Introduction
Mergers and Acquisitions (M&A) in Albania are governed by a combination of domestic legislation and EU-inspired regulations, primarily the Albanian Company Law (No. 9901/2008), the Law on Entrepreneurs and Commercial Companies (No. 7638/1992, as amended), and the Competition Law (No. 9121/2003). The process involves due diligence, regulatory approvals, and compliance with corporate formalities. This article outlines the key legal framework and procedural steps for M&A transactions in Albania.
1. Legal Framework for M&A in Albania
The primary laws regulating M&A transactions in Albania include:
– Company Law No. 9901/2008 – Governs corporate restructuring, mergers, and divisions.
– Competition Law No. 9121/2003 – Requires merger control clearance for transactions exceeding certain thresholds.
– Law on Foreign Investment No. 55/2015 – Ensures non-discriminatory treatment of foreign investors.
– Tax Legislation – Regulates tax implications, including capital gains and transfer pricing.
2. Types of M&A Transactions
Under Albanian law, M&A transactions can be structured as:
– Mergers (Consolidation or Absorption) – Two or more companies combine into a single entity.
– Acquisitions (Share or Asset Deals) – A buyer acquires shares or assets of a target company.
3. Key Steps in the M&A Process
A. Due Diligence
Before proceeding with an M&A transaction, the buyer conducts legal, financial, and tax due diligence to assess risks and liabilities. Key areas include:
– Corporate structure and governance
– Contracts and employment obligations
– Intellectual property rights
– Litigation and regulatory compliance
– Real estate and environmental liabilities
B. Structuring the Transaction
Parties must decide whether the deal will be structured as:
– Share Purchase Agreement (SPA) – Acquisition of shares, transferring ownership with existing liabilities.
– Asset Purchase Agreement (APA) – Acquisition of specific assets and liabilities.
C. Regulatory Approvals
1. Merger Control (Competition Clearance)
Under the Competition Law, transactions that meet the following thresholds must be notified to the Albanian Competition Authority (ACA):
– Combined turnover in Albania exceeding ALL 1 billion (approx. €8 million).
– Individual turnover of at least two parties exceeding ALL 200 million (approx. €1.6 million) .
The ACA reviews the transaction for potential anti-competitive effects, with a decision typically issued within 60 days.
2. Sector-Specific Approvals
Certain industries (e.g., banking, energy, telecommunications) require additional approvals from regulatory bodies such as the Bank of Albania or the Energy Regulatory Authority (ERE).
D. Corporate Approvals & Shareholder Consent
– Board Resolution – The board of directors must approve the transaction.
– Shareholder Approval – For mergers, a two-thirds majority vote is typically required.
– Creditors’ Rights – Creditors may object if the merger affects their claims.
E. Drafting and Signing Transaction Documents
Key documents include:
– Letter of Intent (LOI) / Memorandum of Understanding (MOU) – Outlines preliminary terms.
– Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA) – Defines rights, warranties, and indemnities.
– Disclosure Letter – Lists exceptions to warranties.
F. Closing & Post-Closing Formalities
– Payment of Consideration – As per the agreement (cash, shares, or a combination).
– Transfer of Shares/Assets – Registration with the National Registration Center (NRC).
– Post-Merger Integration – Compliance with tax, employment, and corporate governance requirements.
4. Tax Considerations
– Capital Gains Tax – 15% on profits from share transfers (unless exemptions apply).
– VAT – Generally not applicable to share deals but may apply to asset transfers.
– Transfer Pricing – Transactions must comply with arm’s length principles.
5. Challenges in Albanian M&A Transactions
– Bureaucratic Delays – Lengthy registration and approval processes.
– Unclear Title & Property Rights – Due diligence is crucial for real estate assets.
– Enforcement of Contracts – Dispute resolution may require arbitration.
Conclusion
M&A transactions in Albania require careful legal planning, regulatory compliance, and thorough due diligence. Engaging local legal and financial advisors is essential to navigate the complexities of Albanian corporate and competition law. As Albania continues to align with EU standards, M&A procedures are expected to become more streamlined, offering increased opportunities for investors. For tailored legal advice on M&A transactions in Albania, consult Alba Legal Albanian Law Firm a qualified law firm with expertise in Albanian commercial regulations.