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Marie-Agnes Arlt, Martin Oppitz, and and Hermann Ortner have launched A2O — a new Austrian law firm specializing in corporate law, banking and capital markets, real estate, and dispute management.

Prior to establishing A2O — the name coming from the first letters of the partners’ surnames — Arlt was a Contract Partner with Kunz Schima Wallentin (KSW), while Ortner and Oppitz were Partners with Grohs Hofer.

Commenting on the new venture, a firm release stated: “We have observed a change in that the legal business is heading in the direction of smaller but very experienced teams. You have more issues which require in-depth legal know-how and which are interconnected, so you have to be very experienced — and you have the duty to work effectively for your client. So we decided to work together, offering all the classical core issues of of a business law firm: banking/finance, M&A, real estate, and dispute management.”

The three Partners also expressed their appreciation towards Grohs Hofer and KSW for their time with the firms. 

The arrival of A2O follows a recent trend of boutique split-offs in Austria, described in the August 2015 issue of the CEE Legal Matters magazine.

On 30 April 2016, the Act dated 14 April 2016 on Suspending the Sale of Real Properties Included in the Agricultural Property Stock of the State Treasury and Amending Some Other Acts takes effect (Journal of Laws of 2016, item585).

The new regulations will significantly restrict direct and indirect trade in agricultural real properties located in Poland. Restrictions should be taken into account when planning transactions of trade in agricultural real properties and shares of companies owning such properties.

Purpose and scope of the new regulations

As of early May 2016, restrictions on purchasing agricultural properties by entities from the European Economic Area and Switzerland will cease to be binding. Such entities purchasing agricultural properties will then not be required to obtain a permit issued by the Minister of Internal Affairs. Therefore, it has been planned for a long time to implement restrictions on trade in agricultural properties to apply to both Polish entities and foreigners.

The Polish legislator has decided to implement several restriction types since some new regulations will apply to real properties owned by the State Treasury only. For example, sale of agricultural properties owned by the State Treasury will be suspended for five years.

However, most restrictions, including the ones regarding terms of sale and purchase of real properties, will apply to all agricultural properties owned or held in perpetual usufruct by private entities.

Applicability of new regulations 

New terms will apply to all agricultural properties located in Poland regardless of the legal title to the property of the eligible party. Thus, they will apply to both properties held in ownership and in perpetual usufruct.

At the same time it is important that under Polish laws, agricultural properties are not only properties used for agricultural purposes but also properties that may be used for such purposes (meaning they are classified as arable land in the land register), and have not been intended for other purposes in applicable master plans.

A substantial portion of properties located in towns is arable land, and restrictions taking effect on 30 April 2016 will apply to them. This is also the case for arable land located outside of towns, which land is often used for investment purposes.

Exclusions from applicability of new regulations

The new restrictions will not apply to:

1. agricultural properties included in the Agricultural Property Stock of the State Treasury,
2. agricultural properties with an area of less than 0.3 hectare,
3. arable land with an area of not more than 0.5 hectare, on which there will be residential buildings, and buildings and constructions not used for agricultural production representing an organised business whole on 30 April 2016, and
4. agricultural properties which will be intended for non-agricultural purposes in final zoning decisions on 30 April 2016.

However, agricultural properties specified in 3. and 4. above will be subject to the existing restrictions in effect until 29 April 2016. Hence, each transaction concerning such properties will require verification of the previous regulations to make sure whether, and to what extent, they should be applied.

Individual farmer as an exclusive purchaser of agricultural properties 

In general, agricultural properties with an area of not less than 0.3 hectare can be purchased by an individual farmer only, ie, a natural person who meets certain requirements.

Subject to a few exceptions, other entities, including commercial companies, co-operatives, foundations and associations can purchase agricultural properties only after they obtain a permit from the President of the Agricultural Property Agency (the “Agency”). Such permit can be issued if it is impossible to sell the property to an individual farmer, the purchaser will warrant to properly carry out agricultural activities, and the purchase does not result in an excessive concentration of agricultural properties. If the permit is refused, the property owner may request that the property be purchased by the Agency at a price set by the property appraiser.

Obligations of the agricultural property purchaser

The purchaser of an agricultural property with an area of not less than 0.3 hectare will not be able to sell or give it for use (eg to lease a property under a lease or tenancy agreement) for 10 years from its purchase date. In cases of random events beyond the purchaser’s control, the permit may be given by the court. Furthermore, the purchaser is obliged to run a farm on the agricultural property for 10 years, and if the purchaser is the natural person, he will be obliged to run such farm in person.

Agency’s rights to purchase agricultural properties 

The Agency has the pre-emptive right with respect to each agricultural property with an area of not less than 0.3 hectare.

If the property owner changes otherwise than on the basis of sale, for instance by way of inheritance or donation, the Agency may make a representation on acquiring that property upon payment of its value. The agency will have an analogous right if the agricultural property is acquired as a result of transformation or merger of commercial companies. Similarly, in the case of pre-emption, the Agency will be entitled to acquire the property with an area of at least 0.3 hectare.

If the property is purchased without respecting the Agency’s rights, the sale will be invalid.

Agency’s rights concerning companies that are owners or perpetual usufructuaries of agricultural properties

The Agency will also have the pre-emptive right with respect to shares in commercial companies owning agricultural properties with an area of at least 0.3 hectare, except for listed companies. If the share purchase agreement is executed for shares of a company owning an agricultural property in excess of the area specified, and the Agency’s pre-emptive right is not respected, the sale of all shares will be invalid. It will be invalid even for the sale of the company whose activities are entirely unrelated to agriculture, but owns an agricultural property with an area of at least 0.3 hectare.

If shares are transferred on a legal basis other than sale (eg inheritance, donation or contribution in kind), the Agency may acquire such shares upon payment of their market value. Similarly, as in the case of pre-emption, failure to notify the Agency of acquisition of shares in a company owning an agricultural property with an area of at least 0.3 hectare will result in the acquisition being invalid.

Restrictions will also apply to partnerships: if a partner is changed or a new partner joins the partnership owning an agricultural property with an area of at least 0.3 hectare, the Agency will be entitled to purchase that property from the partnership upon payment of the property market value.

Summary

New limitations on direct and indirect trade in agricultural properties are very restrictive, and also apply to areas unrelated to agricultural activities. They should be expected to impede and restrict the trade in agricultural properties to a great extent, and the implementation of investment projects with the use thereof. They will also complicate M&A transactions for entities that do not operate directly on the real estate market but carry out, for instance, production activities. The sanction of invalidity of actions taken in breach of new regulations will bring about the need to introduce a number of changes in the existing practice of developers and investors operating on the Polish market, and also an in-depth analysis of how new regulations may affect the schemes designed for transactions that may result in the indirect acquisition (even unintended) of agricultural properties.

By Agata Demuth, Partner, and Konrad Bisiorek, Attorney at Law, Schoenherr

Zoltan Benko has joined Citi as its new Regulatory Risk Officer. In his new global risk management position, Benko will be based in the shared service center of Citi in Budapest.

Benko joins Citi from Allianz, where he worked first as a Senior Claims Manager and Senior Claims Adjuster for Allianz Hungary / Corporate International and Recourse Claim Handling Center, and later as an Internal Auditor for Allianz Hungary Ltd., Allianz Asset Management Company Ltd., Allianz Occupational Pension Fund Ltd. Earlier still, he worked as a Junior Legal Advisor for OTP Bank.

Laszczuk & Partners is reporting that legal advisor Marek Korcz, who worked at the firm from 1994-2007, has re-joined as a Partner.

Korcz advises on corporate/M&A matters — particularly in regulated industries — as well as consumer and telecommunications law. According to Laszczuk & Partners, “his experience includes comprehensive advice in judicial proceedings (including employment litigation) and administrative proceedings.”

From 2007–2016 Korcz “held managerial positions in the legal department of one of Poland’s largest telecommunications operators, including Director of the Legal Department.”

He is a graduate of the Faculty of Law and Administration at the Jagiellonian University in Krakow.

Sulija Partners in Vilnius has successfully represented Ashley Kozel, an American citizen, in her request to have the Lithuanian Court of Appeal of Lithuania recognize and enforce a “Florida multimillion money judgement in Lithuania.”

Sulija Partners reports that the Lithuanian court recognized the September 11, 2015 decision by a Florida court ruling that its client — which the firm describes as “the creditor former wife” — was entitled to recover an amount over USD 34 million from her former husband, Todd Kozel.

According to the firm, “this landmark recognition ruling of the Court of Appeal is a sign for US and other foreign creditors that Lithuania is a jurisdiction that respects the judgements of foreign democracies.”

Introduction

Under Austrian tax law, not only the transfer of Austrian real estate, but also the transfer or consolidation of 95% of the shares in a property-owning company, triggers a 0.5 % Austrian real estate transfer tax.

The tax basis will essentially be the value of the underlying real estate. Such tax burden is equally triggered if at least 95 % of the shares in a property owning company are acquired or owned by corporations which are part of a tax group for Austrian corporate income tax purposes.

Trustee structures

In addition, the law deems any shares held in trust to be allocated for purposes of Austrian real estate transfer tax, directly to the trustor, thereby denying the recognition of a trustee’s interposition. As a result, a mere trustee structure may not avoid Austrian real estate transfer tax.

Indirect changes in shareholder structure

According to the prevailing view in Austrian tax literature prior to the Austrian Tax Reform Act of 2015 (“ATRA”) coming into effect (prior to 2016), an indirect change in the shareholder structure of a property-owning company should not trigger Austrian real estate transfer tax. Such view was based on a decision of the Austrian Supreme Tax Court from 1984. Such view was explicitly upheld by the Austrian legislator in the reports on the legislative initiative covering ATRA, which introduced, inter alia, the relevance of trustee structures for Austrian real estate transfer tax purposes, as well as the decrease of the threshold for the tax triggering event of consolidation of shares in a property-owning company from 100% to 95%.

Nevertheless, from a recent published statement by a representative of the Austrian Ministry of Finance the view can be derived that under specific circumstances one may argue that an indirect share transfer of a property-owning company may trigger Austrian real estate tax. Since currently there are no official statements available from the Austrian Ministry of Finance as to whether indirect share transfers may be seen as a tax-triggering event or not, increased caution has to be observed in any share deal scenarios involving Austrian property-owning companies. This is not only relevant for third party deals, but may also affect mere intra-group transactions.

We would be delighted to assist you in planning your transaction, equipping you with a tailor-made solution and efficient arguments aimed at avoiding an Austrian real estate transfer tax burden.   

By Michaela Petritz-Klar, Partner, Schoenherr

Slovenia has amended the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (ZFPPIPP or the Insolvency Act) again, following amendments in 2013, amending preventive restructuring, simplified compulsory settlement and personal bankruptcy proceedings. Amendments to the Insolvency Act, which were adopted by the National Assembly on 31 March 2016, will come into force on 26 April 2016.

The main modifications introduced by the amendments are as follows:

• small companies may now rely on proceedings on preventive restructuring, in addition to medium-sized and large companies as was previously permitted;
• a decision approving financial restructuring must now be published during preventive proceedings, eliminating delays in delivering a decision to individual creditors and shortening the period between conclusion of the agreement and its entry into force;
• simplified compulsory settlement can only be conducted in case of micro companies and entrepreneurs;
• extensive amendments to personal bankruptcy proceedings, all which aim to prevent bankruptcy debtors from defrauding creditors and misusing bankruptcy proceedings. Most importantly, the amendments introduce an extension of the period for challenging legal acts concluded by the bankruptcy debtor in favour of a closely related person from three to five years. Rights of creditors to challenge several other legal acts have been introduced, as have new rules limiting the dismissal of a bankrupt person’s liabilities.

In less than eight years from its introduction, the Insolvency Act has undergone its seventh extensive amendment in order to achieve greater efficiency in manners of dealing with over-indebtedness of natural and legal persons, while introducing measures to prevent the misuse of personal bankruptcy proceedings and the dismissal of a bankrupt individual’s liabilities, both of which are common in Slovenia.

By Marko Ketler, Partner, Karanovic & Nikolic

The new EU Market Abuse Regulation (MAR)¹ will take direct effect across EU member states from 3 July 2016 onwards. It will not only extend the market abuse regime to issuers of securities traded on multilateral and organised trading facilities (ie non-EU regulated markets), but will also bring about significant changes to the reporting of directors’ and senior managers’ dealings.

1. In-scope persons, instruments and transactions – Key changes 

As under the current market abuse framework, persons discharging managerial responsibilities (“PDMR”), as well as persons closely associated with such persons (the “Associated Persons”), will be obliged to publicly disclose any transactions conducted on their own account above an annual threshold. Key changes / clarifications under MAR include:

• Persons: Disclosure obligations will be extended beyond PDMR of an issuer to also cover (i) PDMR of an emission allowance market participant, or (ii) of an auction platform, auctioneer and auction monitor involved in the auctions held under Regulation (EU) No 1031/2010, in so far as their transactions involve emission allowances, derivatives thereof, or auctioned products based thereon;
• Instruments: from 3 July 2016 onwards, covered instruments (“Covered Instruments”) will include
  • shares, derivatives or other financial instruments linked thereto (in respect of issuers);
  • debt instruments, derivatives or other financial instruments linked thereto (in respect of issuers); 
  • emission allowances, auction products based thereon or derivatives relating thereto (in respect of emission allowance market participants).
• Transactions: The scope of notifiable transactions will be significantly extended and will include, amongst others²:
  • acquisition, disposal, short sale, subscription or exchange of Covered Instruments;
  • pledges of Covered Instruments. However, a pledge, or a similar security interest of financial instruments in connection with the depositing of the financial instruments in a custody account, will not need to be notified, if and until it is designated to secure a specific credit facility;
  • borrowing or lending of shares or debt instruments of the issuer, or derivatives or other financial instruments linked thereto;
  • acceptance or exercise of a stock option, and the disposal of shares stemming from the exercise of a stock option;
  • entering into or exercise of equity swaps;
  • transactions in or related to derivatives, including cash-settled transaction;
  • entering into a contract for difference on a financial instrument of the concerned issuer, or on emission allowances or auction products based thereon;
  • acquisition, disposal or exercise of rights, including put and call options, and warrants;
  • subscription to a capital increase or debt instrument issuance;
  • transactions undertaken by intermediaries acting on behalf of a PDMR or an Associated Person, including where discretion is exercised such as eg under an individual portfolio or asset management mandate;
  • transactions made under a life insurance policy where the investment risk is borne by the policyholder, and the policyholder has the power or discretion to make investment decisions regarding specific instruments in that life insurance policy, or to execute transactions regarding specific instruments for that life insurance policy;
  • transactions in derivatives and financial instruments linked to a debt instrument of the concerned issuer, including credit default swaps;
  • conditional transactions upon the occurrence of the conditions and actual execution of the transactions;
  • automatic or non-automatic conversion of a financial instrument into another financial instrument, including the exchange of convertible bonds to shares;
  • gifts and donations made or received, and inheritance received in relation to Covered Instruments; 
  • transactions executed in index-related products, baskets and derivatives (according to ESMA’s consultation paper³ only if the underlying share and/or debt instrument, at the time of the transaction, represents 20 % or more of the aggregate value of the securities in the basket or index);
  • transactions executed in shares or units of investment funds, including alternative investment funds (according to ESMA’s consultation paper only if the underlying share and/or debt instrument, at the time of the transaction, represents 20 % or more of the aggregate value of the securities in the basket or index⁴);
  • transactions executed by the manager of an AIF in which the PDMR or an Associated Person has invested.
• Threshold: The obligation to notify dealings will apply once a threshold of EUR 5,000 has been reached within a calendar year. A competent authority may decide to increase such threshold to EUR 20,000 in which case it shall inform ESMA of its decision and the justification therefor. The respective threshold is calculated by adding, without netting, every transaction conducted on the relevant PDMR’/Associated Person’s own account relating to the issuer’s securities, or financial instruments linked to them.

2. Notifications – Key changes

The notification process as such will also be subject to change:

• Timeframe: the timeframe for notifications will be shortened from five to three business days.
• Persons obliged: PDMR and Associated Persons must notify the issuer or the emission allowance market participant and the competent authority by electronic means and by using the mandatory notification form (see below). The issuer or emission allowance market participant shall then ensure that the information is made public no later than three business days after the transaction. Alternatively, national law may provide that a competent authority may publish the information in lieu of the issuer.
• Mandatory notification form: notifications and public disclosure of managers’ transactions need to follow the mandatory template prescribed by the European Commission.

3. Information and record keeping obligations – Key changes

MAR introduces information and record keeping obligations both for issuers / emission allowance market participants, as well as for PDMR:

• Issuers and emission allowance market participants: They must notify their PDMRs in writing of their obligations in relation to dealings under MAR. In addition, they must draw up a list of their PDMRs and persons closely associated with them.
• PDMRs: must inform Associated Persons of their obligations in writing and shall keep a copy of this information.

4. Trading in closed periods – Key changes

MAR introduces a general trading prohibition for PDMR in closed periods:

• Closed period: closed periods will be 30 calendar days before the announcement of an interim or year-end report that an issuer is obliged to make under its national law or pursuant to the rules of the trading venue on which its shares are listed.
• Exemptions: Despite the general trading prohibition in a closed period, the issuer has the right to permit a PDMR to trade in a closed period
  • under exceptional circumstances. Circumstances are exceptional when they are extremely urgent, unforeseen and compelling, where their cause is external to the PDMR and the PDMR has no control over them. In order for an issuer to grant its permission, the PDMR must submit a reasoned written request to the issuer, explaining why the sale of shares is the only reasonable alternative to obtain the necessary financing; or
  • under an existing employee share or savings scheme if certain conditions set forth in Art 9 of the Commission’s Delegated Regulation (EU) 2016/522 of 17 December 2015 are met.

With less than two months to go, companies should make sure that adequate procedures as well as proper record keeping are in place to ensure that notification and announcement of managers’ dealings are in accordance with MAR. We will be delighted to guide you through the new framework and related implications for your organisation. Please contact us for further details.

By Ursula Rath, Partner, Schoenherr

[1] See Art 19 paras 1 and 7 MAR and Art 10 of the Commission’s Delegated Regulation (EU) 2016/522 of 17 December 2015.

[2] See Art 19 paras 1 and 7 MAR and Art 10 of the Commission’s Delegated Regulation (EU) 2016/522 of 17 December 2015.

[3]  ESMA’s draft technical advice on possible delegated acts concerning the Market Abuse Regulation of 11 July 2014, ESMA/2014/808, no. 107.

[4]  ESMA’s draft technical advice on possible delegated acts concerning the Market Abuse Regulation of 11 July 2014, ESMA/2014/808, no. 108.

The Warsaw office of Greenberg Traurig has represented Cyfrowy Polsat and Polkomtel in the acquisition of Midas S.A., which closed on April 27, 2016.

Greenberg Traurig describes Midas S.A. as a “dynamic entity operating on the telecommunication market,” and says that “the company is one of the world’s pioneers in the implementation of high speed wireless LTE Internet.”

According to Greenberg Traurig, “the acquisition was performed through the acquisition of Litenie Limited, the direct owner of 65.9975% of the share capital of Midas, and a tender offer to purchase shares of Midas, announced by Polkomtel on February 29, 2016, when it became the indirect dominant company of the Midas Group. As a result of the tender offer Polkomtel acquired 403,054,449 shares in Midas, representing 27.2395% of the total number of votes and share capital of Midas. Currently, Polkomtel holds 1,379,597,139 shares in Midas, representing 93.237% of the total number of votes and share capital of Midas.”

The Greenberg Traurig team was led by Managing Partner Jaroslaw Grzesiak and Local Partner Daniel Kaczorowski. They were supported by Partner Michal Fereniec, Local Partner Aleksander Janiszewski, Senior Associates Agata Jakubczak and Piotr Smolarczyk, and Associates: Adam Puchalski, Paulina Kimla-Kaczorowska, Dawid Van Kedzierski, and Martyna Komorniczak. 

Greenberg Traurig did not reply to our inquiry about counsel for Midas on the deal.

Hedman Partners has announced the promotion of attorneys Liisa Linna and Urmas Kiik to the firm’s partnership, raising its number to seven.

Liisa Linna, who specializes in construction and planning law, joined Hedman Partners in 2005. According to Hedman Partners, “Liisa has participated in the drafting of the Building Act and the Planning Act and gives regular lectures on issues related to real estate law.” She graduated from the University of Tartu School of Law in 2001.

Urmas Kiik joined Hedman Partners in 2007 and focuses on defending the interests of clients in administrative and civil disputes. He specializes in administrative law, state liability, and environmental law. In addition to court cases, Kiik represents clients in labour and rent disputes and public procurement disputes. He graduated from the University of Tartu in 1996.

Hedman Partners Managing Partner Merlin Salvik, commenting on the new appointments, said: “Liisa and Urmas are qualified and renowned legal advisors in their particular fields and adding them to the roster of partners is a logical development in our long-standing relationship.”