Continuation Of Past Practice Regarding Introduction Of Opt-Out Clauses

Author:Mr Alexander Vogel and Debora Kern
Profession:meyerlustenberger | lachenal

Introduction The Securities and Stock Exchange Act provides for a mandatory offer obligation when a shareholder, or a group of shareholders acting in concert, exceeds a threshold of 33.3% of the voting rights in a company listed on the stock exchange (or 49% when a company has introduced an opt-up clause). The shareholders of a listed company can choose to opt out of the mandatory offer obligation according to Article 22 of the act, by including an opt-out clause in the articles of association. Such an opt-out clause can be included before or after the listing of the shares on the stock exchange. The introduction of an opt-out clause is, in principle, invalid when it is selective either in a formal sense (ie, the name of the beneficiary of such clause is explicitly stated in the articles of association) or in a material sense (ie, such a clause was introduced in view of a specific beneficiary or a particular transaction, without stating explicitly such beneficiary or transaction in the articles of association). The Takeover Board's practice regarding the evaluation of the validity of an opt-out clause has recently undergone several changes. In particular, in the Advanced decision issued on October 11 20121 the board deviated from its previous practice (for further details see " Takeover Board confirms opt-out practice"). The cases discussed in this update indicate that the Takeover Board will maintain its practice established in Advanced, even when an opt-out clause has been introduced before the current practice came into place. Perfect Holding SA Facts Perfect Holding SA is listed on the SIX Swiss Exchange. On April 27 2007 the shareholders' meeting resolved on the introduction of an opt-out clause. The shareholders' group - Stephen Grey, Nicholas Grey, Grover Ventures Inc and Haute Vision SA - had a direct interest in the introduction of the opt-out clause and thus refrained from taking part in the vote. The proposed opt-out clause in the articles of association was adopted by 98.59% of the remaining shareholders which attended the shareholders' meeting. At the meeting, 50.03% of Perfect's shares were represented (ie, the shareholders' group held 58.3% and the remaining shareholders' held 41.7% of the shares represented in the meeting). Shortly after the introduction of the opt-out clause, some members of shareholders' group submitted a request to the Takeover Board for exemption from the mandatory offer obligation. The board decided that the opt-out clause was selective in a material sense and was therefore not applicable to the shareholders' group. Since...

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