Archive for May, 2009
Tuesday, May 26th, 2009
Legal and regulatory provisions affect debt for equity swaps throughout the transaction and subsequently, until lenders have disposed of their shareholdings. Firstly, there is the need to ensure that the transaction is structured in compliance with all local legal and regulatory provisions. In addition, lenders must ensure that they are not in breach of laws and regulations that apply to them as a result of them being:
- Substantial shareholders in a company.
- Financial institutions holding shares in a non-financial entity.
Laws and regulations relating to the shareholdings held by the lenders in general, and the banks in particular, include:
- Obligations under corporate legislation, or local stock exchange regulation, to disclose acquisitions and movements in shareholdings above a certain threshold.
- The need to comply with local insider dealing legislation.
- In certain circumstances, local and regional mergers regulation may be triggered as a result of the lenders acquiring a substantial shareholding in a company. Dispensation may need to be applied for.
- In some countries there are rules that restrict banks holding shares in non-bank companies. Dispensation is usually available if the shares are acquired to facilitate a rescue.
- Lenders may become a ‘connected party’ with the company and may, as a result, become subject to additional legal and regulatory provisions that govern their dealings with it.
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