After our three-part series of articles about the Belarusian M&A market published last year, now we would like to highlight the main characteristics of a merger clearance in Belarus. A merger clearance in Belarus differs from EU states, both in the terms of the scope of controlled transactions and the application process itself. Belarusian law establishes a specific control test for all transaction types separately, consisting of one or two elements:
- substantive element describing the specific characteristics of the transaction which make it subject to the merger control; and/or
- financial thresholds / market control
Controlled transactions and their testing
A merger clearance in Belarus can be required in relation to the following transaction types:
Share acquisition
The test for share acquisitions comprises substantive and financial / market control elements (both must be present for the transaction to be subject to merger control).
The substantive element is met whenever a transaction is characterised as any of the following:
- acquisition of at least 25% of the voting shares in a target by an acquirer holding a dominant position in the same market as the target;
- acquisition of at least 25% of the voting shares in a target holding a dominant position in a market;
- acquisition of the right to dispose of more than 25% or 50% of the voting shares in a target, i.e. any transaction which results in the shareholding of the acquirer in the target exceeding any of the specified thresholds (e.g. acquiring 10% of the shares when the acquirer already holds 20%).
Any of the following meet the financial / market control element:
- total non-consolidated worldwide book value of assets of the target or acquirer exceeds 200,000 basic units (BYN 5,100,000 or roughly EUR 2,176,000);
- total non-consolidated worldwide turnover of the target or acquirer for the year preceding the year of the merger clearance application exceeds 400,000 basic units (BYN 10,200,000 or roughly EUR 4,352,000);
either the target or the acquirer is included in the State Register of Entities Holding a Dominant Position in Commodities Market or State Register of Natural Monopolies.
Acquisition of fixed or intangible assets
The test for acquisitions of fixed or intangible assets comprises substantive and financial / market control elements (both must apply for the transaction to be subject to merger control).
The substantive element is met whenever a transaction has all of the following characteristics:
- the acquired assets are either fixed or intangible and belong to a commercial organisation;
- the acquired assets are located in Belarus;
- the balance sheet value of the acquired assets (including assets acquired in several related transactions) exceeds 20% of the book value of all fixed and intangible assets of the seller.
Any of the following meet the financial / market control element:
- total non-consolidated worldwide book value of assets of the seller or acquirer exceeds 200,000 basic units (BYN 5,100,000 or roughly EUR 2,176,000);
- total non-consolidated worldwide turnover of the seller or acquirer for the year preceding the year of the merger clearance application exceeds 400,000 basic units (BYN 10,200,000 or roughly EUR 4,352,000);
- either the seller or acquirer is included in the State Register of Entities Holding a Dominant Position in Commodities Market or State Register of Natural Monopolies.
Other acquisition of control over a company
The test for other acquisitions of control comprises substantive and financial / market control elements (both must apply for the transaction to be subject to merger control).
The substantive element is met whenever a transaction is characterised as any of the following:
- acquisition of the right to influence decisions made by a target holding a dominant position in a market;
- acquisition of the right to give mandatory orders to a target or the right to perform functions of the target’s executive body, including on the basis of a trust management agreement, a simple partnership agreement, or an agency agreement;
- acquisition of the right to participate in executive bodies, supervisory board, or other managing bodies of two or more targets operating in the market of interchangeable (similar) goods by the same acquirer (provided that the acquirer has an opportunity to determine conditions for the targets’ business activities).
The financial / market control element is similar to the one for share acquisitions.
Conclusion of a joint venture agreement
The test for concluding joint-venture agreements comprises substantive and financial / market control elements (both must apply for the transaction to be subject to merger control).
The substantive element is met whenever a transaction has all of the following characteristics:
- the parties to the joint-venture agreement are individual entrepreneurs and/or commercial organisations;
- the parties to the joint-venture agreement are competitors;
- the joint-venture agreement is concluded in the territory of the Republic of Belarus.
Any of the following meet the financial / market control element:
- total non-consolidated worldwide book value of assets of the parties to the joint-venture agreement (jointly) exceeds 200,000 basic units (BYN 5,100,000 or roughly EUR 2,176,000);
- total non-consolidated worldwide turnover of the parties to the joint-venture agreement (jointly) for the year preceding the year of the merger clearance application exceeds 400,000 basic units (BYN 10,200,000 or roughly EUR 4,352,000);
- any of the parties to the joint-venture agreement is included in the State Register of Entities Holding a Dominant Position in Commodities Market or State Register of Natural Monopolies.
Merger and joinder
The test for mergers and joinders comprises only a financial / market control element, which is met when any of the following applies:
- total non-consolidated worldwide book value of assets of any of the parties to the merger or joinder exceeds 200,000 basic units (BYN 5,100,000 or roughly EUR 2,176,000);
- total non-consolidated worldwide turnover of any of the parties to the merger or joinder for the year preceding the year of the merger clearance application exceeds 400,000 basic units (BYN 10,200,000 or roughly EUR 4,352,000);
- any of the parties to the merger or joinder is included in the State Register of Entities Holding a Dominant Position in Commodities Market or State Register of Natural Monopolies.
Establishment of a commercial company
The test for establishing a commercial company comprises substantive and financial / market control elements (both must apply for the transaction to be subject to merger control).
The substantive element is met whenever a transaction has all of the following characteristics:
- the established commercial company acquires shares or fixed or intangible assets (as contributions to the share capital or otherwise);
- this acquisition of shares is subject to a merger control according to the rules as described above / this acquisition of fixed or intangible assets satisfies a substantive element of the test for merger control of acquisitions of fixed or intangible assets as described above.
Any of the following meet the financial / market control element:
- total non-consolidated worldwide book value of assets of the founders and the company whose shares / assets are acquired by a newly established company (jointly) exceeds 200,000 basic units (BYN 5,100,000 or roughly EUR 2,176,000);
- total non-consolidated worldwide turnover of the founders and the company whose shares / assets are acquired by a newly established company (jointly) for the year preceding the year of the merger clearance application exceeds 400,000 basic units (BYN 10,200,000 or roughly EUR 4,352,000);
- any of the founders or the company whose shares / assets are acquired by a newly established company is included in the State Register of Entities Holding a Dominant Position in Commodities Market or State Register of Natural Monopolies.
Establishment of an association, union, state association, and holding (specific type of amalgamation under Belarusian law) as well as joining an existing holding
The test for mergers and joinders comprises only a financial / market control element, which is met when any of the following applies:
- total non-consolidated worldwide book value of assets of the founders (jointly) exceeds 200,000 basic units (BYN 5,100,000 or roughly EUR 2,176,000);
- total non-consolidated worldwide turnover of any of the founders (jointly) for the year preceding the year of the merger clearance application exceeds 400,000 basic units (BYN 10,200,000 or roughly EUR 4,352,000);
- any of the founders is included in the State Register of Entities Holding a Dominant Position in Commodities Market or State Register of Natural Monopolies.
Any new company joining the holding requires merger clearance in Belarus.
Foreign-to-foreign transactions
Belarusian anti-monopoly law and the merger clearance requirements potentially apply to foreign-to-foreign transactions. Antimonopoly approval is necessary in case the transaction negatively affects or might negatively affect competition in the Belarusian market. The potential effect on competition is assessed on a case-by-case basis by the antimonopoly authority, and there are no clear guidelines on how to verify the need to obtain the consent of the antimonopoly authority prior to applying for this consent. Nevertheless, it is generally recommended to consider the following circumstances:
- corporate presence of the acquirer and target in Belarus (also non-direct presence);
- supplies to the Belarusian market by the acquirer and target as well as their group companies.
It is also possible to apply in advance to the antimonopoly authority to seek its opinion on the need to obtain approval with regard to a specific transaction. However, this opinion is non-binding and can be disregarded if the antimonopoly authority becomes aware of new circumstances, which is almost always the case. Hence, it is usually recommended to apply for consent in any controversial or unclear situation.
Application process
Generally, applications for merger clearance in Belarus can be submitted by any party of the controlled transaction. For the most common type of transaction – share acquisitions – applications are usually submitted by the acquirer.
Within 10 working days of the submission, the antimonopoly authority considers the provided documents and can issue an additional request, or refuse to accept the application. If the application is accepted, the final decision is issued within 30 calendar days of the date of its submission. The antimonopoly authority refuses to issue its consent to the transaction in any of the following cases:
- the information provided is false or incomplete; or
- the transaction can create or strengthen a dominant position in the market or otherwise negatively affect competition.
The antimonopoly authority has the discretion to allow a transaction that negatively affects the competition, provided that some of the advantages gained from the transaction are transferred to consumers or that the transaction can result in an improvement to the production or sales process, can stimulate technical progress, or can increase the competitiveness of goods in the global market. Furthermore, the antimonopoly authority can also make the transaction subject to requirements aimed at reducing the negative effect on competition.
If consent to the transaction is granted, it remains valid for one year.
Some intragroup transactions are subject to a simplified procedure, which only means notifying the antimonopoly authority about the transaction within one month of its completion. These intragroup transactions comprise transactions between a company and its shareholder controlling more than 50% of the voting shares as well as transactions between companies controlled by the same persons (the same persons shall hold more than 50% of the voting shares in each company).
Failure to comply
Failure to comply with the merger clearance requirements can result in the transaction being acknowledged as invalid, provided it has created or strengthened a dominant position in the market or otherwise negatively affected competition. A corresponding claim can be filed at a court by the antimonopoly authority.
Furthermore, a person can be subject to a fine of up to BYN 2,700 (roughly EUR 1,150) in the event of failure to comply with a request of the antimonopoly authority, including failure to provide requested information.
If you would like to know more about merger clearance in Belarus, please visit the homepage of Sorainen, the Baltic partner of WTS Global!
