Consent of the Belarusian Antimonopoly Authority: Myth or Reality?
- Structure of the transaction
- Legal justification
- Consequences of not obtaining the consent of MART
- Reorganization structure
- Legal justification
- Consequences of failure to notify MART.
- Contact our legal team to learn more
Obtaining permits/consents from various government agencies is a common procedure that accompanies many M&A transactions. Depending on the transaction, these may be, for example, permits from the Government Commission, consents of the antimonopoly authority, etc.
In a situation where the company whose shares/shares are acquired has subsidiaries in foreign jurisdictions, for example, in Belarus, it is quite often overlooked that such an "indirect acquisition" may require the consent of foreign state authorities, in particular, the antimonopoly authority.
Here is an example of situations in which we will analyze when such an "indirect acquisition" requires the consent of the Belarusian antimonopoly authority, and in which cases consent is not required.
Structure of the transaction
Target, Seller and Buyer are legal entities established and operating in the Russian Federation. The size of the share to be sold in the authorized capital of Target is 99%. A subsidiary of Targeta is a legal entity established and operating in the Republic of Belarus. The share in the authorized capital of the subsidiary owned by Target is 100%. In such a transaction structure, the acquisition by the Buyer of a share in the authorized capital of Target from the Seller requires the consent of the antimonopoly authority of the Republic of Belarus. |
Legal justification
As in the Russian Federation, a number of actions performed by companies in the Republic of Belarus are recognized as economic concentration. If a number of conditions are met, economic concentration actions require:
- obtaining the prior consent of the antimonopoly authority for their implementation; or
- notifying the antimonopoly authority of their commission.
Reference. The antimonopoly authority in the Republic of Belarus is the Ministry of Antimonopoly Regulation and Trade ("MART"). |
Thus, among others, the actions of economic concentration include the acquisition of rights that allow to give binding instructions to another business entity – an individual entrepreneur or a commercial organization when they carry out entrepreneurial activities (subclause 1.7 of clause 1 of Article 32 of the Law of the Republic of Belarus of 12.12.2013 No 94-Z "On Countering Monopolistic Activity and Development of Competition").
At the same time, the acquisition of the right to give binding instructions in practice means, among other things, the right to make decisions on the reorganization and liquidation of the Target; the right to participate in the approval of various transactions, including major transactions and interested party transactions; the right to change the charter and the size of the authorized capital; the right to elect the executive body of the Target, as well as to take part in other decisions as part of the exercise of the participant's right to manage the Target.
It should be noted that the list of these rights is not exhaustive. The legislation does not determine the threshold value of the amount of votes at which it is assumed that the right to give mandatory instructions is acquired. In practice, we see that such a right arises when more than 50% of the votes attributable to voting shares/stocks in the authorized capital are acquired.
The consent of MART, in case of acquiring the right to give binding instructions, must be obtained if one of the following criteria is met:
- the book value of the assets of the Target or the Buyer as of the last reporting date is more than 400,000 basic units (i.e. as of the date of issue of the article 16,000,000 Belarusian rubles or about 450,000,000 Russian rubles); or
- revenue from the sale of goods (works, services) of the Target or the Buyer for the previous year (excluding VAT) of more than 800,000 basic units (i.e. as of the date of issue of the article 32,000,000 Belarusian rubles or about 900,000,000 Russian rubles); or
- The Target or Buyer is included in the State Register of Economic Entities Occupying a Dominant Position in Commodity Markets, or in the State Register of Natural Monopolies.
Consequences of not obtaining the consent of MART
As a general rule, failure to obtain the consent of MART may result in:
- recognition by the court of the transaction as invalid;
- bringing to administrative responsibility.
Recognition of the transaction as invalid by the court
Such an outcome is possible if the following conditions are met:
- the transaction is actually completed;
- the transaction has led to the emergence or strengthening of a dominant position and/or to the prevention, restriction or elimination of competition.
MART has the right to file a lawsuit to invalidate such a transaction. To satisfy the stated claims of MART, it is necessary to prove the above two facts.
Taking into account the transaction made outside the Republic of Belarus, it seems difficult to challenge it. From practice, we also do not know of cases of such a challenge.
Bringing to administrative responsibility
Also, for failure to obtain the consent of the MART or for failure to notify of the actions taken on economic concentration, administrative liability is provided (Article 13.31 of the Code of the Republic of Belarus on Administrative Offenses) in the form of a fine in the amount of 20 to 100 basic units. There is no need for any consequences to be brought to administrative responsibility. A person who is obliged to send an application for consent to MART or to send a notice of the transaction is brought to justice (for example, in the case under consideration, the Seller and the Buyer have the right to submit an application for consent).
A similar situation with the need to obtain the consent of MART arises not only when buying shares / shares, but also, for example, during reorganization. At the same time, under certain conditions, the action on economic concentration may not require the prior consent of MART, but will require subsequent notification.
Let's consider another situation.
Reorganization structure
Form of reorganization: a spin-off. Entity to be reorganized: JSC "A" is a legal entity established and operating in the Russian Federation. Person created as a result of reorganization: LLC "B" is a legal entity created as a result of spin-off. The share in the authorized capital of LLC "C" owned by JSC "A" is 90%. As a result of the spin-off, a 90% shares in the authorized capital of LLC "C" was transferred to LLC "B". The specified transfer of the share to the authorized capital of LLC "C" requires notification of MART. |
Legal justification
As we wrote above, the acquisition of rights that allow to give binding instructions to another business entity – an individual entrepreneur or a commercial organization in the course of their entrepreneurial activities – refers to actions on economic concentration and, if a number of conditions are met, requires the consent of MART.
Consent is NOT required if:
- all parties have the same persons owning more than 50% of the votes attributable to the voting shares/stocks in the authorized capital; or
- The person being reorganized and the person created as a result of the reorganization are a parent and a subsidiary (as well as, for example, if the seller and the buyer are a parent company and a subsidiary), while the parent company owns more than 50% of the votes attributable to the voting shares/stocks in the authorized capital in the subsidiary.
In these cases, consent is not required, but it is necessary to notify MART within 1 month from the date of transfer of ownership of a share in the authorized capital of LLC "С".
Consequences of failure to notify MART.
Failure to notify is subject to administrative liability (Article 13.31 of the Code of the Republic of Belarus on Administrative Offenses).
Summing up the analysis of these two cases, we would like to draw your attention to the fact that when structuring transactions and performing individual corporate actions, it is necessary to check for the presence of subsidiaries in a foreign jurisdiction and take into account the specifics of local legislation.
Importantly.
The article does not provide all cases when it may be necessary to obtain the consent of MART, but only the most common. If you have any questions about your current situation, you can always contact our lawyers for an individual solution.
Contact our legal team to learn more
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