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892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 132
MampAin SPANISH LAW
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 232
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 332
MampA
GOacuteMEZ-ACEBO amp POMBO
Directors
FIFTH EDITION
AacuteNGEL CARRASCO PERERA JOSEacute Mordf AacuteLVAREZ ARJONA
in
SPANISH LAW
Editor
RALPH SMITH
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 432
Editorial Aranzadi SA Camino de Galar 1531190 Cizur Menor (Navarra)ISBN 978-84-9059-177-2Legal deposit NA 7842015Printed in Spain Impreso en Espantildea
Fotocomposition Editorial Aranzadi SA Print Rodona Industria Graacutefica SLPoliacutegono Agustinos Calle A Nave D-1131013 - Pamplona
The publisher takes no responsibility for the opinions collected comments and statements expressedby the authors The present work includes only the opinion of the author as a manifestation of his rightto freedom of expression
Editorial expressly opposed to any page of this work or parts thereof are used for conducting press
briefings Any way of reproduction distribution public communication or transformation of this work can onlybe done with the consent of their owners except where exempted by law Please contact CEDRO(Spanish Reproduction Rights Center) if you need to photocopy or scan a fragment of this work (wwwconlicenciacom 91 702 19 7093 272 04 45)
Therefore this book may not be reproduced in whole or in part or transmitted by electronic meansmechanical magnetic or computer storage and retrieval or any other means being prohibited itsloan rent or any other form of transfer of use copy writing of the holders of copyright without priorpermission
Thomson Reuters and the Thomson Reuters logo are trademarks of Thomson Reuters Aranzadi is a trademark of Thomson Reuters (Legal) Limited
First edition 2015Fifth edition english translation
copy 2015 [Thomson Reuters (Legal) Limited Goacutemez-Acebo amp Pombo Abogados]
copy Cover Thomsom Reuters (Legal) Limited
It includes digital version
copy Translation M Laura Fuentes
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7
Contents
FOREWORD O HE ENGLISH EDIION 35
FOREWORD O HE FOURH EDIION 37
FOREWORD O HE HIRD EDIION 39
FOREWORD O HE SECOND EDIION 41
ABBREVIAIONS 45
PAR I
SRAEGY NEGOIAION AND CLOSING
CHAPER 1COMMON ELEMENS AND CLOSING SRAEGY 51
JOSEacute Mordf AacuteLVAREZ ARJONA
1 Background 51
2 Motives reasoning 52
3 Te acquisition process 55
4 ypes of acquisitions shares vs assets 56
5 Acquisition and investment agreements typical content 58
51 Approach 58
52 ypical content o an agreement 58
A Formal Aspects 58
B Subject Matter of the Contract 59
C Price and Consideration 59
D Representations and Warranties 60
E Limitation of Liability 60
F Closing erms and Conditions 60
G Conditions Precedent 61
Paacutegina
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H Guarantees 61
I Additional Agreement 62J Interim Management of the Business 62
K Reference Balance Sheets 62
53 Miscellaneous 64
A Notices 64
B Severability 64
C Assignment 65
D Invalidation Clause 65
E Heading 65F Sovereign Immunity 65
G Languages 65
54 Exhibits and side letters 66
A Exhibits 66
B Side Letters 66
6 Closing strategy 67
61 Approach 67
62 ypical content o a closing clause 68A Date and Venue 70
B Payment and Delivery 71
C Required Conditions for Closing 72
D Miscellaneous 74
E Statement of Representations and Warranties at Closing 74
63 Complexity o the closing and related issues 75
64 Preparing or the closing closing checklist 77
65 Representation issues incomplete powers o attorney ratifications ad-denda 79
A Powers of Attorney 79
B A Foreignerrsquos Power of Attorney Immigration Regulation 79
C Signature without Power of Attorney Ratifications 80
D Adhesion 81
66 Additional issues on the purchase price bank transers and oreign cur-
rency 82
A Introduction 82
B Payment in Foreign Currency 82
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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MampA
GOacuteMEZ-ACEBO amp POMBO
Directors
FIFTH EDITION
AacuteNGEL CARRASCO PERERA JOSEacute Mordf AacuteLVAREZ ARJONA
in
SPANISH LAW
Editor
RALPH SMITH
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Editorial Aranzadi SA Camino de Galar 1531190 Cizur Menor (Navarra)ISBN 978-84-9059-177-2Legal deposit NA 7842015Printed in Spain Impreso en Espantildea
Fotocomposition Editorial Aranzadi SA Print Rodona Industria Graacutefica SLPoliacutegono Agustinos Calle A Nave D-1131013 - Pamplona
The publisher takes no responsibility for the opinions collected comments and statements expressedby the authors The present work includes only the opinion of the author as a manifestation of his rightto freedom of expression
Editorial expressly opposed to any page of this work or parts thereof are used for conducting press
briefings Any way of reproduction distribution public communication or transformation of this work can onlybe done with the consent of their owners except where exempted by law Please contact CEDRO(Spanish Reproduction Rights Center) if you need to photocopy or scan a fragment of this work (wwwconlicenciacom 91 702 19 7093 272 04 45)
Therefore this book may not be reproduced in whole or in part or transmitted by electronic meansmechanical magnetic or computer storage and retrieval or any other means being prohibited itsloan rent or any other form of transfer of use copy writing of the holders of copyright without priorpermission
Thomson Reuters and the Thomson Reuters logo are trademarks of Thomson Reuters Aranzadi is a trademark of Thomson Reuters (Legal) Limited
First edition 2015Fifth edition english translation
copy 2015 [Thomson Reuters (Legal) Limited Goacutemez-Acebo amp Pombo Abogados]
copy Cover Thomsom Reuters (Legal) Limited
It includes digital version
copy Translation M Laura Fuentes
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7
Contents
FOREWORD O HE ENGLISH EDIION 35
FOREWORD O HE FOURH EDIION 37
FOREWORD O HE HIRD EDIION 39
FOREWORD O HE SECOND EDIION 41
ABBREVIAIONS 45
PAR I
SRAEGY NEGOIAION AND CLOSING
CHAPER 1COMMON ELEMENS AND CLOSING SRAEGY 51
JOSEacute Mordf AacuteLVAREZ ARJONA
1 Background 51
2 Motives reasoning 52
3 Te acquisition process 55
4 ypes of acquisitions shares vs assets 56
5 Acquisition and investment agreements typical content 58
51 Approach 58
52 ypical content o an agreement 58
A Formal Aspects 58
B Subject Matter of the Contract 59
C Price and Consideration 59
D Representations and Warranties 60
E Limitation of Liability 60
F Closing erms and Conditions 60
G Conditions Precedent 61
Paacutegina
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H Guarantees 61
I Additional Agreement 62J Interim Management of the Business 62
K Reference Balance Sheets 62
53 Miscellaneous 64
A Notices 64
B Severability 64
C Assignment 65
D Invalidation Clause 65
E Heading 65F Sovereign Immunity 65
G Languages 65
54 Exhibits and side letters 66
A Exhibits 66
B Side Letters 66
6 Closing strategy 67
61 Approach 67
62 ypical content o a closing clause 68A Date and Venue 70
B Payment and Delivery 71
C Required Conditions for Closing 72
D Miscellaneous 74
E Statement of Representations and Warranties at Closing 74
63 Complexity o the closing and related issues 75
64 Preparing or the closing closing checklist 77
65 Representation issues incomplete powers o attorney ratifications ad-denda 79
A Powers of Attorney 79
B A Foreignerrsquos Power of Attorney Immigration Regulation 79
C Signature without Power of Attorney Ratifications 80
D Adhesion 81
66 Additional issues on the purchase price bank transers and oreign cur-
rency 82
A Introduction 82
B Payment in Foreign Currency 82
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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MampA
GOacuteMEZ-ACEBO amp POMBO
Directors
FIFTH EDITION
AacuteNGEL CARRASCO PERERA JOSEacute Mordf AacuteLVAREZ ARJONA
in
SPANISH LAW
Editor
RALPH SMITH
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Editorial Aranzadi SA Camino de Galar 1531190 Cizur Menor (Navarra)ISBN 978-84-9059-177-2Legal deposit NA 7842015Printed in Spain Impreso en Espantildea
Fotocomposition Editorial Aranzadi SA Print Rodona Industria Graacutefica SLPoliacutegono Agustinos Calle A Nave D-1131013 - Pamplona
The publisher takes no responsibility for the opinions collected comments and statements expressedby the authors The present work includes only the opinion of the author as a manifestation of his rightto freedom of expression
Editorial expressly opposed to any page of this work or parts thereof are used for conducting press
briefings Any way of reproduction distribution public communication or transformation of this work can onlybe done with the consent of their owners except where exempted by law Please contact CEDRO(Spanish Reproduction Rights Center) if you need to photocopy or scan a fragment of this work (wwwconlicenciacom 91 702 19 7093 272 04 45)
Therefore this book may not be reproduced in whole or in part or transmitted by electronic meansmechanical magnetic or computer storage and retrieval or any other means being prohibited itsloan rent or any other form of transfer of use copy writing of the holders of copyright without priorpermission
Thomson Reuters and the Thomson Reuters logo are trademarks of Thomson Reuters Aranzadi is a trademark of Thomson Reuters (Legal) Limited
First edition 2015Fifth edition english translation
copy 2015 [Thomson Reuters (Legal) Limited Goacutemez-Acebo amp Pombo Abogados]
copy Cover Thomsom Reuters (Legal) Limited
It includes digital version
copy Translation M Laura Fuentes
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7
Contents
FOREWORD O HE ENGLISH EDIION 35
FOREWORD O HE FOURH EDIION 37
FOREWORD O HE HIRD EDIION 39
FOREWORD O HE SECOND EDIION 41
ABBREVIAIONS 45
PAR I
SRAEGY NEGOIAION AND CLOSING
CHAPER 1COMMON ELEMENS AND CLOSING SRAEGY 51
JOSEacute Mordf AacuteLVAREZ ARJONA
1 Background 51
2 Motives reasoning 52
3 Te acquisition process 55
4 ypes of acquisitions shares vs assets 56
5 Acquisition and investment agreements typical content 58
51 Approach 58
52 ypical content o an agreement 58
A Formal Aspects 58
B Subject Matter of the Contract 59
C Price and Consideration 59
D Representations and Warranties 60
E Limitation of Liability 60
F Closing erms and Conditions 60
G Conditions Precedent 61
Paacutegina
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H Guarantees 61
I Additional Agreement 62J Interim Management of the Business 62
K Reference Balance Sheets 62
53 Miscellaneous 64
A Notices 64
B Severability 64
C Assignment 65
D Invalidation Clause 65
E Heading 65F Sovereign Immunity 65
G Languages 65
54 Exhibits and side letters 66
A Exhibits 66
B Side Letters 66
6 Closing strategy 67
61 Approach 67
62 ypical content o a closing clause 68A Date and Venue 70
B Payment and Delivery 71
C Required Conditions for Closing 72
D Miscellaneous 74
E Statement of Representations and Warranties at Closing 74
63 Complexity o the closing and related issues 75
64 Preparing or the closing closing checklist 77
65 Representation issues incomplete powers o attorney ratifications ad-denda 79
A Powers of Attorney 79
B A Foreignerrsquos Power of Attorney Immigration Regulation 79
C Signature without Power of Attorney Ratifications 80
D Adhesion 81
66 Additional issues on the purchase price bank transers and oreign cur-
rency 82
A Introduction 82
B Payment in Foreign Currency 82
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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Editorial Aranzadi SA Camino de Galar 1531190 Cizur Menor (Navarra)ISBN 978-84-9059-177-2Legal deposit NA 7842015Printed in Spain Impreso en Espantildea
Fotocomposition Editorial Aranzadi SA Print Rodona Industria Graacutefica SLPoliacutegono Agustinos Calle A Nave D-1131013 - Pamplona
The publisher takes no responsibility for the opinions collected comments and statements expressedby the authors The present work includes only the opinion of the author as a manifestation of his rightto freedom of expression
Editorial expressly opposed to any page of this work or parts thereof are used for conducting press
briefings Any way of reproduction distribution public communication or transformation of this work can onlybe done with the consent of their owners except where exempted by law Please contact CEDRO(Spanish Reproduction Rights Center) if you need to photocopy or scan a fragment of this work (wwwconlicenciacom 91 702 19 7093 272 04 45)
Therefore this book may not be reproduced in whole or in part or transmitted by electronic meansmechanical magnetic or computer storage and retrieval or any other means being prohibited itsloan rent or any other form of transfer of use copy writing of the holders of copyright without priorpermission
Thomson Reuters and the Thomson Reuters logo are trademarks of Thomson Reuters Aranzadi is a trademark of Thomson Reuters (Legal) Limited
First edition 2015Fifth edition english translation
copy 2015 [Thomson Reuters (Legal) Limited Goacutemez-Acebo amp Pombo Abogados]
copy Cover Thomsom Reuters (Legal) Limited
It includes digital version
copy Translation M Laura Fuentes
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7
Contents
FOREWORD O HE ENGLISH EDIION 35
FOREWORD O HE FOURH EDIION 37
FOREWORD O HE HIRD EDIION 39
FOREWORD O HE SECOND EDIION 41
ABBREVIAIONS 45
PAR I
SRAEGY NEGOIAION AND CLOSING
CHAPER 1COMMON ELEMENS AND CLOSING SRAEGY 51
JOSEacute Mordf AacuteLVAREZ ARJONA
1 Background 51
2 Motives reasoning 52
3 Te acquisition process 55
4 ypes of acquisitions shares vs assets 56
5 Acquisition and investment agreements typical content 58
51 Approach 58
52 ypical content o an agreement 58
A Formal Aspects 58
B Subject Matter of the Contract 59
C Price and Consideration 59
D Representations and Warranties 60
E Limitation of Liability 60
F Closing erms and Conditions 60
G Conditions Precedent 61
Paacutegina
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H Guarantees 61
I Additional Agreement 62J Interim Management of the Business 62
K Reference Balance Sheets 62
53 Miscellaneous 64
A Notices 64
B Severability 64
C Assignment 65
D Invalidation Clause 65
E Heading 65F Sovereign Immunity 65
G Languages 65
54 Exhibits and side letters 66
A Exhibits 66
B Side Letters 66
6 Closing strategy 67
61 Approach 67
62 ypical content o a closing clause 68A Date and Venue 70
B Payment and Delivery 71
C Required Conditions for Closing 72
D Miscellaneous 74
E Statement of Representations and Warranties at Closing 74
63 Complexity o the closing and related issues 75
64 Preparing or the closing closing checklist 77
65 Representation issues incomplete powers o attorney ratifications ad-denda 79
A Powers of Attorney 79
B A Foreignerrsquos Power of Attorney Immigration Regulation 79
C Signature without Power of Attorney Ratifications 80
D Adhesion 81
66 Additional issues on the purchase price bank transers and oreign cur-
rency 82
A Introduction 82
B Payment in Foreign Currency 82
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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FOREWORD O HE ENGLISH EDIION 35
FOREWORD O HE FOURH EDIION 37
FOREWORD O HE HIRD EDIION 39
FOREWORD O HE SECOND EDIION 41
ABBREVIAIONS 45
PAR I
SRAEGY NEGOIAION AND CLOSING
CHAPER 1COMMON ELEMENS AND CLOSING SRAEGY 51
JOSEacute Mordf AacuteLVAREZ ARJONA
1 Background 51
2 Motives reasoning 52
3 Te acquisition process 55
4 ypes of acquisitions shares vs assets 56
5 Acquisition and investment agreements typical content 58
51 Approach 58
52 ypical content o an agreement 58
A Formal Aspects 58
B Subject Matter of the Contract 59
C Price and Consideration 59
D Representations and Warranties 60
E Limitation of Liability 60
F Closing erms and Conditions 60
G Conditions Precedent 61
Paacutegina
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H Guarantees 61
I Additional Agreement 62J Interim Management of the Business 62
K Reference Balance Sheets 62
53 Miscellaneous 64
A Notices 64
B Severability 64
C Assignment 65
D Invalidation Clause 65
E Heading 65F Sovereign Immunity 65
G Languages 65
54 Exhibits and side letters 66
A Exhibits 66
B Side Letters 66
6 Closing strategy 67
61 Approach 67
62 ypical content o a closing clause 68A Date and Venue 70
B Payment and Delivery 71
C Required Conditions for Closing 72
D Miscellaneous 74
E Statement of Representations and Warranties at Closing 74
63 Complexity o the closing and related issues 75
64 Preparing or the closing closing checklist 77
65 Representation issues incomplete powers o attorney ratifications ad-denda 79
A Powers of Attorney 79
B A Foreignerrsquos Power of Attorney Immigration Regulation 79
C Signature without Power of Attorney Ratifications 80
D Adhesion 81
66 Additional issues on the purchase price bank transers and oreign cur-
rency 82
A Introduction 82
B Payment in Foreign Currency 82
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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H Guarantees 61
I Additional Agreement 62J Interim Management of the Business 62
K Reference Balance Sheets 62
53 Miscellaneous 64
A Notices 64
B Severability 64
C Assignment 65
D Invalidation Clause 65
E Heading 65F Sovereign Immunity 65
G Languages 65
54 Exhibits and side letters 66
A Exhibits 66
B Side Letters 66
6 Closing strategy 67
61 Approach 67
62 ypical content o a closing clause 68A Date and Venue 70
B Payment and Delivery 71
C Required Conditions for Closing 72
D Miscellaneous 74
E Statement of Representations and Warranties at Closing 74
63 Complexity o the closing and related issues 75
64 Preparing or the closing closing checklist 77
65 Representation issues incomplete powers o attorney ratifications ad-denda 79
A Powers of Attorney 79
B A Foreignerrsquos Power of Attorney Immigration Regulation 79
C Signature without Power of Attorney Ratifications 80
D Adhesion 81
66 Additional issues on the purchase price bank transers and oreign cur-
rency 82
A Introduction 82
B Payment in Foreign Currency 82
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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C Payment by Bank ransfer 84
67 Language o the closing document 867 Te foreign component 88
71 Legislative evolution 88
A Foreign Investments in Spain 89
B Spanish Investments Abroad 90
72 Current legislation 90
73 Cross-border economic transactions and exchange control 93
CHAPER 2
LEERS OF INEN 95
AacuteNGEL CARRASCO PERERA
1 Definition 96
2 Definition of the subject 97
3 Te process of issuing letters of intent 97
31 Offer and acceptance 97
32 Letter-style and memorandum o understanding 98
33 Avoiding commitment 100
34 Te letter o intent as an obligatory step 100
4 Te functions of a letter of intent 101
41 Fault in the conclusion o a contract 101
42 Anticipating agreements with specific consent 102
43 No definite terms early in the negotiation process 102
44 Te need to agree on the non-binding nature 103
45 Restrictions on the reedom to negotiate 104
46 Search or financing 104
47 Risks o a letter o intent 105
5 Structure of a letter of intent 105
51 Defining the subject matter o the agreement 105
52 Te costs o ailed negotiations 107
53 Clause on risk allocation and ailed costs 108
54 Non-binding clause 109
55 Non-binding content 111
56 Is a letter o intent presumed to be non-binding 112
57 Degrees o binding 113
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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58 Obligations and conditions 116
59 Tree final comments on the nature o letters o intent 1176 Unity of the agreement and partial agreements 118
61 Partial agreements and incorporation power o the courts 118
62 Partial validity vs non-binding contract 120
63 Agreement and written orm 121
64 Good aith and renegotiation 122
7 Defined agreements 124
71 Requirement o a ully defined subject matter 124
72 Determinability and negotiation in good aith 124
73 Definitive agreement subject to a condition and letter o intent to nego-tiate 125
8 Spanish case law on letters of intent and pre-contractual agreements 126
81 Ineffectiveness o definitions given by the parties (Supreme Court Judgment o 2 December 1995 [Aranzadi Case Law Digest No 9156o 1995] and Supreme Court Judgment o 14 October 1996 [AranzadiCase Law Digest No 7560 o 1996]) 126
82 Partial agreements and final disagreement (Supreme Court JudgmentChamber 4 9 March 1998 [aranzadi Case Law Digest No 2372 o1998]) 127
83 Essential elements o the agreement and the powers o the court to in-corporate terms into agreements pre-contractual agreements to set upcompanies (Supreme Court Judgment O 5 July 1940 [aranzadi CaseLaw Digest No 684 O 1940] Supreme Court Judgment O 9 July 1940[aranzadi Case Law Digest No 691 o 1940] and Supreme Court Judg-ment O 13 November 2009 [CLA No 474637 o 2009] Ruling o theProvincial Appeal Court o Vizcaya o 13 October 2000 [Civil Aran-zadi No 2441 o 2000] and Ruling o the Provincial Appeal Court o
Madrid o 13 September 2000 [CLA No 279377 o 2000]) 12884 Compliance and compensation claims (Ruling o the Provincial Ap-
peal Court o Granada o 27 April 1999 [Civil Aranzadi No 4573 o1999]) 131
85 Pactum de contrahendo theories on pre-contractual agreementsmemoranda o understanding and degree o contractual determina-tion (Supreme Court Judgment o 11 November 1943 [Aranzadi CaseLaw Digest No 1170 o 1943] Supreme Court Judgment o 1 July1950 [Aranzadi Case Law Digest No 1187 o 1950] Supreme Court
Judgment o 7 February 1966 [Aranzadi Case Law Digest No 793 o1966] Supreme Court Judgment o 1 June 1966 [Aranzadi Case Law
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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Digest No 2848 o 1966] Supreme Court Judgment o 30 January 1998
[Aranzadi Case Law Digest No 353 o 1998] Ruling o the Provincial
Appeal Court o Coruntildea o 9 December 1994 [Civil Aranzadi No 2103
o 1994] Supreme Court Judgment o 28 April 2000 [Aranzadi Case
Law Digest No 2677 o 2000] Ruling o the Provincial Appeal Court
o Leoacuten o 8 February 2002 [CLA No 113725 o 2002] Ruling o the
Provincial Appeal Court o Murcia o 18 September 2003 [CLA No
250942 o 2003]) 132
86 Cooperation statement o intent or ulfilment (Supreme Court Judg-
ment o 5 October 1961 [Aranzadi Case Law Digest No 3284 o
1961]) 137
87 Letters o intent obligation to negotiate vs obligation to sign a state-
ment o intent (Supreme Court Judgment o 4 july 1991 [Aranzadi Case
Law Digest No 5325 o 1991] Supreme Court Judgment o 3 June 1998
[Aranzadi Case Law Digest No 3715 o 1998] and Supreme Court
Judgment o 30 March 2010 [Aranzadi Case Law Digest No 2538 o
2010]) 137
88 Impossible perormance (Supreme Court Judgment o 19 July 1994
[Aranzadi Case Law Digest No 6698 o 1994]) 141
89 Potential liability o one o the parties (Supreme Court Judgment o 28December 1995 [Aranzadi Case Law Digest No 9402 o 1995] and Rul-
ing o the Provincial Appeal Court o Valladolid o 9 November 1998
[Civil Aranzadi No 8974 o 1998]) 141
810 Multiple consents and implied conditions (Supreme Court Judgment o
14 October 1996 [Aranzadi Case Law Digest No 7560 o 1996]) 143
811 Fault in the conclusion o a contract (Supreme Court Judgment o 16
May 1988 [Aranzadi Case Law Digest No 4308 o 1988] Supreme
Court Judgment o 14 June 1999 [Aranzadi Case Law Digest No 4105
o 1999] and Ruling o the Provincial Appeal Court o Navarra o 31 July 1999) 144
812 Agreements and consensual pre-contractual agreements o real con-
tracts (Ruling o the Provincial Appeal Court o Baleares o 12 May
1997 [Civil Aranzadi No 1144 o 1997] Ruling o the Provincial Ap-
peal Court o Madrid o 4 June 1998 [Civil Aranzadi No 1420 o 1998]
and Supreme Court Judgment o 20 April 2001 [Aranzadi Case Law
Digest No 5282 o 2001] 147
813 Memoranda o understanding and pre-contractual agreements with
condition subsequent (Supreme Court Judgment o 24 July 1998 [Aran-zadi Case Law Digest No 6393 o 1998]) 148
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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814 Offers pre-contractual agreements and incorporation o terms by a
third party (Supreme Court Judgment o 29 November 2000 [Aranzadi
Case Law Digest No 9245 o 2000]) 149
815 Conclusions 151
816 Final note on section 708 o the Spanish Civil Procedure Act2000 152
CHAPER 3DUE DILIGENCE 155
ROSANA HALLE CHARRO
1 Introduction to legal due diligence 155
11 Legal due diligence meaning and relevance 15512 iming and preliminary commitments 157
13 Meaning o due diligence in connection with representations and war-
ranties 159
14 Duty o the seller to provide inormation 161
15 Considerations on the inormation provided by the seller 165
16 Confidentiality o the inormation provided 166
A Confidentiality obligations with third parties 167
B Legal privilege 1682 Due diligence questionnaire 168
21 General considerations 168
22 Subject areas to analyse 169
23 Adapting items to each specific case o the questionnaire 170
3 Personnel engaged in the investigation and information disclosed 171
31 Personnel engaged in the due diligence and organisation process 171
32 Inormation provided by the transeror or the purposes o the legal due
diligence approaches 174A Information predefined by the seller 174
B Information provided by the seller upon the buyerrsquos requests 176
4 Due diligence approach 177
5 Confirmations non-registered information confirmation or informa-
tion from registries or other public entities 179
51 Inormation rom the corresponding commercial registry or the land
registry 179
52 Inormation on industrial property rights 180
53 Certificates or inormation rom the ministry o economy and finance 181
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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54 Certificates rom the general treasury o the social security 181
55 Inormation on urban planning 18156 Administrative inormation 181
57 Inormation rom other types o registries or entities as the case may
be 182
6 Issues to be considered and verified in relation to documents provided
for legal due diligence purposes 182
61 Corporate aspects 183
62 Assets o the company 186
63 Contracts 190
A Financing and banking contracts 191
B Insurance policies 192
64 Labour aspects 192
65 Administrative aspects 194
66 ax issues 195
67 Litigation 196
68 Competition law 196
69 Urban planning and environment 1977 Legal due diligence report 198
71 Presenting inormation 198
72 Content 200
73 Use o the inormation in the report 201
CHAPER 4CROSS983085BORDER ASPECS OF CORPORAE OPERAIONS 205
ELISA ORRALBA MENDIOLA1 Cross-border mergers 205
11 Intra-community cross-border mergers 208
A Scope of the law governing each of the companies to bemerged 209
a Merger proposal 209
b Merger agreement 210
c Special consideration the right of shareholder separa-tion 211
d Pre-merger certificate 212
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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B Scope of the law governing the company resulting from amerger 213
C Other issues 214
a Employee participation 214
b Merger of listed companies 214
12 Extra-community cross-border mergers 215
2 ransfer of the headquarters and registered office 215
21 General aspects 215
22 ranser o the registered office 216
A ransferring the registered office of a Spanish companyabroad 219
B ransferring the registered office of a foreign company intoSpain 220
3 Te european corporation in cross-border mergers and transfers of reg-
istered office 222
4 De-mergers 222
5 Global transfer of assets and liabilities 223
PAR II
HE CONRAC
CHAPER 5REPRESENAIONS AND WARRANIES AND LIABILIY FOR BREACH 227
AacuteNGEL CARRASCO PERERA
1 Function of representations and warranties 228
11 Concept and application 228
12 Misrepresentation in english law 228
13 Te process o representations and warranties 231
14 Te sale o shares and assets 233
15 Te party making representations and warranties 235
16 Function o the representations and warranties clause 236
17 Indemnity or breach o representations 239
2 ypical representations 239
21 Representations relating to incorporation status share capital andstatutes o the selling or target company 240
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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22 Representations relating to governing bodies auditors and powers o
attorney 241
23 Representations relating to financial statements and accounting
books 241
24 axes 242
25 Principal agreements 242
26 Intellectual property 242
27 Movable assets and real estate 243
28 Insurance 243
29 Staff and service agreements 243
210 Administrative licences and authorisations 244
211 Litigation 244
212 Changes and other adverse events 244
213 Inormation 244
214 Environmental issues 245
215 Product saety 245
216 Accuracy o inormation 245
217 Exclusion o implicit commitments 245
218 Materiality 245
219 Tird party claims 246
220 Representations at the closing 246
3 Classification of representations 247
31 Representations o pastpresent events and representations o uture
events 247
32 Representations o belies 249
33 Representations o sufficient title 250
34 Representations o best efforts 25135 Meta-representations 252
36 Representations o the partyrsquos own past behaviour 253
4 Reference to the price and the agreement in its entirety 255
5 Spanish case law on representations and warranties in corporate acquisi-
tions 255
51 Judgment o provincial appeal court o barcelona o 5 january 2000
(civil aranzadi no 686 o 2000) 255
52 Supreme court judgment o 30 june 2000 (aranzadi case law digest no6747 o 2000) 256
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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53 Supreme court judgment o 11 july 2000 (aranzadi case law digest no
6683 o 2000) 257
54 Supreme court judgment o 21 july 2008 (aranzadi case law digest no
4721 o 2008) 257
55 Supreme court judgment o 11 june 2008 (aranzadi case law digest no
3561 o 2008) 259
56 Supreme court judgment o 20 november 2008 (aranzadi case law di-
gest no 283 o 2009) 260
57 Supreme court judgment o 30 march 2011 (aranzadi case law digest
no 3133 o 2011) 262
58 Supreme court judgment o 19 december 2011 (aranzadi case law di- gest no 297 o 2012) 263
6 General application of the provisions in the civil code 263
61 Warranty o title 263
62 Warranty against hidden deects 264
63 Claims or breach o contract 265
64 Indemnity and annulment due to raud 266
7 Effectiveness of representations 269
71 Negligent misrepresentation 26972 Risk o no liability waiver or unknown inormation 270
73 Digression how should warranties be structured 272
74 Elimination o the risk o no material deect 273
75 Elimination o the risk o unoreseeable damage 274
76 Elimination o risks resulting rom the concept o hidden deects 274
77 Contingency o qualities laquonot consistentraquo with the agreement 275
78 Te purpose o identiying contingencies 277
79 Unbalanced inormation and reasons to disclose inormation 2778 Disclaimers 278
9 Limitation period 281
10 Conventional limitation of the effective time period 282
11 Contractual allocation of known or knowable risks disclosure letter and
entire agreement clause 283
12 Contractual and statutory remedies 284
13 Guarantees 290
131 General guarantees 290
132 Escrow 290
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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133 Guarantees in escrow agreements 292
134 Withholding payment 294
CHAPER 6ACQUISIIONS IN HE PRIVAE EQUIY AND VENURE CAPIAL
MARKE 295
INtildeIGO ERLAIZ COELO
1 Private equity investors and venture capitalists as buyers 296
2 Private equity and venture capital firms 297
21 Funds and managers historic structure and method o operation 29722 Spanish system private equity companies private equity unds and
management companies 297
23 Legal regulations or private equity entities 299
3 Private equity investment and its various stages entry growth and exit 303
4 Shareholding valuation and adjustments at the initial stage of the invest-
ment 304
41 Introduction 304
42 Valuation and adjustment systems in buyout operations 30543 Valuation and adjustment systems in growth capital investments 306
44 Intangible contributions o the management shareholders their valua-
tion and different systems or capitalisation 309
5 Development stage of the investment private equity entity as sharehold-
er of the company and its relationship with other shareholders share-
holdersrsquo agreement 314
51 Introduction 314
52 ypical clauses governing the relationship with shareholders and theexercise o their rights in the investment 316
A Matters or decisions subject to qualified majority 316
B Anti-dilution mechanisms preferential subscription right 318
C Pre-emption rights and restrictions on the free transfer ofshares 322
D Clauses on the need for subsequent financing and the contri-bution of shareholders 324
E Preference rights to the distribution of dividends 326
F Incentives and retention of managers and key employees 327
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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53 Relationships between shareholders in an MBO trust between the
management team and the private equity entity as a key actor to a
successul operation 329
6 Disinvestment stage exit strategies and investment protection 330
61 Introduction 330
62 Investor exit clauses included in shareholdersrsquo agreements 331
A Clauses protecting the amount invested 332
B Clauses protecting the exit 334
a Clauses protecting the exit through a sale to third par-ties 334
b Clauses protecting the exit through the sale to othershareholders buy-back agreements and risks associatedwith these arrangements 338
c Clauses protecting an exit through an IPO 340
C Effects of the exit event on incentive systems for directors 343
63 Brie reerence to exit mechanisms in the absence o a shareholdersrsquo
agreement 343
7 Other characteristics of private equity acquisition agremeents 344
CHAPER 7ACQUISIIONS IN REGULAED INDUSRIES 349
CAROLINA SERRANO ALONSO
1 Insurance brokerage reinsurance and insurance companies 349
2 Credit institutions investment service companies and mutual funds 354
3 Commercial television 357
4 elecommunications 359
5 Other industries 360
CHAPER 8PRICE AND IS DEERMINAION 363
FRANCISCO PENtildeA GONZAacuteLEZ
1 Required characteristics of the price 363
11 Required characteristics o the price 363
12 Fair price and protection o minority shareholders 364
13 Protection o minority shareholders in private company acquisitions 365
2 Pricing 367
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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21 Pricing by a third party arbiter as set out in article 1447 o the civil
code 369
22 Effects o the lack o determination 371
23 Price adjustments by a third party arbiter 372
3 Payment of the price elements of the payment and deferral of the pay-
ment obligation 373
31 Payment requirements 373
32 Date place and persons authorised to collect payment 374
33 Deerral o the acquirerrsquos obligation to pay 375
4 Payment deferral variable component of the price 376
41 Deerred payment 376
42 Deerral o the variable part o the price and allocation o the companyrsquos
profits 376
CHAPER 9HE RANSFER OF ECHNOLOGY IN BUSINESS RANSFERS 379
AacuteNGEL GARCIacuteA VIDAL
1 Background 379
11 Intellectual property rights know-how and technology transer 37912 ranser o businesses and assignments o IP rights and know-how 382
A ransfer of businesses 383
B IP rights and trade secrets as elements of the business 385
2 Format issues 388
21 Requirements o orm in the transer o IP rights [laquoIndustrial Proper-
tyraquo] 388
22 Requirements o orm in the transer o IP Rights [Copyright] 395
23 ranser o companies and ormal requirements to assign IP rights 396A Te sale and purchase of a business 397
B Te transfer of a business as a consequence of companyevents 398
C Specific regulation on Community trade marks 399
3 Te effectiveness of the assignment of ip rights to third parties 400
31 Material publication 400
32 Te subjective scope o the principle o effectiveness 406
33 Consequences o the principle o effectiveness o registered acts 411A Incompatible acts 411
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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B Te registration of rights as a requirement to prohibit their useby third parties [ius prohibendi] Te issue of locus standi right of standing 412
34 Effectiveness o the assignment o IP rights to third parties in business
transers 416
A Business transfers and material publication of the CommercialRegistry Relations with the material publication of IP Regis-tries 416
B Specific provisions in the Regulation on Community radeMarks and the Regulation on Community Drawings and Mod-
els in connection with the principle of effectiveness and thetransfer of a business 419
4 Liability for dispossession and hidden defects of an ip right when the as-
signment results from a business transfer 421
41 Remedies in IP rights 421
42 Dispossession and deects o the IP right and remedy or the business 423
5 Business transfers and the assignment of licence agreements for ip rights
and know-how 425
6 Reference to the acquisition of businesses of high technological value andearn-out clauses 427
CHAPER 10DISPUE RESOLUION CLAUSE 431
JOSEacute Mordf AacuteLVAREZ ARJONAESIacuteBALIZ ARANBURU URIBARRI
1 Introduction 431
2 Alternative dispute resolution mechanisms 432
3 Deciding between arbitration and litigation 436
4 Alternatives in arbitration 446
41 Ad hoc vs administered arbitration 446
42 Seat o the arbitration and legislation applicable to the arbitration pro-
cess 452
43 Arbitration at law vs arbitration in equity Reason or the award 454
44 Further considerations 458
5 Te decisive role of a third party in share price adjustments 463
6 Conclusion 475
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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PAR III
SPECIAL PROCEDURES AND ACQUISIION RESOURCES
CHAPER 11
CORPORAE RESRUCURING OPERAIONS O RANSFER
COMPANIES 479
FERNANDO MARIacuteN DE LA BAacuteRCENA
1 Introduction 479
2 Characteristics 480
21 Concept and mandatory nature o the regulation 480
22 Universal block transer 481
A Joint transfer of the net equity as an entirety 481
B Fragmented transfer of economic units 482
23 Incorporation o shareholders and the principle o continuity 483
24 General description o the procedure 484
3 Legal regime on the protection of shareholders 485
31 Approach 48532 Principle o proportionality in swaps 486
A Concept 486
B Directors and expertsrsquo report 487
C Simplified mergers and de-mergers 488
D Special mergers and de-mergers 489
33 Shareholdersrsquo remedies 490
A General system of challenges and annulments 490B Indemnity 491
4 Protection of creditors 492
41 Approach 492
42 Report on the coverage o the capital through contributions 493
43 Specific and individual protection o creditors 495
A Right of objection 495
B Extension of liability 497
44 Objection and insolvency rescission as remedies 497
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Contents
CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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CHAPER 12SHAREHOLDERSrsquo AND FAMILY AGREEMENS 501
Mordf LUISA APARICIO GONZAacuteLEZ
1 Introduction 501
11 Definition 503
12 Corporate scope o shareholdersrsquo agreements 503
13 Classification 504
A Agreements based on the shareholdersrsquo relationships 504
B Attribution agreements 505
C Agreements on the organisation 5052 Shareholdersrsquo agreements in listed companies 507
21 Legal definition 509
22 Agreements on voting rights 509
23 Agreements restricting or imposing conditions on the ree transer o
shares or convertible or exchangeable bonds 510
24 Publication regime 511
25 Exception to the general regime 513
3 Shareholdersrsquo agreements in closed companies 51331 Family agreements 514
32 Effectiveness o the publication o amily agreements 514
33 Effect o the right o separation in closed companies as a result o the
ailure to distribute dividends 515
4 Case law doctrine on the effectiveness of shareholdersrsquo agreements 516
CHAPER 13ACQUISIIONS WIH FINANCIAL ASSISANCE 519
AacuteNGEL CARRASCO PERERAINtildeIGO ERLAIZ COELOAINARA RENERIacuteA AZO
1 Introduction criteria to interpret the prohibition on financial assis-
tance 519
2 Elements of the legal concept analysis of article 150 of the companies
act 523
21 Financial assistance Concept and applicable cases 524
A Advancing funds 524
B Granting loans 524
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D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
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Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
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33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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892019 MampA in SPANISH LAW
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Paacutegina
Contents
D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
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Paacutegina
Contents
A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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Paacutegina
Contents
102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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Paacutegina
Contents
44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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Contents
B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
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Paacutegina
Contents
D Drop dead clause 571
E ransfer of the agreement 572F Refinancing existing debt 572
53 Specific traits o financing agreements 573
6 Consequences of the insolvency act and its effect in LBO agreements therule of cause and effect 576
61 Overview o the problem 576
62 Classification o loans and payment order as provided or in the insol-vency act 578
63 Rescission and its effect in LBOS 580
64 Regime to enorce guarantees in rem 58265 Rescission o financing agreements 584
66 Enorcement o loan agreements that have expired prematurely 584
67 Other relevant aspects o the insolvency act 585
7 Financial assistance and LBOs an old debate 588
71 Practical treatment o the issue 588
8 Leveraged recapitalisation a brief reference 597
CHAPER 15ACQUISIIONS OF LISED COMPANIES 599
ALBERO DIacuteAZ MORENO
1 Control of listed companies and takeover bids (tobs) 600
2 akeover bids general ideas 601
21 Definition characteristics and applicable law 601
22 Te choice o a mandatory total unconditional ex post acto and reg-ulated price takeover bid system 602
23 Subjective scope o the application o the takeover bid regulations 605
3 Mandatory tobs resulting from takeovers of listed companies 607
31 Introduction 607
32 akeover assumptions 608
A akeover by attaining 30 percent of the voting rights of a listedcompany 609
a Calculation of voting rights 610
B Appointment of the majority of the board members 612
C Waiver of the duty to make a tob 614
33 akeover methods 615
892019 MampA in SPANISH LAW
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25
Paacutegina
Contents
A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
892019 MampA in SPANISH LAW
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26
Paacutegina
Contents
102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
892019 MampA in SPANISH LAW
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27
Paacutegina
Contents
44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
892019 MampA in SPANISH LAW
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28
Paacutegina
Contents
B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
892019 MampA in SPANISH LAW
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29
Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
892019 MampA in SPANISH LAW
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Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
892019 MampA in SPANISH LAW
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Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
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Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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Paacutegina
Contents
A Acquisition of securities conferring voting rights 615
B akeover by shareholdersrsquo agreements 616C Indirect or unexpected takeover 618
34 Circumstances excluded rom the obligation to make a OB 622
35 Bidder recipients and deadline or submitting the mandatory OB 625
36 laquoequitableraquo price 627
37 Consequences o breaching the obligation to make a OB 630
4 akeover bids with specific purposes 633
41 Characteristics 633
42 A delisting bid 63443 Capital reduction bid 638
5 Voluntary bids 640
6 Consideration and guarantees of the bid 643
61 Consideration 643
62 Guarantees 646
7 Announcement submission authorisation and publication of the bid
directorsrsquo report and information for employees 647
71 Announcement o the bid 647
72 Submission o the bid 649
73 Authorisation and publication 652
74 Directorsrsquo report and inormation or employees 653
8 Responsibility of neutrality of the board of the target company 654
81 Previous concepts 654
82 Subjective scope and duration o the duty o neutrality 655
83 Objective scope o the duty o neutrality 656
84 Decision o the general meeting 657
9 Neutralisation of defensive measures 659
91 Introduction 659
92 Optional neutralisation 660
A Decision to apply neutralisation measures 661
B Scope and effects of optional laquoneutralisationraquo 662
C Compensation 667
93 Necessary neutralisation 668
10 Modification withdrawal and cessation of effects of the bid 669101 Irrevocability and ability to modiy the bid 669
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Paacutegina
Contents
102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
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27
Paacutegina
Contents
44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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Paacutegina
Contents
B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
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Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
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Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
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31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
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Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
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Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
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26
Paacutegina
Contents
102 Withdrawal and cessation o effects o the bid 671
11 Acceptance and settlement of the bid 675111 Acceptance o the bid 675
112 Result o the bid 676
113 Settlement o the bid 678
12 Competing bids 679
121 Concept and requirements 679
122 Authorisation acceptance withdrawal and modification o competing
bids 682
123 Equality o inormation 68513 Squeeze-outs and sell-outs 686
131 Concept economic unction and characteristics 686
132 Procedure 690
CHAPER 16MERGERS ACQUISIIONS AND COMPEIION LAW CONROL OF
CONCENRAIONS BEWEEN UNDERAKINGS 693
RICARDO ALONSO SOO
1 Importance of the control of concentrations in competition law 693
2 Scope of the application of control definition of concentration 695
3 Regulation applicable to the control of concentrations community law
and national law 697
31 Definition o community dimension 698
32 Meaning o undertakings and calculation method o their aggregate
turnover 699
33 Exceptions 701
4 Control of concentrations between undertakings in the european un-
ion 703
41 Regulations 703
42 Concept o concentration 705
43 Procedure 707
A Notification 708
B Effects of the notification 709
C Stages of the procedure 710
D Rights of the undertakings concerned 712
892019 MampA in SPANISH LAW
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27
Paacutegina
Contents
44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
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28
Paacutegina
Contents
B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
892019 MampA in SPANISH LAW
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29
Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2832
30
Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2932
31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
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32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
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33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
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27
Paacutegina
Contents
44 Powers o the European Commission in connection with the control o
concentrations 714
A Power of inspection 714
B Power of decision 714
C Power to impose fines 715
5 Te spanish system of control of concentrations between undertakings 715
51 Characteristics 715
52 Concept o concentration 716
53 Scope o application o the control 718
54 Control procedure 719
A Notification 719
B Effects of notification 720
C Procedure 720
55 Penalties 722
56 Fee applicable to the assessment and examination o control opera-
tions 723
57 Jurisdictional control 723
6 Issues worthy of further examination 723
61 Scope o the relevant market 72362 Criteria to assess concentrations 725
63 Joint ventures 728
64 Ancillary restraints 730
65 Acceptable commitments and solutions 732
CHAPER 17EMPLOYMEN LAW SOCK OPION PLAN 735
ALFONSO AREIIO BASAGOII1 Employment law 736
11 Introduction 736
12 Te subject matter o the transer 749
13 Mechanisms or change o company ownership 755
14 Contractual changes 765
15 Corporate changes 766
A Purchase of assets by the employees through the formation of
an Employee-Owned Corporation [Sociedad Anoacutenima Labo-ral] 766
892019 MampA in SPANISH LAW
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28
Paacutegina
Contents
B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2732
29
Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
892019 MampA in SPANISH LAW
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30
Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
892019 MampA in SPANISH LAW
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31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
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32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
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33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
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Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
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28
Paacutegina
Contents
B De-mergers 771
C Mergers 773D ransformation of companies 774
E Non-monetary contributions 775
F Global transfer of assets 775
G Share purchase subsidiarisation of entities and company re-structuring 776
16 Special cases 780
A Outsourcing agreements and subcontracting for works andservices 780
B Changing the business owner that renders services 780
C ransferring employment contracts 789
D Special cases and regulations 791
E ransfer of powers from the State to the Regional AutonomousCommunities 792
F Public-private transfers 794
G Creation of a European SA Corporation (Sociedad AnoacutenimaEuropea) 794
17 Notiying employees representatives 79618 Liability or debts beore the transer 811
A Scope of joint and several liability 813
B Effects on the individual employment relationships affectedemployees and maintaining working conditions 819
C Collective Bargaining Agreements and agreements betweencompanies and employees 828
D Effects on the contracts of senior executives 845
E Effects relating to Social Security 849F Effects for employees representatives 858
G Effects on dismissal procedures pending resolution 865
a Fair dismissal 866
b Wrongful dismissal 867
c Null and void dismissal 868
19 Liability or debts afer the transer 869
110 Challenging the transer o undertakings 871
111 Potential effects o the transer o undertakings 872
A Employment Regulation File (ERE) 872
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2732
29
Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2832
30
Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
892019 MampA in SPANISH LAW
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31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3032
32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3132
33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2732
29
Paacutegina
Contents
a Causes 872
b Quantitative requirements 873c ime requirement 873
B Collective relocation 873
C Consultation periods and dispute resolution 875
112 ranserring companies in crisis 876
2 Stock option plans or programmes (ESOPs) and their consequences ontransfers of undertakings 881
21 Incentive and payment systems stock option plans 881
22 Legal concept and nature o stock option plans 887
23 Employment issues 891
24 ax or fiscal matters 902
A Recent developments 902
B Current treatment in Spanish Law 907
25 Commercial matters 910
26 Stock market matters 922
A If the stock option plan is implemented by means of an in-crease of capital ie if the option is exercised by underwriting
new shares 926B If the stock option plan is implemented by the company ac-
quiring its own shares 928
C If the stock option plan is implemented through the interven-tion of funding entities in their execution 930
27 Other matters relating to stock option plans 931
28 Final considerations 934
CHAPER 18
AX REGIME FOR CORPORAE MERGERS AND ACQUISIIONS ANDOHER CORPORAE RESRUCURING OPERAIONS 943
ENRIQUE OREGA JAVIER SEIJO JAVIER VINUESA JOSEacute MANUELSAacuteNCHEZ REMEDIOS GARCIacuteA MARINA RINCOacuteN BAacuteRBARAMAMBRILLA MARIANA DIacuteAZ983085MORO
1 Background 944
2 Preliminary operations 946
21 ax due diligence 947
22 axation o preliminary agreements (promises and options) 94923 Valuation o transactions between affiliated entities 951
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2832
30
Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2932
31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3032
32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3132
33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2832
30
Paacutegina
Contents
3 Sale and purchase of assets and liabilities 953
31 Direct taxation 953A ransferor 953
a Individual residents in Spain 953
b Legal entities resident in Spain 955
c Individuals or legal entities not resident in Spain 957
B Buyer 958
32 Indirect taxation 959
A Value added tax 959
B ax on Capital ransfers and Documented Legal Acts 96333 ax liability o the buyer 963
4 Sale and purchase of shares 965
41 Direct taxation 965
A ransferor 965
a Individual residents in Spain 965
b Legal entities resident in Spain 969
c Individuals or legal entities not resident in Spain 970
B Buyer 97142 Indirect taxation 972
5 ax implications of the main methods of financing investments 976
51 Loans 976
52 Joint venture agreements 981
53 Increases in share capital 983
54 Other shareholdersrsquo contributions to equity 984
6 Mergers de-mergers contributions of assets and securities exchanges 985
61 A brie reerence to the accounting treatment 985
62 Direct taxation general system 989
A axation of transferring entities 991
B axation of shareholders 992
a Individuals resident in Spain 992
b Legal entities resident in Spain 993
c Individuals or legal entities not resident in Spain 994
63 Special deerral system transactions subject to the special system 995
A Merger Article 761 of the Company ax Law 995
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2932
31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3032
32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3132
33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 2932
31
Paacutegina
Contents
B De-merger Article 762 sections 1 and 2 of the Company axLaw 996
C Non-cash contributions by branches of activity Article 763and 764 of the Company ax Law 1002
D Securities Exchanges Article 765 of the Company ax Law 1003
E Non-cash contributions Article 87 of the Company ax Law 1003
64 ax implications or transerring entities acquiring entities and share-
holders subject to the special tax deerral regime 1006
A ransferring entities 1006
B Requirements under the tax regime applicable to securities ex-
changes 1008
C Waiver 1010
D Acquiring entities 1011
E Shareholders 1012
65 Specific aspects 1016
A Valid economic purpose 1016
B Interests in the share capital of both the transferring and ac-quiring companies above 5 1019
C Subrogation of tax rights and liabilities 1025
D Special case securities exchange 1027
E ax losses and group taxation 1028
F Provisions to avoid double taxation 1032
G Retroactive accounting 1036
H Formal requirements 1037
66 Indirect taxation regime 1039
A ax on Capital ransfers and Documented Legal Acts and Val-ue Added ax 1039
B Article 108 of the Stock Market Act 1041
67 ax on the increase o value o urban land 1041
7 Cross-border mergers of corporate entities 1042
71 Historical background 1042
A Community legislation 1042
B Previous domestic regulation of cross-border mergers 1043
72 Current regulation o cross-border mergers 1043
A Directive 200556EC and Statute for a European Company 1043
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3032
32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3132
33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3032
32
Paacutegina
Contents
B Law No 32009 of 3 April on structural changes to compa-nies 1044
C Chapter VII of itle VII of the Company ax Law approved bythe Law 272014 of 27 November 1044
73 Specific cases o transactions involving non-residents 1047
A Cross-border mergers 1047
B Non-cash contributions 1049
a Non-cash contributions of business branches 1049
b Special non-cash contributions 1050
C Exchanges of securities 1051
74 axation o non-resident shareholders 1052
A axation of shareholders in mergers 1052
B axation of shareholders in non-cash contributions and ex-changes of securities 1053
CHAPER 19ACQUISIIONS IN AN INSOLVENCY CONEX 1055
JOSEacute Mordf AacuteLVAREZ ARJONA
INtildeIGO ERLAIZ COELO1 Concept and significance 1055
2 Acquisitions prior to insolvency proceedings rescission of agreements
entered into during the laquosuspectraquo period close to the insolvency proceed-
ings 1056
3 Composition as a means to acquire a company 1063
31 Standard composition proposal 1063
32 Anticipated composition proposal 1069
4 Acquisition of insolvent companies in liquidation 10705 Acquisition of companies at the common stage of the insolvency pro-
ceedings under article 432 1071
51 Method and requirements to carry out the sale 1072
6 Civil employment and tax liabilities assumed by the buyer 1074
61 Te transer o civil liabilities 1074
A Agreement proposal to assume debt 1075
B ransfers in the event of a secured or privileged claims 1075
62 ax contingencies 1075
63 Employment and social security liabilities 1077
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3132
33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3132
33
Paacutegina
Contents
7 Acquisition of liabilities of the target company 1077
8 laquoLoan-to-ownraquo acquisition strategies 107881 Capital increase through set-off 1079
82 Capital increase through contributions in kind 1079
83 Some differences between the two options 1080
9 Rescue financing and distressed debt acquisition 1081
91 Rescue financing 1082
A Rescue financing prior to the opening of the insolvency pro-ceedings 1082
a Rescue financing outsidethe scope of a refinancing agree-
ment or the consideration of laquoother non-rescindableactsraquo under the insolvency act 1082
b Rescue financing undera refinancing agreement or grant-ed under the consideration of laquoother non-rescindableactsraquo as set out in the insolvency act 1083
c New incentives for equitisations 1085
B Rescue financing following the opening of insolvency proceed-ings 1086
92 Acquisition o distressed debt 1087
A Issues to consider when acquiring distressed debt 1087
APPENDICES
ANNEX 1 EXCLUSIVIY AGREEMEN 1093
ANNEX 2 CONFIDENIALIY AGREEMEN 1095
1 Definitions 1095
2 Confidentiality 1096
3 Use 10964 Lack of rights on the information 1096
5 Protection of the information 1096
6 Other restrictions on disclosure 1097
7 Representativesrsquo commitments 1097
8 Employees 1097
9 Prohibition on commercial use 1098
10 Notice of information request 1098
11 Prohibition on copies 109812 Return 1098
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
892019 MampA in SPANISH LAW
httpslidepdfcomreaderfullma-in-spanish-law 3232
Paacutegina
Contents
13 Note 1098
14 Indemnity for failure of compliance 109915 Amendments 1099
16 Applicable legislation and jurisdiction 1099
ANNEX 3 GUIDELINES ON INVOLVEMEN 1101
ANNEX 4 DAA ROOM RULES 1105
ANNEX 5 PRELIMINARY QUESIONNAIRE 1111
ANNEX 6 LEGAL DUE DILIGENCE REPOR 1121
ANNEX 7 SAMPLE LEER OF INEN 1127
11 Main sale and purchase operation 1127
12 Proposed purchase price 1128
13 Adjustment of the purchase price 1128
14 Due diligence 1128
15 ype of agreement proposed 1128
16 Conditions for the proposed sale and purchase agreement 1128
17 Proposed non-competition agreement 1129
18 Other proposed terms 1129
21 Non-executable non-binding provisions 1129
22 Definitive agreement 1129
23 Access 1129
24 Exclusive relationship 1130
25 Indemnity 1130
26 Management of the business 1130
27 Disclosure 1131
28 Confidentiality 113129 Costs 1131
210 Rescission 1131
![Know Your Rights When Encountering Law Enforcement [Spanish] - ACLU](https://img.dokumen.tips/doc/110x75/577ce6231a28abf103923749/know-your-rights-when-encountering-law-enforcement-spanish-aclu.jpg)
