Corporate M&A 2022 Comparisons

The COVID-19 pandemic has not particularly affected the pace of deal activity during the past 12 months. Investors find significant value in businesses across several sectors of the Greek economy. Following a decade of crisis, and given a period of economic recession, multinational groups and financial investors find value in promising medium-term business plans, which are offered at competitive prices. 

Starting from 2021, there is a clear trend in several sectors of combining expertise and clientele, or of targeting similar functions to add value through volume. The market is preparing by absorbing Recovery and Resilience Facility funds, which are expected to play a crucial role in the overall activity for the next five years.

Energy (particularly renewables), real estate (particularly hospitality), the food industry, insurance and pharmaceuticals have experienced significant activity in the past 12 months, especially considering the scale of the Greek economy. Increased activity is also apparent in non-performing loan portfolios changing hands or management.

Primary Techniques

The following techniques/legal means for acquiring a company are available in Greece.

Asset deal

An asset deal involves the acquisition of part or whole of a company’s assets. Such technique is not specifically regulated by Greek law; the general provisions of the Greek Civil Code (GCC) are applicable (Articles 513 and subsequent). The vendor company is not dissolved as a result of the transaction.

Share deal

A share deal involves the acquisition of part or whole of the company’s shares. Again, such technique is not specifically regulated under Greek law; the general provisions of the GCC are applicable (Articles 513 and subsequent). Again, the vendor company is not dissolved as a result of the transaction. A share deal can also take the form of a spin-off, as regulated by Law 4601/2019. A spin-off can be achieved in any of the following ways:

• by absorption of a particular business unit of a company by another existing company;
• by contribution of a particular business unit of a company into a new company; or
• by combining the above; ie, partial absorption by an existing company and partial contribution into a new company.

In spin-offs, shares in the benefiting companies are distributed to the existing shareholders or partners pro rata to their participation. Spin-offs are used when the activities/operations of a company are various and distinct and the shareholders wish to transfer one of those activities/operations in the form of a separate unit. As per the above, the company being divided is not dissolved as a result of the transaction.

Merger

Mergers are regulated by Law 4601/2019 and may take the following forms.

• Merger by absorption – upon dissolution, one or more companies transfer to an existing company their total assets and liabilities in exchange for the transfer to their shareholders of shares in the absorbing company (buyer) and possibly an additional money sum, not exceeding 10% of the nominal value of any corporate shareholdings transferred pursuant to the merger (or, in the absence of a nominal value, their book value).
• Merger by establishment of a NewCo – upon dissolution, one or more companies set up a NewCo, to which they transfer their total assets and liabilities, in exchange for the transfer to their shareholders of shares in the NewCo, and possibly an additional money sum not exceeding 10% of the nominal value of any corporate shareholdings transferred pursuant to the merger (or, in the absence of a nominal value, their book value).

Share capital increase

Finally, the acquisition of a substantial shareholding in a target company by a third party may take place through a share capital increase, provided that the existing shareholders do not exercise their pre-emption rights.

M&A Activity

There is no specific regulator for M&A activity in Greece. Certain regulators may be involved depending on the sector of activity/size of the companies involved and on whether the target company is listed; in particular, the following.

• Pursuant to Law 3959/2011 (the Greek Competition Law), the Hellenic Competition Commission (HCC) is responsible for monitoring any M&A activity in relation to antitrust (concentration) matters. Whether an M&A transaction is notifiable depends on the sector of activity/size of the companies involved, as provided in the Greek Competition Law.
• The Hellenic Capital Market Commission (pursuant to Law 3461/2006) (HCMC) and the Athens Stock Exchange are responsible for regulating and monitoring specific matters pertaining to listed companies.

Save for the above, different public bodies may be competent for regulating and monitoring M&A activity on a sector-specific basis, such as the Regulatory Authority for Energy (RAE) for the energy sector, and the Bank of Greece for financial and credit institutions.

In principle, foreign investments in Greece are treated in the same way as investments by Greek entities. However, certain restrictions may be applicable to address national security concerns. One example is Law 3978/2011, as currently in force, which prohibits the transfer of any shares or other equitable interest in companies that own any real estate in borderline areas to any natural or legal entities having a nationality or domicile other than in an EU or European Free Trade Association (EFTA) member state.

Regulations Applicable to Business Combinations

Mergers and acquisitions, as well as fully functional joint ventures, are subject to preventative concentrations control by the HCC based on Law 3959/2011 provided that the global turnover of all the participating undertakings is at least EUR150 million worldwide and at least two of the participating undertakings make individually a turnover of more than EUR15 million within the Greek market. According to the provisions of the new Law 4886/2022 amending Law 3959/2011, the aforementioned thresholds can be modified by a Joint Ministerial Decision of the Minister of Finance and the Minister of Development and Investments on a global or sectoral basis, taking into account the mapping of various markets performed by the HCC every three years.

For the appraisal of the concentrations, the HCC applies the so-called SIEC test (significant impediment on effective competition) in alignment with the criteria established for concentrations control by the European Commission. The HCC must issue its decision on the notified concentration within exclusive time limits provided by law. The non-issuance of a decision prohibiting the notified concentration after the lapse of the time limit for concluding a complete investigation presumes irrefutably its approval and the HCC is obliged to issue the relevant confirmative administrative act.

What Regulations Should Acquirers Be Concerned About?

Contingent upon the transfer of businesses, undertakings or parts thereof, the basic legal framework applicable in Greece is Presidential Decree 178/2002 stipulating the measures with regard to the protection of employees' rights on such transfers. If the concerned transfer falls within the scope of PD 178/2002 (ie, the transfer results in the change of the legal entity of the employer), the successor employer (transferee) automatically assumes the obligations of the former employer (transferor) arising from the active contracts vis-à-vis the employees of the undertaking, given that such obligations are regarded as an integral part of the undertaking and are also borne by the new employer.

Dismissals of employees in direct relation to the transfer are considered invalid and the employees are entitled to claim for re-employment and unpaid wages, as well as possible moral damages. The transferor is jointly and severally liable with the transferee for the obligations arising out of the employment contract till the date of the transfer. Additionally, both the transferor and the transferee are required to inform employees who are affected by the transfer or their representatives with regard to the terms and conditions of the transfer.

The employee's consent is not a prerequisite for the transfer, and employees are obliged to offer their services to the transferee. If employees object to the transfer, they are entitled to terminate their contracts with appropriate notice. If a transfer does not fall within the scope of PD 178/2002 (eg, a share transfer deal), the employees may hold their positions or may be dismissed at the company’s discretion, with compensation depending on their years of employment pursuant to Law 2112/1920, Law 3198/55, Law 3899/2010 and Law 4093/2012.

For matters relating to national security review of acquisitions, see 2.3 Restrictions on Foreign Investments.

Court Decisions and Legal Developments

The most important legal development is the enactment of the law on corporate transformations in 2019 (Law 4601/2019), which consolidates the previously fractured legal regime on mergers and other forms of corporate restructurings such as spin-offs. This law defines and sets out the main features of mergers restrictively recognised in Greece – ie, merger by absorption and merger by establishment of a new company – while also ruling extensively on the tax benefits applicable for each merger, provisions on creditor protection, etc.

Another development that may affect M&A activity in Greece is the very recent (December 2021) passing of Law 4864/2021 (the Law on Strategic and Private Investments), which aims to provide for new incentives to any investments deemed as strategic, such as tax reliefs and a fast-track procedure for licensing. It also aims to reshape the regulatory context of the Greek Development Law (Law 4399/2016), as well as to introduce amendments, which will improve and encourage the investment climate in Greece.

Other significant legal developments are the enactment of Law 4706/2020, on corporate governance rules, which applies to listed companies (see also 3.2 Significant Changes to Takeover Law) and the introduction of the new Insolvency Code (Law 4738/2020).

Greek legislation on public takeover bids, which to a large extent is shaped by Law 3461/2006, is supplemented by the recent Law 4706/2020 on corporate governance rules of listed companies, and particularly Articles 57–68 of said law.

The aim of these provisions is to reshape the legal framework with regard to publication requirements pursuant to a public offer of securities or the import of securities for trading in a regulated market as well as to procure for the implementation of Regulation (EU) 2017/1129 on the prospectus published by listed companies, pursuant to a public offer of securities or the import of securities for trading in a regulated market. The procedure and supporting documents required for the approval of the prospectus are regulated by subsequent rulings of the HCMC.

It is customary for bidders to already own a minority stake in a Greek listed company before submitting a takeover bid. This may be sensible, given that an intended bidder would in any case prefer to be familiar with the business and operations of the target company before taking control. Thus, a prospective bidder may have initially acquired a minority stake in the target company via a private agreement and may have subsequently entered into an agreement with other shareholders of the company as a means to arrange various issues, including voting rights. These do not constitute an absolute rule nonetheless.

Filing Obligations

As far as listed companies are concerned, pursuant to Law 3461/2006, any person submitting a public bid (whether voluntary or mandatory) has to notify in writing the HCMC as well as the board of directors of the target company. In the case of a voluntary bid (ie, any bid that falls short of the mandatory bid threshold; see 6.2 Mandatory Offer Threshold), the notification needs to take place immediately after the decision to prove the public offer has been taken. In the case of a mandatory bid, the disclosure must take place within the 20-day (or 30 days under specific circumstances) period set out in paragraph 1, Article 7 of said law. Within the aforementioned timeframe, the prospective bidder needs to file the prospectus before the board of directors of the target and the HCMC.

Save for the above, and pursuant to the Greek Transparency Law, 3556/2007, any shareholder who acquires or disposes of shares with voting rights in a listed company must notify the issuer if their shareholding reaches or exceeds the thresholds of 5%, 10%, 15%, 20%, 25%, ⅓, 50% or ⅔ of the total percentage of voting rights acquired or disposed of as a result of the transaction. Such notification must be addressed to the HCMC as well.

No other reporting obligation is required in such cases, unless the target company operates in a regulated market, such as energy (notification to RAE), or in the case of financial and credit institutions (notification to the Bank of Greece).

Regardless of whether a company is listed or not, further reporting obligations may be imposed pursuant to the Greek Anti-Money Laundering Law, 4557/2018, which requires any corporate entity having its registered seat in Greece to maintain adequate and accurate information with regard to its ultimate beneficiary owner(s).

The provisions on reporting thresholds imposed by Law 3461/2006 are mandatory and thus no company is allowed to introduce higher thresholds in its articles of incorporation or any other by-laws.

Dealings in derivatives are allowed in Greece but can lead to notification obligations; see 4.5 Filing/Reporting Obligations.

According to Law 3556/2007 transposing the Transparency Directive, any person or legal entity that acquires or disposes of, directly or indirectly through a third party, financial instruments that (i) on maturity provide the holder, under a formal agreement, the unconditional right to acquire, or the discretion to acquire, shares of the issuer to which voting rights are attached and that are already issued, or (ii) are not included in the above, but concern shares mentioned therein and have an economic impact similar to that of the financial instruments listed therein, whether they provide a right of physical settlement or not, is required to notify the issuer and the HCMC when the percentage of voting rights reaches, exceeds or falls below the thresholds of 5%, 10%, 15%, 20% 25%, ⅓, 50% and ⅔, as a result of such acquisition or disposal.

Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) is also applicable. Accordingly, EMIR requires that the details of any derivative contract (including any modifications or terminations thereof) negotiated on the regulated markets or over-the-counter should be reported to a trade repository registered with the European Securities and Markets Authority, no later than the working day following the conclusion (or modification, or termination) of the contract.

Shareholders are not required to make known the purpose of their acquisition in private or public companies or their intention regarding control of the company. However, in public takeover bids, the offeror is required to publish the offer document (information bulletin) according to Article 11 of Law 3461/2006, which must include, among other information, the offeror’s intentions/plans with regard to the continuation of the business activities of the offeree company and of the offeror’s company, concerning the maintenance of jobs of their employees and managers, including any material change in the conditions of employment, and in particular of the offeror’s strategic plans for the two companies and the likely repercussions on employment and the locations of places of business of the offeree company and of all related companies.

Target companies are not expressly required by law to disclose a deal at a certain stage. In practice, the majority of deals are disclosed because of a “leak” or at completion of the deal when the changes resulting from the respective business combination (eg, change of the ownership structure) are registered with the competent registry (ie, the draft merger agreement and the detailed report of the board are submitted to the Greek General Commercial Registry (GEMI) and the website of each of the companies involved).

Regarding public takeover bids and in accordance with Law 3461/2006, it is the offeror that has the obligation to announce its final decision. Specifically, when the offeror has decided to launch a bid or when the offeror is required to submit a bid, before proceeding with any relevant public announcement, it must inform the HCMC and the board of directors of the offeree company about the bid in writing. This notification must be made immediately following the decision to launch a bid or, in cases of mandatory bids, within the required deadline. At the same time, the offeror must submit to the HCMC and to the board of the offeree company a draft of the offer document.

Pursuant to the above announcement and within the next business day (and in any case before the beginning of trading of the securities), the bidder announces the takeover bid:

• on the website of the Athens Stock Exchange;
• on the Daily Official List announcements section of the Athens Stock Exchange; and
• on the website of the offeror, where such website exists, provided that the disclosure has already been made.

Due to the fact that when time requirements are specified in law they must be strictly adhered to by the parties, market practice on the timing of disclosure does not differ from legal requirements.

In a negotiated business transaction, the offeror/purchaser performs the legal due diligence on the target company, as well as the financial, tax, technical or any other appropriate due diligence pertaining to the specific industry, scope of business or other activity of the target company.

The scope of the legal due diligence generally focuses on the following:

• the target company’s corporate documents, such as articles of association, certificate of incorporation, certificate of representation, etc;
• certificates from the GEMI and the Court of First Instance, as applicable, proving the status of the company, whether the company has entered into dissolution, liquidation, rehabilitation process or a similar situation, etc;
• tax and social security clearance certificates of the company;
• the criminal records and tax and social security clearance certificates of the members of the board and/or administrators of the company;
• the material contracts of the company (ie, shareholders’ agreements, option agreements, agreements relating to its commercial operations, etc);
• finance arrangements and related agreements;
• information about the employees and employment agreements;
• financial statements of the company;
• board and general assembly resolutions;
• licences and permits of the company, when applicable;
• regulatory matters, where applicable;
• environmental matters, where applicable; and
• information on pending or threatened litigation that the company is involved in.

Impact of COVID-19

The general uncertainty and lack of foreseeability that COVID-19 has internationally introduced to almost all markets has led the negotiating parties to include in their preliminary and definitive agreements force majeure clauses (the so-called material adverse change, or MAC, provisions) and provisions regarding potential amendments to law and regulations that could adversely impact the course of the deal and/or the target’s business activities.

One of the fundamental and general principles governing Greek law is the freedom to contract. In light of this principle, parties are free to negotiate between themselves and decide what documentation and agreements are necessary to safeguard each party’s interests. In this respect, it is common practice for the negotiating parties to enter into exclusivity agreements by which the target undertakes not to enter into discussions/negotiations with potential buyers and not to enter into a deal for an agreed period during which the potential purchaser can conduct due diligence and make a final decision on whether to proceed with the acquisition. Also, it is not uncommon for negotiating parties to include standstill provisions, usually in the letter of intent or as a standalone agreement. 

Tender Offer Terms and Conditions

In the case of public takeovers, the tender offer terms and conditions are required to be documented in the offer document by law. The offer document has to be approved by the HCMC and the board of directors of the offeree company has to submit its justified opinion pertaining to the offer document to the HCMC and the offeror. That said, those terms are not documented in a definitive agreement.

In the case of private acquisitions, it is not common for tender offer terms and conditions to be documented in a definitive agreement.

The duration for acquiring/selling a business in Greece varies significantly, depending on the size of the entities involved, on whether the transactions are public or private, or whether they concern privatisation of a public/state asset, and how swiftly the parties wish to proceed.

Pursuant to the Public Takeover Act, the period for accepting a public takeover bid starts from the publication of the prospectus and cannot be shorter than four weeks or longer than eight weeks (the HCMC may extend the period to two weeks, upon request of the bidder).

The duration for the completion of private M&A is not regulated. Generally, transactions involving smaller entities are completed within two or three months, whereas the sale to larger entities may take between four months and a year.

Greek legislation provides for a mandatory offer threshold. Pursuant to Article 7 of Law 3461/2006, a public bid is mandatory for:

• any person acquiring directly or indirectly, on its own account, or in concert with third parties acting on its behalf, shares representing voting rights in excess of one third of the total voting rights; and
• any person holding more than one third but less than half of the total voting rights that within six months acquires shares that represent more than 3% of the voting rights of the target company.

In such cases, the shareholder needs to file a mandatory and unconditional bid within 20 days (or 30 days depending on certain circumstances) from the date of acquisition for the further acquisition of the total outstanding shares of the target company.

Consideration in Greece is regulated as follows.

With regard to private M&A deals, consideration is regulated pursuant to the Act on Corporate Transformations (Law 4601/2019). As stated in 2.1 Acquiring a Company, Greek law provides for two types of mergers: merger by absorption of the target company and merger by incorporation of a new company. In the former case, the shareholders of the target company shall receive as consideration shares of the buyer and potentially an additional money sum, which in any case must not exceed 10% of the nominal value of the shareholdings transferred (or, in the absence of such nominal value, their book value). In the latter case, the shareholders of the target company receive shares in the new company and possibly an additional money sum, which must not exceed 10% of the nominal value of the shareholdings transferred.

With regard to public takeover bids, a bidder may offer securities, listed or not in a regulated market, cash, or a combination of both. In the event of a mandatory bid, it depends upon the discretion of the recipients.

In cases of private acquisitions, cash is most commonly used.

COVID-19 has made it even more difficult for negotiating parties to evaluate the target company and mutually agree an acquisition price. Valuation difficulties have led to earn-out provisions, which have become more common in Greece during the pandemic. An earn-out is a post-closing acquisition payment mechanism, which depends on the target company fulfilling the agreed conditions post-closing. Due to COVID-19, contracting parties are in some cases using earn-outs to bridge the value gap and reach an agreement. 

Purchase price adjustments are yet another means of addressing high valuation uncertainty. 

Public takeover bids are not subject to any conditions, save for any conditions explicitly set out in the prospectus that relate to the bidder obtaining any administrative licences (eg, anti-trust clearance on merger control) and approvals required or the issuance of securities offered as consideration in the context of the takeover bid.

Nevertheless, the content of the prospectus itself needs to be approved by the HCMC and its compatibility with the rules prescribed by law.

Regarding minimum acceptance conditions for tender offers, a distinction has to be made between mandatory and voluntary bids.

Mandatory bids are not subject to any acceptance conditions, save for the need to obtain any regulatory approvals required (such as antitrust clearance).

Voluntary bids, on the other hand, are subject to approval conditions, which may range from over 50% to 95%. Although passing the 50% threshold may provide the bidder with effective control of the company, some decisions of the general assembly (such as amendments of the articles of association, or AoA) require a 67% majority, while the squeeze-out right requires a shareholding of 95%. Hence, prospective bidders may strive for the acquisition of a higher shareholding percentage to ensure the unhindered control of the target company after the successful completion of the bid.

With respect to public takeover bids, it is explicitly provided in the Public Takeover Act that in the event that the consideration of the public bid is paid in cash, the bidder needs to provide a signed confirmation by a Greek or EU credit institution, evidencing that it possesses the funds required for the full payment of the amount offered in the context of the takeover. Alternatively, in the event that the consideration of the public bid is paid in securities, the bidder needs to file a confirmation by an investment consulting firm or credit institution, with a registered seat in Greece or an EU or EFTA member state, to show that the bidder possesses the securities offered in consideration, or that it has taken other feasible means to secure the payment.

Save for the above, the prospectus published by the bidder needs to set out information as to the funding of the public bid.

As far as private M&A deals are concerned, the obtaining of financing may be included as a condition precedent to the conclusion of the acquisition, although it is not customary procedure.

Contractual Considerations and Changes to Regulatory Environment

Deal protection such as break-up fees and non-solicitation clauses are prima facieavailable in Greece, on the basis of the principle of freedom of contract. However, so far there have not been many known precedents to draw safe conclusions on their enforceability. Possible restrictions that could limit the enforceability of such clauses may be related to the principle of abuse of rights (Article 281, GCC) and financial assistance restrictions.

Parties in an M&A deal may seek to include a MAC clause, dealing with the impact of COVID-19 in the respective agreement, as a means to address the “pandemic risk”. Alternatively, the COVID-19 pandemic may be explicitly designated in the contractual documents as an event of force majeure, affecting the successful completion of the deal. It should be noted, however, that in the absence of such explicit clause, COVID-19 does not qualify as an event of force majeure pursuant to recent jurisprudence.

Regulation on the effect of the COVID-19 pandemic on the deal security measures has been limited so far.

If a bidder does not seek 100% ownership of a target, the bidder may opt to enter into shareholders’ agreements with the remaining shareholders. Such agreements may provide for a wide range of corporate governance matters, including board of directors and general assembly reserved matters, and specific rights to appoint directors.

Another option is to introduce specific provisions in the AoA of the company deviating from the customary provisions of the law; for example, in the event of increased majorities.

Shareholders are allowed to vote by proxy in Greece. Greek Law 4548/2018 on Sociétés Anonymes provides for the ability of shareholders to vote by proxy in the general assembly. This practice is quite common in Greece.

Greek law explicitly provides for two types of squeeze-out mechanisms set out in the Greek law on Sociétés Anonymes (Law 4548/2018) and the Public Takeover Act (Law 3461/2006), respectively.

Without prejudice to any provisions of the public takeover legislation, the Greek law on Sociétés Anonymes stipulates that in the event that a shareholder controls 95% of the total shareholding capital of a company, one or more of the remaining shareholders are entitled to file a lawsuit before the Single-Member First Instance Court demanding the purchase of their shareholdings by said shareholder. Pursuant to said provision, the requirement of a 95% shareholding may also be met by taking into consideration any shares owned by affiliate companies or close family members of the shareholder. The lawsuit needs to be filed within a period of five years from the acquisition of the shares by the majority shareholder. The Public Takeover Act sets a slightly lower ownership threshold at 90% of the total voting rights in the target company, obliging the bidder to acquire any securities offered by the remaining shareholders of the target company. The consideration is paid in cash, unless the remaining shareholders exercise their discretion to receive securities instead.

Save for the above squeeze-out provisions, the Greek law on Sociétés Anonymes provides for similar mechanisms that set out the right (or obligation) of minority shareholders to proceed with the sale of their shareholdings. Such is the case of the sell-out (right of minority shareholders to seek judicial recourse for the purchase of their shares by the company), as well as tag-along and drag-along rights, as long as relevant provisions are included in the AoA of the company.

Obtaining commitments by principal shareholders are available under Greek law. It is questionable, however, whether such commitments are, strictly speaking, irrevocable from a legal perspective. In any event, such practice is not common.

A bid is made public when the offeror decides to proceed with a takeover bid or in cases where the bidder has acquired securities that trigger the making of a mandatory bid at the time of such acquisition. The bid is made public through a public announcement and in accordance with the following procedure:

• the bidder has to notify in writing the HCMC and the board of the target company;
• within the next business day, the offeror has to announce the takeover bid on its website and in the Daily Official List announcements of the Athens Stock Exchange;
• the HCMC approves the information bulletin within ten days of its submission; and
• the information bulletin is published on the bidder’s website.

Within two days from the lapse of the period for acceptance of the bid, the bidder is required to announce the result of the bid and publish it on the website and in the Daily Official List announcements of the Athens Stock Exchange as well as on its own website.

All Greek companies, private and listed, are subject to notification and disclosure requirements for the issuance of shares. More specifically, each company is required to submit and publish on the GEMI the decision of its general assembly (or the board of directors, as the case may be) regarding any share capital increase and, generally, any change in the company’s capital structure. Also, all companies are required to publish their annual financial statements, which set out all key corporate details, including the issuance of shares. Such information is submitted to the GEMI and is available to the public. With regard to public (listed) companies, they are additionally required to publish their financial statements to the Athens Stock Exchange, their website and the HCMC.

Listed companies are further obliged to report the relevant transactions to the Athens Stock Exchange and publish the transactions on their website. In particular, according to the regulation of the Athens Stock Exchange, the issuer must notify the Athens Stock Exchange and comply with a specific procedure in order for shares from a share capital increase due to merger through absorption, takeover of a division or contribution of assets to be admitted to trading. The issuer may also be required to report the relevant transactions to the HCMC, in accordance with the requirements of good corporate governance under Regulation (EU) No 596/2014 on market abuse and the Greek Transparency Law 3556/2007. Notification requirements to the HCC may also be established under the Greek Competition Law, 3959/2011, as amended by Law 4886/2022, and Regulation (EC) No 139/2004 (the EC Merger Regulation) with respect to competition law issues.

Strictly speaking, the bidders are not per se required to produce financial statements in the prospectus or their public announcement on the bid. Nevertheless, the prospectus needs to contain information as to their business goals, with respect to the continuation of operations by the target company as well as their strategic plans for the companies involved, which may be corroborated by the publishing of pro forma financial statements. Greek companies are required to follow the International Financial Reporting Standards pursuant to Law 4308/2014.

The merger plan is filed at, and published by, the GEMI.

In public takeover bids, the prospectus is published and available in hard copy and in electronic form on the bidder’s website.

No other documents concerning the transaction are published.

There are no specific duties owed by the directors in a business combination. The duties that the directors generally owe to the company are the following:

• duty of care, which dictates that directors must manage the affairs of the company lawfully and act exclusively in favour of the company’s interests;
• fiduciary duty, which provides that directors must refrain from pursuing personal interests that are contrary to, and likely to harm, the company’s interests and that the directors are required to disclose any personal interests that may arise from the company’s transactions, as well as any conflict of their interests with those of the company or its affiliates;
• directors also have a duty of confidentiality in relation to the company’s affairs; and
• directors have a non-compete obligation towards the company that forbids them from acquiring shares in competing companies without the company’s permission.

In public takeover bids, the board must not prevent the shareholders from properly assessing the public offer.

According to law, directors of Greek companies owe their fiduciary duty (loyalty) to the company; however, in practice, fiduciary duty is interpreted as being ultimately owed to the shareholders.

In more complex transactions, it is quite common that the board of directors creates a special committee with the purpose of assessing the potential business combination. Directors that have a conflict of interest pertaining to the transaction – eg, they may receive large bonuses/commissions as a result of the prospective transaction – are excluded from participating and voting in said committees.

However, it is noted that directors are in any case required by law to disclose any conflict of interest and refrain from voting in any relevant decision of the board. In such cases, decisions are taken by the rest of the directors if they number at least three, otherwise the decision has to be referred to the general assembly.   

Greek courts in their majority tend not to significantly defer and deviate from the judgement of the board of directors in takeover situations. 

Greek law provides that in mergers, independent experts (certified public accountants, auditing firms, etc) have to examine and provide the company with a written report on the draft merger agreement prepared by the directors. In public (takeover) offers, the offeror company must procure the services of a credit institution or an investment services company to act as the offeror’s adviser. Also, the board of the offeree company is required to provide its opinion on the takeover bid, which is submitted to the HCMC and distributed to the shareholders along with a detailed report prepared by a financial adviser (credit institution or an investment services company).

Apart from the above, it is common practice that in business combinations, directors are supported by external expert advisers, such as investment bankers, auditors, and legal, financial or technical advisers.

Conflict of interest issues are often brought before Greek courts, especially by minority shareholders requesting the court to appoint a temporary board of directors for the purpose of assessing and deciding whether to proceed with a business alliance. In such cases, the claimant shareholders request that the board is replaced due to a conflict of interest of the directors and the acquiring company, maintaining that the directors were acting in favour of their own personal interests and against those of the company. However, in the majority of such cases, the court has resolved that a decision by the board regarding a corporate opportunity may be assessed in terms of the business judgement rule but that it does not constitute a conflict of interest.

What has also quite often been the subject of dispute in corporate transformations is when shareholders accuse the directors and/or executive managers of agreeing to a significantly low exchange ratio for the shares, especially in cases of absorption by the company of a 100% subsidiary.

Greek Law 3461/2006 on public takeover bids neither permits nor precludes hostile tender offers. In light of this, hostile takeover bids should be considered as permitted in principle; however, they remain unregulated. Hostile tender offers are not common in Greece; Greek public companies are mostly family-owned and controlled by a small number of persons, thus having a low free float compared to public companies of Anglo-Saxon capital markets.

Board Neutrality Rule

Greek law has adopted the “board neutrality rule”, which provides that, following the announcement of the tender offer and until the publication of the bid’s result, the board of directors cannot proceed with any actions that deviate from the company’s ordinary course of business and that could hinder the takeover, unless the general assembly has authorised it to do so, or if the bidder does not apply the board neutrality rule (the reciprocity principle).

In this regard, the board is allowed to use defensive measures that do not affect shareholder rights or decision-making processes and is also allowed to seek alternative bids (a white knight defence) without prior shareholder approval.

Due to the board neutrality rule, and since there is as yet no known case of a company deliberately avoiding a hostile takeover, defensive measures in Greece are largely preventative. Thus, to date and taking into consideration common business practices in Greece, common pre-bid defensive measures could include the following:

• calling up on callable shares;
• issuance of an employees’ stock option plan; and
• a shareholders’ agreement with preferential put/call options.

Post-bid defensive measures (if allowed by the general assembly – the board neutrality rule) could include the following:

• the issuance of (poison) warrants;
• a share capital increase (diluting shares);
• change of control clauses in shareholders’ agreements;
• golden parachute clauses; and
• convertible bonds with special conversion rates.

During the pandemic, Greek companies that were severely impacted by the COVID-19 crisis were focused on survival and prioritised defensive measures to gain value through the rapid sale of assets, the divestment of non-core assets and portfolio restructuring. Divestment of non-performing assets featured strongly with companies in the travel, transport and tourism sectors.

When enacting defensive measures, directors are bound by their fiduciary duty and duty of care towards the company and the shareholders;see 8.1 Principal Directors' Duties. In this regard, the board cannot enable any defence mechanisms unless they are already approved by the general assembly and cannot prevent or cancel the takeover bid unless the general assembly has authorised it to do so.

Directors cannot “just say no” and take action that prevents a business combination because Greece has adopted the board neutrality rule. Said rule/principle prevents the board of directors from adopting defensive measures that could block an imminent takeover without the prior authorisation of the shareholders in the general assembly. Greek law has adopted the basic rule of Directive 2004/25/EC, which dictates that the general assembly should be exclusively responsible to decide on the adoption of defensive measures.

Litigation is not common in Greece in connection with M&A deals in the Athenian jurisdiction.

There is no applicable information in this jurisdiction.

The question of whether lessons have been learned from disputes between parties with pending transactions in early 2020 is not applicable.

The Focus of Activists

Shareholder activism is relatively new in Greece and until recently it was rather uncommon due to the lack of any legal and regulatory framework. Law 4548/2018 on Société Anonymes has, inter alia, transposed into Greek law the EU Shareholder Rights Directive and has broadened the range of rights of the minority shareholders (already granted by its preceding law, 2190/1920) depending on the amount of share capital that they hold. Apart from the above rights, Greek law provides that shareholders may form and act through unions. The Hellenic Investors Association is the first Greek union introducing shareholders’ activism in 2017 in Greece.

Moreover, Greece has very recently adopted Law 4706/2020 on corporate governance, which also transposed the EU Shareholder Rights Directive and is expected to improve shareholder participation in listed companies and have a positive impact on the campaigns of activist shareholders.

The latest shareholder activism campaigns (OTE – Amber Capital (2019), Ellaktor – Reggeborgh (2021)) were focused on board changes on the grounds of inadequate management.

Based on data of the 2019 EY Global Capital Confidence Barometer, activist shareholders have been keen for Greek companies to divest assets as a result of their last portfolio review, aiming to achieve an increased return through improved shareholder value.

During COVID-19, portfolio restructuring activities leading to divestments seemed to remain the focus of activism in most Greek companies. At the same time, activist shareholders of the companies that were relatively less affected by the crisis seemed to encourage their companies to prioritise M&A objectives and make acquisitions in line with transformation and growth aspirations.

A strong example of the interference of activists with the completion of an announced transaction took place in April 2021 when the board of directors of Piraeus Bank announced its decision to proceed with a share capital increase of EUR1 billion by applying the process of book building and by cancelling the pre-emption rights of the existing shareholders. The share capital increase was expected to almost fully dilute the existing shareholders through the planned reverse split process.

In light of the above, the Hellenic Investors Association decided to take legal action by filing a class action against Piraeus Bank and its management pertaining to the protection of the rights of minority shareholders, inviting the shareholders that have suffered damages due to the so-called new economic “scandal” to join the Hellenic Investors Association and claim full damages from the bank and/or any other party deemed responsible.