buyer from paying different considerations to multiple sellers in a private M&A transaction. Such prohibition applies only with respect to free float shareholders tendering their shares to the offeror in case of a Greek law tender offer, in which case the offeror must offer the same amount or value consideration to all tendering shareholders. In general, consideration in a Greek law tender offer may either be cash or securities, the consideration in a Greek law mandatory tender offer mandatorily consist of a cash option.

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These arrangements are used, mainly depending on the industry and the perceived risks of the parties involved, but are not very usual.

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Acquisitions are usually financed by a loan (either through a notes issuance by the buyer or a loan facility granted to the buyer) or by raising funds through a share capital increase. Availability of the acquisition financing is proven either by providing a letter of guarantee or an equity commitment letter or other proof of funds availability.

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There are no general limitations set by Greek law on how to finance the acquisition, apart from restrictions otherwise applicable under Greek Corporate Law with respect to related party transactions or other special rules.

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Transactions are normally subject to closing conditions, the latter usually referring to an anti-trust or other regulatory clearance or other regulatory compliance requirements or to the satisfaction of requirements provided for by agreements that are material for the operation or financial condition of the target and are triggered by the contemplated acquisition or disposal (for example, change of control clauses). Non-occurrence of a material (ie, exceeding a certain amount) breach of the warranties provided by the seller may also be included as a condition precedent.

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The parties are free to agree the level of diligence and effort that the buyer must have when undertaking action to fulfil the closing conditions without any limitation, apart from the obligation to respect (in cases of Greek law-governed agreements) the generally applicable principles of Greek law.

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Pre-closing covenants are more usual in cases where the buyer has economically acquired the risk of the business purchased, but does not yet have the actual, effective control over it. In this context, pre-closing covenants largely refer to the conduct of business between signing of the sales agreement and the completion of the transfer.

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In the case of agreements governed by Greek law, it is not usual that parties agree on a termination right applying after the signing and before the transfer of the asset or business, apart from termination rights triggered by a material adverse change that would render the continuation of the agreement economically unduly burdensome for one of the counterparties, or in the case that the regulatory clearance required for the acquisition or disposal has not been obtained by an agreed date or in the case of a material breach of warranty (usually if a certain threshold amount of losses is exceeded).

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To date, deal protection is not heavily practised in Greece. Break-up fees that are in principle enforceable have been agreed in a small number of cases. However, as there is no published case law, their enforceability has not yet been tested. Of course, in case of Greek law-governed contracts, limitations based on general principles of law (ie, the abusive exercise of rights) will apply.

Further, in order to mitigate the risk of not receiving the necessary approvals for the transaction (eg, approval from the Hellenic Competition Commission or the Hellenic Capital Market Commission), the parties often set the granting of the relevant approvals as conditions precedent for closing.

In case any of the parties unduly terminates the sale and purchase agreement, then the non-defaulting party is entitled to compensation, which usually covers the time and resources spent in negotiating the deal or the loss of another deal. In most cases, penalty clauses are agreed upon, but if excessive they can be reduced by the court.

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Representations, warranties and indemnities are usually agreed in a shares or business transfer deal. They are not customary in case of asset deals. Warranties and indemnities typically cover the amount and composition of the share capital of the target, past tax and other liabilities vis-à-vis the Greek state or other Greek public law entities, accuracy of financial statements, lack of encumbrances on assets, good standing (including solvency status), compliance with law, including on environmental matters (to the extent relevant), intellectual property and employment issues. Specific items may be added to the above depending on the target’s sector, as well as the due diligence findings.

Where the relevant agreement is governed by Greek law, representations and warranties are regulated by article 534 of the Greek Civil Code and are treated in the same way in terms of the liability borne by the seller in case of a breach. Influenced by common law contracts of sale and not by operation of law, representations and warranties are typically qualified by the information provided to the buyer during the due diligence exercise. It is also possible to agree on indemnities as separate contractual obligations that are acknowledged under Greek private contract law.

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No substantial limitations to the types of warranty that may be given are provided for under Greek law. The customary limitations on a seller’s liability under a sale and purchase agreement are limitations on time and quantum (for example, de minimis amounts and overall cap amounts to apply for all claims arising from the agreement or with respect to specific claims that depend, inter alia, on relevant due diligence findings, risk tolerance of the counterparties and other related factors), similar to the ones in other jurisdictions. However, in case of Greek law governed agreements, the limitation of liability is not valid, even if agreed between the parties, in case of gross negligence or wilful misconduct of the liable party, pursuant to article 332 of the Greek Civil Code. Moreover, according to article 275 of the Greek Civil Code, the parties may neither reduce nor extend the statute of limitations, which is two years regarding movables (including shares) and five years regarding real estate properties. Extension of the statute of limitations is achieved under Greek law by the warranty period that the seller may provide according to article 556 of the Greek Civil Code or the ‘independent strict liability’ provided by the seller, in which case the statute of limitations is 20 years.

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It is one of the most recent trends; however, it has not been used extensively in Greece so that a trend is established with respect to customarily agreed terms.

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There is no standard market practice on this matter. This largely depends on the risk that the parties are willing to undertake and the nature of the assets or business transferred. They are used some times in order to avoid including in the transfer agreement a price re-adjustment mechanism or to address or rectify issues that could not have been addressed on time until closing. Post-closing covenants are less usual in asset deals. In the case of shares and business transfer deals, tax covenants are most commonly used as post-closing covenants.

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On the assumption that the cause of transfer is exclusively sale (ie, not donation or inheritance etc), the following apply:

Income tax

Individuals (acting in a non-business capacity)

Greek tax residents

Capital gains from the transfer of shares or of a business are taxed at 15 per cent. Capital gains from the transfer of listed shares, where the seller owns less than 0.5 per cent of the share capital of the company are exempted from income tax.

Capital gains will be subject to a further tax called ‘solidarity contribution’. The rate of the solidarity contribution rises progressively from 2.2 per cent to 10 per cent and is calculated with reference to both taxable and tax-exempt annual income exceeding €12,000.

Capital gains from other assets are taxed depending on the type of asset. Capital gains from real property are currently exempted from income tax. Transfer of securities or financial derivatives are taxed a described above. Transfer of most other assets would not be subject to income tax, assuming that capital gains generated are not deemed to be income from business activity.

Non-Greek tax residents

Capital gains from the transfer of shares, or of a business, or of other securities or of financial derivatives are exempted from tax where the seller is a tax resident in a jurisdiction that Greece has entered into a double taxation avoidance treaty with.

Otherwise, capital gains from the transfer of shares or a business or other assets are taxed as described above.

Legal entities

Greek tax residents

Capital gains from the transfer of shares, or of a business, or of other assets will as a rule be treated as income from business activity and be included in the calculation of the annual profits of the legal entity. Taxable profits are taxed currently at a rate of 28 per cent (29 per cent for credit institutions), although this may change shortly.

Non-Greek tax residents

Capital gains will only be deemed income generated in Greece, where they are realised through a permanent establishment in Greece. In that case, income would be taxed as above.

Transaction taxes

Shares

Sale of shares is exempted from VAT. It is also exempted from stamp duty. The sale of shares listed in Greece is subject to a transaction tax of 2 per cent, owed by the seller. The same applies for shares listed anywhere, provided that the seller, individual, legal entity or permanent establishment, is a Greek tax resident.

Business

Where a business (or its assets as a whole, without its liabilities) is transferred and both the transferor and transferee are wholly liable to VAT, the transfer falls outside the scope of VAT (is not considered a supply of goods), but is subject to stamp duty generally at a rate of 2.4 per cent. Where the transferor or the transferee either supply goods or services which are exempted from VAT or are themselves exempted from VAT, the transfer will be subject to VAT (the general rate is 24 per cent), although it will be exempted from VAT where the transferor and the business are not liable to VAT. VAT is paid by the buyer. Stamp duty is owed jointly by both parties, and it is a matter of agreement who will bear the cost and to what degree. Arguably, lacking a specific agreement the cost will be divided equally inter partes.

Assets

Taxation would depend on the type of asset. For example, regarding real estate, transfer tax is generally 3 per cent plus a municipal tax equal to 3 per cent of the transfer tax (effectively in practice 0.09 per cent). To this, one must add the registration costs with the land registry of currently approximately 5.75 per cent to 5.95 per cent (in some cases, plus VAT), as well as public notary fees calculated on the basis of a regressive graduated scale from 8 per cent to 1 per cent. The above are calculated over the value of the sale or a notional value (called ‘objective value’) of the real property, whichever is higher. Newer real properties are also subject to VAT at a rate of 24 per cent.

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See question 31.

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When the shares of a target company are acquired, then only the shareholders -and eventually control - change on the target company; its employees are not transferred but remain employees of the target company.

However, when a buyer acquires a business, or part of a business, from the target company, then the employees dedicated to such business shall be transferred automatically to the entity that will acquire such business. In this case, pursuant to Greek Presidential Decree 178/2002, which implemented Council Directive 98/50/EC of 29 June 1998, relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses, provides that the rights and obligations from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the buyer. The same may be true in the case where assets are acquired that qualify as business from a labour perspective, irrespectively of their qualification tax-wise.

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The seller and buyer are required to inform the representatives of their respective employees affected by the transfer of the date or proposed date of the transfer, its reasons, the legal, economic and social implications of the transfer for the employees and any measures envisaged in relation to the employees. Such information is to be provided to the representatives of the employees or each one of them, in case there are no representatives, in due time, and in any event before the transferring employees are directly affected by the transfer as regards their conditions of work and employment. Consultation is required when the seller and buyer envisage measures in relation to the employees, in which case the former shall consult with the representatives of the employees in due time on such measures in order for the parties to reach a mutual agreement.

Moreover, Greek Presidential Decree 240/2006, which implemented Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002, establishes a general framework for informing employees and consulting with them.

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Concerning the employee’s rights arising from existing insurance agreements or private pension funds (pension plans), the following apply:

• if the buyer agrees to the terms of the existing agreements, the agreements are renewed;
• if the buyer agrees to the continuation of the agreements with different terms, the buyer consults with the employees and the seller and signs a new agreement. If an insurance company or a private fund intervenes, the representative of the insurance company or the trustee of the private pension fund is invited to the consultation to submit suggestions, taking into account the existing reserves or credit balance of the pension funds’ deposits; and
• if the buyer disagrees to the continuation of the agreements (before the transfer), the relevant funds are liquidated (wound up) and belong to the employees.

If there are no employees’ councils in the transferred company (and, according to Greek law 1767/1988, the employees of a company with at least 50 employees have the right to elect such councils), then a committee, constituted by three employees at least, is elected by the employees, so that it participates in the above consultations, liquidation and distribution.

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Key developments

36 What are the most significant legal, regulatory and market practice developments and trends in private M&A transactions during the past 12 months in your jurisdiction?

The most significant market development has been the insurance for representations and warranties, which has started being used in particular where the seller is a fund. Insurance products are offered by foreign insurers.

The most significant legal development is the entry into force of the Greek Corporate Transformation Law, which has introduced the partial de-merger and the hive down effected by universal succession.

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