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The Year in Review

International Legal Developments Year in Review: 2022

International M&A and Joint Ventures - International Legal Developments Year in Review: 2022

Kristian Wilson, Eduardo Baamonde, Cristina Sanchez San Juan, Timur Bondaryev, Yana Babych, Geoffrey M Goodale, Natella Kortiashvili, Sarah Schwartz, Anton Dzhuplin, Kristina Akalovich, Fiorella Monge, Jean- Paul Chabaneix, Luigi M Pavanello, and Kelly Ian I Lei


  • This article summarizes important developments during 2022 in international mergers and acquisitions (M&A) and joint ventures.
  • Specifically it highlights the developments in British Virgin Islands, China, Italy, Peru, Russia, Spain, Ukraine, and the United States.
  • Actions taken by, relating to, or involving the Committee on Foreign Investment in the United States (CFIUS) represented the most significant developments in the United States for cross-border M&A transactions in 2022.
International M&A and Joint Ventures  - International Legal Developments Year in Review: 2022
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This article summarizes important developments during 2022 in international mergers and acquisitions (M&A) and joint ventures in British Virgin Islands, China, Italy, Peru, Russia, Spain, Ukraine, and the United States.

I. British Virgin Islands

A. Introduction

There were several significant international M&A transactions involving British Virgin Islands (BVI) companies in the first half of 2022. A number of deals focused on the technology sector, with notable deals including the $200 million acquisition of Six Waves Inc., a game developer, by Stillfront Group and the acquisition by Gopher Investments of Finalto, the financial trading division of Playtech plc, for $250 million.

After a strong start to the year, with the highest number of first quarter incorporations in four years, the wider corporate market witnessed decline in the second quarter with a 17.85% decline in new incorporations compared to first quarter 2022 with a number of large transactions being put on hold. The market appears to have picked up in the third quarter with increased M&A and joint venture activity involving BVI companies, particularly within the Asia-Pacific region.

B. Alterations to Corporate Laws

New amendments to the Business Companies Act 2004 (BCA) came into force on January 1, 2023, following the enactment of the BVI Business Companies (Amendment) Act, 2022 (Amendment Act).

The Amendment Act introduces a number of significant changes to the BCA including the requirement for an annual financial return, the public filing of registers of directors with the BVI registry, and the introduction of a framework for a register of persons with significant control of BVI companies. In terms of the proposed beneficial ownership register, the specific details are still unclear, as the new rules are to be outlined in regulations which will be published by the end of 2023.

C. Virtual Asset Laws

On September 9, 2022, the BVI Financial Service Commission issued the draft Virtual Assets Service Providers Act, 2022 (VASP Act) for consultation by industry and stakeholders.

The VASP Act is designed to incorporate the principles outlined by the Financial Action Task Force in its Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, by extending regulatory oversight to service providers in the virtual assets space. A new licensing regime will be introduced that will require entities conducting virtual assets service provision, virtual asset custody services and/or virtual asset exchanges to apply for registration and comply with certain regulatory requirements and international anti-money laundering standards. The new legislation is wide in scope and will include activities such as the transfer of virtual assets, safekeeping and administration of virtual assets, and the provision of financial services related to an issuer’s offer or sale of a virtual asset.

The VASP Act subsequently came into effect on February 1, 2023, although many details are still to be set out in secondary legislation. Consequently, the scope of the law is still unclear. There is currently no indication as to what types of virtual assets will be covered by the legislation and whether there will be certain categories of excluded persons. It is likely that there will be exclusions for classes of virtual assets, such as non-fungible tokens and limited purpose payment tokens, and safe harbors for certain classes of persons, such as lawyers and accountants providing incidental services, but the position will remain unclear until subsidiary regulations issued under the VASP Act are circulated.

D. Conclusion

The recent legislative changes in 2022, specifically the Amendment Act and the VASP Act, are likely to have an impact on M&A transactions and joint-venture structuring within the British Virgin Islands.

In terms of the Amendment Act, the ability to conduct public searches for directors, and potentially, more limited searches in relation to beneficial owners of BVI companies, is likely to assist in conducting more efficient and certain due diligence at an early stage.

In terms of the VASP Act, the new legislation points to the need to conduct regulatory due diligence on companies operating in the virtual assets space, to verify whether such companies are conducting regulated activities and, if so, whether they are licensed. Given the large number of technology related M&A deals involving BVI companies, regulatory due diligence may become a more important consideration for M&A transactions.

II. China

In 2022, China imposed a series of regulatory trends that pose new challenges for M&A deal-making. Under the new legislation, parties in M&A transactions should closely review the relevant data protection and antitrust requirements and conduct the necessary risk assessments as part of compliance with regulations in China.

A. Data Privacy Measure

One of the procedures for companies to get clearance on cross-border data transfer is to undergo a security assessment organized by the Cyberspace Administration of China (CAC). The Measures for Security Assessment of Outbound Data Transfers (the Measures), which came into effect on September 1, 2022, provided details on the requirement and procedures for such security assessment.

The Measures require CAC security assessment if one of the following thresholds is met: (1) if data processors transfer “important” data abroad; (2) if the data is exported by the critical information infrastructure operators or data processors that handle the personal information of more than 1 million people; (3) if the data processors have exported the personal information of over 100,000 people or the sensitive personal information of over 10,000 people abroad since January 1 of the previous year; or (4) other situations required an assessment as stipulated by the CAC.

Prior to the CAC review application, the data processor must first conduct a self-assessment, evaluating the data transfer risk that may be posed to China’s national security, public interests and the lawful rights of individuals and organizations. Then, the processor has to apply for the CAC review by submitting requisite materials such as the self-assessment report, and legal documents signed between the data handler and the overseas recipient. Upon application acceptance, CAC will organize the relevant departments and agencies to complete the assessment within forty-five working days. Where the data processor objects to the assessment result, it may request reconsideration within fifteen working days of receiving the results, and the re-assessment decision will be final. The positive assessment outcome is valid for two years from the issuance date. But the outcome can be revoked if there is a substantive change to the circumstances under which the approval for outbound data transfer was granted. Also, companies must re-apply for an assessment sixty working days before the expiration date.

B. Antitrust Law Alteration

On August 1, 2022, the Anti-Monopoly Law (AML) amendment took effect. This amendment establishes a suspensive merger review system and raises the risk of broader antitrust scrutiny of M&A transactions. Some relevant changes include: (1) prohibiting companies from leveraging data and algorithms, technology, or capital advantages and platform rules to involve in monopolistic behavior; (2) increasing penalties; (3) enabling the anti-monopoly authorities to require reporting obligation and conduct antitrust investigation if there is evidence that the consolidation restricts or could restrict competition, even though the consolidation does not meet the reporting standards; (4) introducing a safe harbor rule: vertical monopolistic agreements are not prohibited if the parties’ market share in the relevant market is under certain threshold and the conditions established by the enforcement agency are fulfilled; and (5) permitting suspension of the calculation of the merger review period if (a) the parties fail to submit the required documents and materials and makes review impossible, or (b) new circumstances or facts that significantly affect the merger review occur and the review cannot proceed without verification, or (c) further evaluation is needed on the additional restrictive conditions for the concentration of business operators, and the company requests a suspension.

III. Italy

A. Russian Roulette Clauses

Under Italian law, notaries are entrusted in making the first evaluation of the lawfulness of the Certificate of Incorporation and By-Laws (Statuto) of an Italian company. The Notarial District of Milan is one of the most important in Italy and whose decisions are very important and constitute a persuasive precedent in Italian corporate law. It established in its Decision no. 181, as amended, of the Corporate Law Commission that it is now lawful to provide anti-deadlock (whether in the Board of Directors or in the shareholders meeting) provisions, including a Russian roulette clause in the By-Laws of an Italian company. These kinds of clauses are typically used in companies with only two shareholders, or in closely held companies.

It has been long debated whether Russian roulette clauses were legal or, if legal, whether they could be included in the By-Laws of a company. But after a recent seminal decision of the Court of Rome on its validity, the Notarial District of Milan decided anti-deadlock and Russian Roulette provisions may be included in By-Laws of a company.

Russian roulette clauses are those clauses whereby upon the occurrence of certain triggering events, a shareholder may commence a procedure whereby it has the right to determine the value of the respective equal participations giving to the counterpart the choice between (1) sell its participation to the shareholder that has set the value or (2) purchase the other party participation at the same price.

The Notarial District of Milan decision points out that this clause has only one mandatory limit, which needs not to be expressly stated. The value of the participation so determined must not be lower than the value determined by the law in case of withdrawal of shareholder from a company, as prescribed by the current majority jurisprudence and scholars.

It should also be noted that the decision of the Notarial District of Milan expressly mentions and allows the use of the Russian roulette clause and similar clauses for different purposes than deadlock solving. For example, as a right granted to a shareholder holding a certain percentage of capital or as special right to the holder of a certain category of shares upon the occurrence of certain triggering events.

In short, in Italian corporate law the Russian roulette clause (and similar clauses) went from a questionable validity to now being acceptable clauses used for several purposes besides the traditional one of anti-deadlock clause.

IV. Peru

A. Merger Control and Enforcement Trends

Merger Control was introduced in Peru by means of Law 31112, the Merger Control Law (MCL) enacted in June 2021. Under the law, all business concentration transactions in any sector or industry, including foreign transactions that have effects in Peru and transactions involving agents that have not previously carried out activities in the sector or industry under evaluation and which meet the thresholds set forth in the MCL, require the prior clearance of the National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI), the Peruvian antitrust agency.

The clearance proceeding before INDECOPI is structured in two progressive phases. INDECOPI does allow early access to discuss aspects of the filing by way of what is called a “pre-filing” stage. Submitting the application to INDECOPI as a “pre-filing” aims to avoid contingencies in the proceeding and thereby smooth the analysis of the transaction. Ensuring the correct preparation of all the documents is also key for having the transaction approved without a hitch.

The latest experiences show that INDECOPI may take between three and four months for their review and that transactions are normally approved on phase one of the proceeding. Only one of the twelve transactions during the first year of application of the MCL was not approved in phase one and required phase two analysis.

Phase two analysis applies only if a transaction involves competition concerns. This second stage evaluation may take an additional four to five months to be completed. The final decision may approve the transaction, approve it subject to certain conditions or deny the transaction.

As referred above, during the first year of application of the MCL, twelve notifications were submitted to INDECOPI, of which eight were approved by June 2022. INDECOPI worked efficiently to ensure compliance with the legal terms provided for in the MCL for resolution of the cases.

In the case of the first phase two transaction, approval was granted subject to conditions in three of the five relevant markets under evaluation. Thus, Pharmaceutica Euroandina S.A.C. was authorized to acquire control of Hersil S.A. Laboratorios Industriales Farmacéuticos, subject to the following conditions:

(1) Main commitment: Pharmaceutica Euroandina is to license to a third party the trademarks marketed by Hersil in the antiseptics, anti-infectives, the aminoglycosides, and the systemic nasal preparations markets, for a minimum term of five years. At the end of said term, the relevance of maintaining or modifying the commitments will be evaluated.

(2) Transitional commitment: From the day after the closing of the transaction until the signing of the trademark license agreement referred to above, Pharmaceutica Euroandina is to implement a pricing policy in the alluded markets pursuant to which it will not be able to increase the prices of the products marketed under the trademarks to be licensed. This commitment includes maintaining the discount programs in place by Medifarma and Hersil for products distributed in those markets prior to the merger.

It is also relevant to mention that INDECOPI has not denied approval or imposed structural conditions (e.g., a divestiture) since the entering into effect of the MCL.

Considering the decision-making and enforcement trends of INDECOPI so far, we consider that such authority is acting reasonably in determining if the business concentration transaction involves competition concerns.

It is worth mentioning that with the constant dynamization of the markets, the experience gained, and the guidelines that INDECOPI is adopting for the analysis and approval of transactions, the application of the merger control regime will become more predictable, effectively providing with more tools to evaluate transactions and file complete and efficient notifications in the years to come.

Finally, it’s important to note that even when a business transaction does not meet the thresholds for antitrust clearance so no filing is required, INDECOPI is entitled to act ex officio when there are reasonable indications to consider that the transaction may generate a dominant position or affect effective competition in the relevant market. Such post completion action may only be triggered up to one year after the transaction not subject to approval is closed.

V. Russia

Despite the fact that 2022 appeared to be challenging for Russian markets and especially for the M&A sphere, creating the new reality for M&A transactions; some steps were taken towards further implementation of the world’s best practices in the M&A and joint ventures sphere in Russia. The Russian Supreme Court developed confirmation of the status for the disclosure letter as a tool for limiting the liability of the seller under Russian law. Another positive step for the Russian market was amending the requirements for the Russian Federal Antimonopoly Service (FAS) to approve M&A transactions.

In 2015 the institute of Representations on Circumstances was incorporated into Russian legislation. But the effective implementation of this tool in the transaction documents is still featured by a lot of blind spots. One of them is the disclosure of the information against Representations on Circumstances. Due to the wide expansion of the freedom of contract principle, Russian M&A deals are accompanied by the classic practice of the disclosure letter. While at the same time, such practice has not developed in courts. In January 2022, the Russian Supreme Court, literally for the first time, confirmed by keeping in force the decisions of the lower courts that the scope of the Representations on Circumstances shall be limited by the information contained in the disclosure letter. The Court in Case No. А50-29581/2020 applied a disclosure letter signed along with the sale and purchase agreement for the transfer of shares (participation interest) in the limited liability company for interpretation of the provisions of the sale and purchase agreement. It held that there were no grounds for claiming damages based on the breach of Representations on Circumstances due to the information contained in the disclosure letter.

Meanwhile, the nature of M&A deals in 2022 changed dramatically as foreign investors were focused on disposing of the Russian assets. The speed for negotiating of the definitive agreements increased as well as the number of “as is” transactions with Russian targets’ management or Russian investors on buyer’s side aimed for the smoothest exit of foreign investors from the Russian market. Such instruments as Representations on Circumstances, indemnities and disclosure letters are not nowadays in demand in the light of distressed deals, however, they shall not be underestimated for the purposes of classic M&A deals.

At the same time, the financial threshold of the M&A transactions subject to preliminary merger clearance was increased. Due to the amendments to the federal law effective since February 28, 2022, the obligatory preliminary consent of FAS for conclusion and performance of the transaction is required in cases where the aggregate value of the assets of a target company and its group exceeds RUB 800,000,000. This is in comparison with former threshold of RUB 400,000,000, based on the latest balance sheet. These increases removed small group companies from the control of FAS. Moreover, in 2022, only transactions involving acquisition of the groups with aggregate value of the assets exceeding RUB 2,000,000,000, based on the latest balance sheet, are subject to the obtaining of the preliminary merger clearance. For other transactions, FAS should be notified within thirty days from their execution. In this regard, the regulatory burden on small businesses decreased.

VI. Spain

To foster entrepreneurship and innovation, the Spanish government passed several important laws to make Spain more attractive for foreign investors. This article highlights two of these laws and how they could impact certain venture capital investments and M&A transactions.

The Creation and Growth Law modifies the Spanish Corporate Enterprises Act, the primary Spanish corporate law. This law facilitates the creation and growth of Spanish companies through various measures. The most relevant measures for M&A attorneys are expediting incorporations and easing access to financing.

The law expedites incorporations by eliminating an economic hurdle by reducing the minimum share capital requirements to €1 from €3,000 and reducing the administrative burden by standardizing forms of corporate bylaws and public deeds of incorporation. In addition, the law promotes the Centro de Información y Creación de Empresas (CIRCE), a digital platform designed to streamline bureaucracy and shorten processing times. Under the new law, the Commercial Register must qualify and register the public deed in six working hours, a significant improvement from fifteen business days. The Notary may also directly remedy any defects if the registration is denied. Even if the standardized documents are not used, registration deadlines are reduced to five days.

The Creation and Growth Law also amends the law governing crowdfunding to implement the applicable European regulation. Similarly, it modifies certain laws applicable to private equity and investment firms. Of these modifications, noted most importantly are the following: permits management companies to be incorporated as limited liability companies; modifying the offer regime for unaccredited investors; and creating a new category of investment vehicle called debt funds.

Spanish legislators also modified the insolvency law, unlocking potentially interesting investment opportunities in distressed assets. Law 16/2022 contemplates a “pre-pack insolvency” to aid the sale of businesses or assets, also known as “productive units,” from companies in insolvency. This pre-pack insolvency can speed up a M&A process because the productive unit’s contracts and administrative permits are automatically assigned to the buyer without requiring the consent of third parties. Moreover, the only liabilities that the buyer will assume are the debts with employees and the Spanish Social Security. An important drawback to the modified law is that buyers must ensure business continuity for at least two years, or otherwise potentially be subject to damages claims.

VII. Ukraine

Ukraine’s M&A landscape was transformed by the outbreak of full-scale war in February 2022. Instead of the investment deals expected in 2021, the market is experiencing sporadic deals, mostly in the IT sector.

But this situation has not stopped the ongoing process of Ukrainian law modernizing and adapting it to internationally recognized best practices. Furthermore, considering the country’s E.U. candidacy status, Ukrainian lawmakers continue to make additional steps towards the E.U.-based principles of the corporate legislation.

The long-awaited Law of Ukraine on Joint-Stock Companies (Law on JSC), adopted by the Ukrainian Parliament this year, is an example of the chosen path. This law will enter into force on January 1, 2023 (with some exceptions to be in force from January 1, 2024). It lowers the minimal charter capital to 200 minimal salaries (instead of 1,250) and alongside other changes makes joint-stock companies more attractive and user-friendly organizational form. For the businesses structured as joint-stock companies the Law on JSC also offers, inter alia, the following opportunities:

(1) The traditional two-level corporate governance model may be replaced by a one-tier structure with both executive and non-executive directors on the board. The companies will select the model that suits their business or corporate governance needs voluntarily.

(2) The Law on JSC makes available several options for remote voting at the general shareholders’ meeting. This overcomes the problem of the prior legislation that seriously hindered companies’ activity within COVID-19 pandemic became even more crucial in wartime. Among suggested options: electronic voting at the standard meeting, fully electronic voting, and voting by ballots. Such remote voting is to be conducted via a special authorized system.

(3) The process of reorganization of the joint-stock companies was significantly simplified by shifting several decisions on reorganization matters to the supervisory board (or board of directors – if the one-tier structure is implemented) level.

(4) The Law on JSC crystallizes the concept of fiduciary duties for companies’ officials, which had been used in court practice but not incorporated into legislation before. The new wording imposes the necessity for the officials to analyze their actions more carefully and perform the obligations not only directly specified by the legislation or bylaws but also implied due to the duty to act reasonably and with due care. It was also clarified that any waivers from such liability are void.

(5) The Law on JSC provides more detailed provisions regarding the shareholders agreement, especially regarding the parties to such an agreement (the company itself was included as the possible party) and applicable law (the shareholders were given the possibility to conclude an agreement governed by the foreign law). Previously, the legislation was silent with regard to such provisions, yet the lack of clarity was an obstacle to use this instrument more widely.

(6) The role of the corporate secretary becomes more visible and, in some cases (e.g., banks, insurance companies and other public joint-stock companies), the company must obligatory appoint such a person.

Moreover, the Law on JSC ensures more efficient protection of the minority shareholders. As an example, minority shareholders holding at least five percent of shares were granted the right to initiate the appraisal process or file the derivative claim. Elimination of the legislative ambiguities (e.g., regarding violation of the material transactions approval) and updated rules for the squeeze-out procedure are among other changes.

In addition to the changes for joint-stock companies, the law also alters the regulation of limited liability companies. A key change is the possibility to secure the title to shares in limited liability companies by using depositary systems for operations with shares in the limited liability companies instead of registering with the existing trade register. It is not mandatory to switch to this system—they have the right to opt for this model, e.g., to prevent potential raider attacks.

Additional changes include an analogous choice of a convenient corporate governance model and clarification of certain provisions of the shareholders agreement as well as an increased level of minority shareholders’ rights.

With the new legislation, companies will have greater flexibility to choose the most beneficial rules, while at the same time it will be necessary to draw up the bylaws more carefully to avoid any ambiguities. Given this, we expect that these novelties will substantially improve the activity of joint-stock companies.

VIII. United States

Actions taken by, relating to, or involving the Committee on Foreign Investment in the United States (CFIUS) represented the most significant developments in the United States for cross-border M&A transactions in 2022.

By way of background, CFIUS is an inter-agency committee, for which the Secretary of the Treasury serves as Chair, that is authorized to review any transaction that could result in a foreign person obtaining the ability to control a U.S. business that could pose a threat to U.S. national security. Based on its review of a transaction, CFIUS may conclude that a transaction threatens to impair U.S. national security and recommend that the President prohibit or unwind a transaction.

The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded the scope of jurisdiction and powers of CFIUS. Specifically, FIRRMA provides CFIUS with new powers to review transactions involving certain strategically sensitive real estate in the United States and non-controlling investments in U.S. businesses involving certain critical technology, critical infrastructure, or sensitive personal data (TID US Businesses). In addition, FIRRMA strengthened requirements concerning the use of mitigation agreements.

In January 2020, the U.S. Department of the Treasury issued two FIRRMA-related final rules that entered into effect on February 13, 2020. One final rule set forth the scope, process, and procedures relating to the national security review by CFIUS of certain transactions involving the purchase, lease, or concession of certain strategically sensitive real estate in the United States (e.g., certain airports, maritime ports, military installations and specific geographic areas in or around those sites) to a foreign person. The other final rule expanded CFIUS’ jurisdiction to review certain non-controlling investments in TID U.S. Businesses and established criteria that would trigger mandatory filing requirements. In addition, both final rules created a new voluntary declaration filing option that is shorter and less detailed than the standard voluntary notice option.

On April 29, 2020, the Treasury Department issued an interim final rule on filing fees. Pursuant to this notice, which entered into effect on May 1, 2020, a fee structure was established that ranges from zero fee for transactions valued at under $500,000 up to $300,000 for transactions valued at or above $750,000,000.

On September 15, 2020, the Treasury Department published a final rule modifying the criteria that triggers mandatory filing requirements. Pursuant to this final rule, effective October 15, 2020, mandatory declarations must be filed with CFIUS if a U.S. export license or authorization would be needed to transfer the relevant critical technology to any of the foreign parties involved in the investment transaction. This requirement is subject to certain limited exceptions (e.g., the critical technology could be transferred pursuant to certain license exceptions under the Export Administration Regulations—TSU, ENC, and STA).

On September 15, 2022, President Biden signed Executive Order 14083 (EO 14083), which was one of the first CFIUS-related executive order issued in decades. While not changing the scope of CFIUS jurisdiction, EO 14083 requires that CFIUS focus on fostering supply chain resiliency, preserving U.S. technological leadership, protecting sensitive personal data, assessing cybersecurity risks and examining transactions in the context of broader industry and investment trends.

Subsequently, on October 20, 2022, the Treasury Department released the first-ever CFIUS Enforcement and Penalty Guidelines (Guidelines). Noting that the process for the imposition of penalties is described in 31 C.F.R. §§ 800.901 and 802.90, the Guidelines describe how CFIUS identifies, processes, and assesses violations, including failure to make a mandatory filing, material misstatements or omissions and breaches of CFIUS mitigation requirements.

The Committee Editor was Anton Dzhuplin, a Partner at ALRUD Law Firm. The author of the British Virgin
Islands section is Kristian Wilson, a Partner at Bedell Cristin. The author of the China section is Kelly Ian I Lei, a student at NYU School of Law. The author of the Italy section is Luigi Pavanello, a partner at PLLC Legal. The authors of the Peru section are Jean Paul Chabaneix, a Partner, and Fiorella Monge, an Associate, at Rodrigo, Elıas & Medrano Abogados. The authors of the Russia section are Kristina Akalovich, a Senior Associate, and Natella Kortiashvili, an Attorney, at ALRUD. The author of the Spain section is Sarah Schwartz, a Partner at Across Legal SLP, where Eduardo Baamonde and Cristina Sanchez San Juan are Lawyers. The authors of the Ukraine section are Timur Bondaryev, a Managing Partner, and Yana Babych, a Senior Associate, at Arzinger. The author of the United States section is Geoffrey M. Goodale, a Partner at Duane Morris.