Corporate M&A 2024 Comparisons

There has been a certain rise in M&A transactions in the past 12–18 months, mostly driven by Lebanon’s economic crisis, aggravated by the COVID-19 pandemic and its ramifications, and the need for restructuring. Following the crisis that erupted in late 2019, one of the major mergers occurred between two major insurers, LIA Insurance SAL and Assurex SAL, whose combined premiums for 2020 amounted to around USD129 million, forming a new unit known as “LIA Assurex SAL”; it is presumably the case that the merger aimed to strengthen both companies’ position allowing them to sustain the crisis, and meet the emerging financial challenges.

The authors believe the market will also witness, in the coming phase, an increase of mergers between banks; in fact, local banks have sustained the biggest blow in the crisis, with several of them bordering restructuring or even bankruptcy. With the severe devaluation of the local currency, and the liquidity crisis, banks will be resorting to mergers enabling them to consolidate their assets, in order to better face the emerging challenges. Not a long while ago, the Lebanese market witnessed a first merger in the banking industry since the financial crisis. In 2021, Audi Bank merged two of its fully-owned subsidiaries, Audi Private Bank (whose assets totalled USD1,430 billion), and Audi Investment Bank (whose assets totalled USD307,500,000), into its own business. The merger, approved by the Central Bank, aimed to eliminate duplicate expenses, and lower operational costs.

Another major recent deal announced is the acquisition by the Satellite channel bouquet, OSN+, of the Lebanese music streaming platform, Anghami. OSN+ is set to become the major shareholder of Anghami. The merger aims to combine the products and service offerings of the two companies, mainly by developing Anghami’s streaming services. 

Please refer to 1.1 M&A Market.

Please refer to 1.1 M&A Market.

The Lebanese legislature has broadly included all types of business combinations under the umbrella term “merger”, encompassing merger by absorption, amalgamation, and acquisition.

In 2019, the Lebanese Code of Commerce (Legislative Decree No 304 of 24/12/1942) (LCC) underwent significant amendments through Law No 126 of 29/3/2019. These amendments provided more specific regulations for the mergers and demergers of companies. According to the LCC, a company merger is defined as the process where one or more companies transfer their assets to an existing company or to a newly established company for this purpose.

A merger can be executed using one of two methods: absorption or amalgamation. In a merger by absorption, one or more companies merge into an existing company, leading to the dissolution of the merged company (referred to as the “Disappearing Company”). Consequently, the capital of the recipient company (referred to as the “Benefitting Company”), which receives some, all, or the net assets, increases by the value of the assets transferred from the Disappearing Company.

Furthermore, the Disappearing Company ceases to exist as a separate legal entity without undergoing liquidation. Meanwhile, the Benefitting Company maintains its legal identity and issues new shares to compensate for the assets received from the Disappearing Company. These new shares are then distributed to its shareholders after evaluating the assets’ value and settling any merger premium. In the case of an amalgamation, two or more companies combine to create a new entity. This process results in the Disappearing Companies being considered dissolved, effectively terminating their legal identities. All rights and obligations of the Disappearing Companies are fully transferred to the new entity, that is, the Benefitting Company, emerging from the merger.

Typically, partners in the Disappearing Company become partners in the Benefitting Company according to the merger agreement, with their old shares and stakes exchanged for new ones in the Benefitting Company. These partners may also receive a premium, which cannot exceed 10% of the nominal value of the newly allotted shares or stakes. However, this exchange does not apply if the shares or stocks are already held by the Benefitting Company or the Disappearing Company, assuming their value is accounted for in the valuation of shares or stakes of the involved companies. Importantly, if the merger results in an increase in liabilities for the partners or shareholders, it is necessary to obtain unanimous consent from them before proceeding with the merger.

Mergers and acquisitions extend beyond domestic boundaries, allowing for cross-border transactions between local and foreign companies. In this context, it is crucial for foreign entities to understand the Lebanese regulations regarding the acquisition of real estate rights. Specifically, according to Decree No 11614 of 4/1/1969 (as amended), foreign individuals or corporations, as well as Lebanese companies considered foreign, are prohibited from acquiring real estate rights in Lebanon without a special licence. This licence must be issued by a decree from the Council of Ministers, based on the recommendations of the Minister of Finance. Thus, when a foreign company intends to acquire a local company holding real estate rights in Lebanon, adherence to this regulation is mandatory. Furthermore, the decree stipulates that the cumulative real estate holdings by foreigners across Lebanon cannot surpass 3% of the nation’s total land area. For individual regions, except Beirut, the limit is also 3%, whereas in Beirut, foreign ownership is capped at 10% of the area.

Public M&A transactions are further regulated by Decree No 13513 of 1/8/1963 (the Code of Money and Credit and The Establishment of the Central Bank), Law No 192 of 4/1/1993 regarding the facilitation of bank mergers (mainly governing M&A transactions targeting banks), and Decree No 7667 of 16/12/1995 implementing the bylaws of the Beirut Stock Exchange (mainly governing M&A transactions targeting publicly listed companies).

Private M&A transactions are not directly regulated.

However, in the banking sector, these transactions fall under the oversight of the Central Bank and its Central Council. According to the Code of Money and Credit, specifically Articles 132(b) and (d), banks that intend to merge into a new entity or convert into a branch of a foreign bank must first secure approval from the Central Bank. Additionally, Law No 192 mandates that any merger involving two or more banks requires the Central Council of the Bank of Lebanon’s endorsement. The Council, after consultation with the Banking Control Committee of Lebanon, may either approve or reject the merger proposal.

Furthermore, the Capital Markets Authority (CMA), established by Law No 161 in 2011, oversees regulations related to significant stock acquisitions in public companies and the procedures for executing acquisition and merger offers. This oversight includes ensuring compliance with Law No 192’s provisions on bank mergers. The CMA’s involvement in M&A transactions specifically aims to uphold the governance standards of publicly listed or issuing companies.

In 2001, Lebanon passed Law No 360 of 16/8/2001 relating to the “Encouragement of Investments in Lebanon”, which established new incentives for foreign investors, and entrusted the Investment Development Authority of Lebanon (IDAL) with the mission of promoting local and foreign investment, and with the authority to grant investment licences and permits.

In general, foreign investors may incorporate, acquire, and dispose of interests in local companies, and may engage in all types of activities that generate revenue, subject to certain licensing and nationality requirements for specific types of commercial activities, such as commercial representation, agency, media, banking, insurance, logistics, transportation, arms trade, and insurance activities.

In 2022, Lebanon introduced Competition Law No 281 of 15/3/2022, aiming to safeguard competitive practices, regulate market conduct, outlaw agreements and actions that compromise competition, and counter monopolies and market dominance abuse. This law is designed to protect consumer rights, encourage economic efficiency, innovation, technical advancement, and uphold quality standards.

A key innovation of this legislation is the establishment of the National Competition Authority (NCA), which holds exclusive responsibility for enforcing antitrust regulations and addressing related issues as referred by sector regulators.

Sector regulators are required to collaborate with the NCA on matters of economic concentration arising from mergers and acquisitions, referring any such transactions to the NCA for prior approval. This ensures that the NCA can assess the transaction’s impact on market competition and provide a binding technical opinion, including approval or rejection.

The law also introduces a merger control regime, necessitating NCA clearance for transactions where the combined market share of the involved parties exceeds 30% over the last three fiscal years. Parties must notify the NCA of these transactions before completion to obtain clearance. Additionally, parties may voluntarily report their transaction to the NCA early in the negotiation process or upon public announcement, regardless of market share thresholds. This responsibility falls on the acquiring parties or, in mergers, all entities involved.

The NCA prohibits any transactions significantly hindering competition, especially those likely to create or strengthen market dominance. The NCA has 60 days from the notification’s receipt to investigate and decide on a transaction, a period extendable by 15 days, upon request, to consider undertakings addressing anti-competitive effects. The NCA could approve, reject, or conditionally approve the transaction, or possibly subject the transaction to further investigation.

Failure to report a transaction prompts the NCA to require reporting or reversal to pre-transaction status, alongside imposing fines of up to 5% of the parties’ last fiscal year’s business volume in Lebanon (excluding fees and taxes), as well as suspending the transaction until a decision is reached.

Moreover, the Competition Law bans specific horizontal agreements that restrict or eliminate competition, such as collusion or co-ordination in bidding processes, including government tenders and supply offers, alongside anti-competitive vertical agreements. Additionally, the Competition Law prohibits market dominance abuse. Specifically, Article 9 deems as abusive behaviours that hinder new competitors’ market entry or cause significant losses to competitors, including practices like selling below production cost, manipulating prices, or setting unfair conditions for the resale of goods or services.

It is important to highlight that the Competition Law is a recent development, and the council for the NCA is yet to be formed. Consequently, these regulations have not been practically applied, which limits the ability of the authors to evaluate the enforcement of antitrust rules in action.

With regard to the M&A impact on employment agreements concluded with the Disappearing Company, the Benefitting Company is required to maintain these agreements, affording legal protection to the concerned employees. In practice, however, mergers often occur with the aim of reducing the size of the merging companies’ expenses, which leads to the termination of employment agreements. In such case, the termination of employees for economic reasons would be regulated in accordance with the provisions of the Law of 23/9/1946 (as amended) (the “Labour Law”).

In fact, Article 50(f) of the Labour Law notes that the employer is entitled to terminate all or part of the establishment’s employment contracts, in the event of a force majeure, or in case of compelling economic or technical circumstances, such as a reduction of the size of the establishment, a replacement of a manufacturing process by another, or a final cessation of work. In such case, the employer is required to notify the Ministry of Labour and Social Affairs of such intent to terminate those contracts one month prior to execution; the employer is equally required to consult the aforesaid Ministry on the programming of such termination, taking into consideration the employees’ seniority, their specialisation, age, family and social status, and finally the means deemed necessary for their re-employment. As a matter of fact, employees laid-off in the above-mentioned manner shall have the benefit, within one year of termination, of priority/preference right for re-employment in the establishment from which they were laid-off, if work is resumed normally in a way that allows their re-employment for newly created positions.

Other Labour Law provisions that acquirers of local entities should primarily be concerned with are the following.

Leave

Maternity leave

The Labour Law grants working women a fully-paid maternity leave for a period of ten weeks, including the period preceding and succeeding delivery, noting that it is prohibited to put working women on notice during their pregnancy and during their maternity leave.

Annual leave

The Labour Law grants each employee (provided that the latter has spent at least a year at their employer) 15 days of annual leave, noting that Lebanon has ratified the Arab Labour Convention, which increases the length of the annual leave depending on the employee’s seniority (one up to five years: 15 days; five up to ten years: 17 days; ten up to 15 years: 19 days and 15 years and more: 21 days).

Sick leave

The Labour Law requires employers to provide their employees with sick leave (not resulting from work injuries) as set under Article 40 thereof.

Termination in General

The employer and employee shall each have a right to terminate at any time the employment agreement concluded between them. However, in case of abuse of this right, the aggrieved party shall be entitled to claim indemnity assessed as follows:

• in case termination stems from the employer, indemnity shall be assessed in accordance with the nature of the employee’s job, age, service period, family status, health condition, the scope of the prejudice and the extent of abuse of that right, on condition that indemnity as awarded by the court shall vary between two and 12 months’ wage;
• in case termination stems from the employee on grounds other than those authorised by law, and if it is proved that by doing so, the employee has caused prejudice or reputational damage to the employer, the latter shall be entitled to indemnity varying between one month and fourth months’ wage; and
• the aggrieved person has the right to institute proceedings before the Labour Conciliatory Board within a time-limit of one month running from the notice of termination.

Notice period

The employer and employee shall each be required to advise the other of their intent to terminate the contract, one month in advance in case a period equal or under three years has elapsed since the implementation of the employment contract, two months in advance in case more than three years and less than six years have elapsed, three months in advance in case more than six years and less than 12 years have elapsed, and four months in advance in case 12 years or more have elapsed.

Abusive termination

Termination is considered abusive if it occurs in the following instances:

• for an unacceptable reason or for a reason not connected with the employee’s capacity or behaviour in the establishment or with the good management and operation of work in the establishment;
• for having adhered or not to a specific professional syndicate or for having engaged in a legal syndicate activity in conformity with the laws and regulations in force, or pursuant to a collective or individual employment contract;
• for presenting their candidacy to elections or for having been elected as a member of a syndicate office or as a representative of the employees of the establishment, all through the period of performing such membership or representation;
• for having lodged, in good faith, a complaint to the competent authorities concerning the enforcement of the provisions of the Labour Law or for having sued the employer as a result thereof; or
• for having practiced their personal or general liberties within the scope of the laws in force.

It is worth noting that the application of the provisions of the Labour Law is of public policy.

Furthermore, foreign acquirers must be made aware of the provisions of Decree No 17561/1964 regulating the work of foreigners in Lebanon (as amended), and the decisions rendered by the Ministry of Labour which are updated yearly, restricting certain professions to Lebanese nationals only.

Regarding the benefits to which an employee is entitled, it should be noted that all employees and workers, regardless of the nature of their employment, are subject to the provisions of the National Social Security Law (Decree No 13955 of 26/9/1963), and foreigners working in Lebanon (holders of work permits) are entitled to social security benefits provided their countries of origin offer equal treatment to Lebanese workers (such as France, Italy, UK, Syria and Belgium).

Moreover, the employer is required to declare before the Ministry of Finance the number of employees in the company and the salary of each employee. A tax is imposed on all wages, salaries including overtime, gratuities and benefits, after deduction of family allowances. Employers are required to withhold the amounts due from salaries and remit them to tax authorities.

The M&A regulations are still in their early phase, and still considered under-developed, in comparison with other countries. Thus, a National Security Review in the context of M&A does not exist yet in Lebanon.

Nevertheless, it is crucial to note certain boycott Laws that are in place. In fact, the Law governing the “Boycott of Israel” of 23/6/1955 prohibits “any natural or legal person from entering, directly or indirectly, into any agreement with entities or persons residing in Israel or of Israeli nationality or working for or in the interest of Israel, whenever the object of the agreement is a commercial transaction or financial operation or any other dealing of whatever nature”. The law further considers that “companies, as well as local and foreign institutions having factories or assembly branches or general representation offices in Israel as part of the entities or persons with whom dealings are prohibited pursuant to above paragraph as will be determined by cabinet’s decision published in the Official Gazette”. Thus, Lebanese and Israeli entities would be prohibited from entering into merger transactions.

The authors are not aware of any court decision in the past three years related to M&A. This can be attributed to several factors; primarily, M&A activities are low in Lebanon whose economy predominantly consists of SMEs. Additionally, Lebanon’s business landscape is characterised by a significant prevalence of family-owned enterprises, which tend to prioritise continuity and stability over aggressive M&A strategies.

In principle, there have been no significant changes to the M&A regulations in the past 12 months, nor are they under review in a way that could result in significant changes in the coming 12 months.

It is not customary in Lebanon for a bidder to build a stake in the target prior to launching an offer. In fact, the whole concept of “stakebuilding” is neither customary nor regulated in Lebanon.

As noted in 4.1 Principal Stakebuilding Strategies, the concept of “stakebuilding” is not regulated in Lebanon. Nevertheless, generally speaking, in 2018 the Ministry of Finance introduced a mechanism enabling the identification of the Ultimate Beneficial Owner (UBO) of companies.

In fact, Decision No 1472/1 of 27/9/2018 considers as UBO, every natural person, regardless of the place of residence, who owns or actually controls, ultimately, whether directly or indirectly, the activity carried out by any other natural or legal person in Lebanon. Every legal entity, regardless of its legal form, must take the necessary measures to determine the identity of the UBO. The UBO is identified if they own, directly or indirectly, at least the equivalent of 20% in the capital of the company. Such material shareholding must be disclosed to (i) the relevant Commercial Register, by virtue of a UBO specimen, upon each amendment to the company’s ownership structure or management, and (ii) to the Ministry of Finance, by virtue of Specimen M/18, upon each annual tax declaration. 

The concept of “stakebuilding” is not regulated in Lebanon.

Dealings in derivatives are allowed, subject to a licensing requirement.

Under Law No 161 of 17/8/2011 (regulating capital markets), every person intending to deal in derivatives must obtain a prior licence from the CMA, provided that brokerage operations and financial portfolio management operations are carried out, exclusively, by the entities specified in Law No 234 of 10/6/2000 relating to the financial brokerage profession. Moreover, any person intending to carry out, professionally, whether directly or indirectly, an activity aimed at attracting clients to subscribe in derivatives, must obtain a licence from the CMA, subject to certain conditions as set by the latter. Dealings in derivatives are also allowed to foreign companies, provided they obtain a licence in accordance with the aforementioned provisions and generally with the provisions of Law No 161.

Moreover, pursuant to CMA’s Decision No 12 of 10/2/2014 on the “Regulations on Financial Securities & Derivative Transactions”, the “financial intermediary” is prohibited from undertaking a transaction relating to “Securities and Derivatives” with a correspondent, except if the latter is (i) a correspondent that carries out activities in the US, and is a member of the National Futures Association (NFA) and licensed by the Commodity Futures Trading Commission (CFTC); or (ii) a correspondent that carries out its activities outside the US but provided such correspondent has an “Investment Grade” and is licensed to trade in derivatives by the relevant regulatory authorities in countries with an “Investment Grade”, pursuant to the ratings of S&P or other international rating agencies. CMA may consider granting exceptions for correspondents with lower rating than “Investment Grade”, on condition that the latter are licensed to trade in derivatives by the relevant regulatory authorities in countries with sovereign “Investment Grade” and above.

Please see 4.4 Dealings in Derivatives.

The parties to a merger or acquisition transaction must declare the purpose of their acquisition in the Deed of Merger. The law requires that the filing of the Deed of Merger at the relevant Commercial Register (CR), and a summary of the Deed must be published in the Official Gazette and in a local newspaper and/or via electronic means, within a month from the date of approval of the merger by the Extraordinary Assembly of Shareholders. The Deed of Merger must contain, inter alia, the purpose and terms and conditions of the merger or acquisition.

Clearance of NCA must be sought for economic concentration transactions that occur between parties, whether in Lebanon or abroad, and whose combined market share during the last three fiscal years exceeds 30% in the market. The concerned parties must report such transaction to NCA, prior to concluding same, in order to be granted the aforementioned clearance. The Competition Law also leaves room for voluntary reporting, subject to the following: parties would have to disclose a deal, as soon as there is a preliminary agreement on same, or as soon as a goodwill undertaking is signed, or as soon as the transaction is made public, provided that it has reached a level that enables NCA to carry out its study.

Market practice on timing of disclosure of a merger may differ from legal requirements. While legal requirements naturally dictate when material information about a merger should be disclosed to the public, market practice might involve additional considerations such as strategic timing, competitive advantage, or investor relation strategies.

Due diligence would usually cover the good standing of the concerned parties, including a detailed report on their activity, since inception, as recorded before the CR. Further investigations could also take place, such as investigating the credit rating of the company, and running a check on the judiciary records to ascertain whether or not the concerned company is or has ever been subject of a financial claim, insolvency or bankruptcy proceedings, etc.

Both standstill agreements and exclusivity agreements are common in M&As. Whether the one or the other is demanded depends on the dynamics of the particular merger transaction, the negotiating leverage of the parties involved, and the strategic objectives of each party. 

It is permissible and somewhat common for the terms and conditions of a tender offer to be documented in a definitive agreement. This agreement should normally outline the specifics of the transaction, including the terms of the tender offer, conditions to closing, representations and warranties of the parties, etc.

In practice, the process for acquiring/selling a business in Lebanon would take around three to four months. This period may vary depending on various factors including business size and complexity, due diligence process, legal and regulatory considerations, market conditions, financing, etc. The authors do not foresee any maximum time limit for the conclusion of the process.

In recent years, M&A transactions have faced significant delays primarily due to governmental measures aimed at combating the pandemic. This included the closure of all public administrations, such as courts and commercial registers, for reasons that extended beyond pandemic management to encompass broader economic and financial challenges facing the country. Furthermore, the parliament enacted multiple laws consecutively, suspending all legal, judicial, and contractual deadlines from 18 October 2019, until 23 March 2021. This suspension of deadlines has led to substantial practical delays in completing various formalities undertaken before public authorities.

There is no mandatory offer threshold in Lebanon.

In fact, public bids for acquisition, regulated by Decree No 7667 of 16/12/1995 (Beirut Stock Exchange), can be made on any number of securities and voting rights. This is inferred from the provision of Article 162 of the Decree which notes that the bidder must submit to the Stock Exchange Commission (SEC) the minimum and maximum number of securities and voting rights that they wish to acquire.

In case of merger, and in accordance with the provisions of the LCC, the shares that the Disappearing Company’s partners hold in the Disappearing Company must be substituted for shares in the Benefiting Company. Partners in the Disappearing Company may also receive a cash premium, provided it does not exceed 10% of the nominal value of their granted shares.

In case of acquisition/sale, cash consideration is more commonly used in Lebanon.

Each takeover offer shall have unique conditions customised to the specific circumstances of the deal and the parties involved. Common conditions typically include regulatory approval (in the case of public/listed companies), a minimum acceptance threshold from shareholders (in private companies), and sometimes financing conditions. 

In the case of public/listed companies, the SEC accepts tender offer by majority of its members. The SEC’s decision can be challenged by the interested party before the Court of Appeal of Beirut (Civil Chamber) within 15 days running from the date of the service of the SEC’s decision to that party. 

In the case of private companies, the issue is usually regulated in the articles of association of each of the target and acquirer.

In public bids, a business combination is conditional on the bidder obtaining financing. The bidder must commit to their public offer and provide a financial guarantee to assure the regulating authority that they are able to fulfil their financial obligations.

In the case of private companies, this matter is left to the discretion of the parties and is regulated in the transaction documents. 

Bidders can seek various deal security measures to protect their interests in the negotiation and execution phases of a transaction. These measures are not expressly regulated but are added to the merger or acquisition agreements in accordance with market practice. Some common types of security measures includes breakup fees, no-shops and exclusivity agreements, material adverse change (MAC) clauses, financing conditions, etc. 

The governance rights are usually agreed upon in a separate shareholder agreement to be entered into between the bidder, the target and the target’s shareholders. A bidder may seek various arrangements to influence the target’s decision-making processes such as negotiate to have one or more representatives appointed to the target’s board of directors allowing the bidder to have a voice in strategic decisions and governance matters. The bidder may also negotiate specific veto rights over certain significant decisions such as mergers/acquisitions/major capital expenditures/change to corporate strategies, etc.

Shareholders may vote by proxy in Lebanon.

In fact, Article 181 of the LCC allows shareholders who cannot attend personally the General Assemblies to empower others to represent them, provided that the representatives are shareholders themselves. Nevertheless, Article 181 still notes that the company’s articles of association may allow shareholders to appoint representatives from outside the company.

This is not applicable in Lebanon.

Irrevocable commitments are not regulated in Lebanese law. However, any shareholders’ agreement entered into between bidders, a target and shareholders of a target are legally binding agreements as long as they do not breach laws of public policy character; meaning that these commitments should be structured and executed in compliance with relevant regulatory requirements, they should not violate fundamental legal principles or public interest considerations and should not involve coercion, fraud or any other unlawful conduct.

Bids are made public when target companies are traded on the stock market. An investor or a group of investors (hereinafter the “Bidder(s)”) who desire to acquire a block exceeding 10% of the voting rights in a company listed on the official market or in the parallel market, or who wishes to own an absolute or specified majority in this company, may submit a public offer project for purchase or barter through a financial intermediary.

The Bidder(s) must submit to the SEC, in support of their public offer project, a description of their objective(s) associated with managing this company, the number of financial instruments they hold and the voting rights they enjoy, the minimum and maximum number of financial instruments and voting rights that they wish to acquire, a proposed cash price and barter terms, and a commitment not to revoke the above-mentioned conditions, accompanied by the related financial guarantees.

The SEC may request from the Bidder(s), within five days from the date of their submission of the offer, to deposit any other guarantee or to provide additional clarification. The SEC may also ask the Bidder(s) to amend the terms of their public offer if the SEC deems it necessary and in the interest of investors and of the market in general.

Once the SEC accepts the offer submitted by Bidder(s), a statement must be issued and published in the official stock exchange bulletin detailing the conditions of the transaction, especially the maximum time limit to deposit the bonds, provided that the duration of the offer is not less than ten stock exchange sessions.

If another Bidder(s) submit(s) a counter-proposal, such counter-offer can only be considered by the SEC if the proposed counter-price exceeds the current offer price by more than 5%.

Bidder(s) can, at any time within the offer period, amend the deposit instructions given to their financial intermediary.

Normally, the issuance of shares in a business combination requires disclosure of details about the number of issued shares; the valuation of these shares; any conditions or rules relating to the issuance of these shares and the impact of such issuance on the ownership structure of the company in question. It may be also crucial to outline any potential dilution effects on existing shareholders to enable investors to assess the transaction’s implications on the financial standing of the company in question and its future prospects.

Bidders are not explicitly required to produce financial statements in their disclosure documents that will be filed with the relevant regulatory authorities. However, for the sake of transparency and in order to have a comprehensive overview on the bidders’ financial health, performance and ability to finance the proposed transaction, the relevant regulatory authority may require that such financial statements be produced allowing shareholders and stakeholders to make informed decisions about the transaction.   

Financial statements are prepared in accordance with the International Financial Reporting Standards (IFRSs). 

There are two types of disclosure of the transaction documents: (i) disclosure by publication and (ii) disclosure by filing the merger documents in both Disappearing Company and Benefitting Company’s files at CR. Note that CR documents are publicly available and can be accessible by third parties.

A brief or summary of the deed of merger must be published in the official gazette and in a local newspaper within a month from the date the Extraordinary Assembly of Shareholders (EGM) approves the merger. The full deed of merger is deposited at CR along with the minutes of meeting of the aforementioned EGM and the board of directors’ report on the merger.

In addition to above documents, the financial auditors of the Disappearing Company and Benefitting Company must prepare a unified report outlining the merger process and assessing the valuation of the shares and their exchange ratio. This report must also indicate that the value of the net assets belonging to the Disappearing Company is not less than the value of the contingent increase in the capital of the Beneficiary Company. The judge overseeing CR shall appoint one or more supplementary financial auditor(s) to study the unified report and submit their observations within a maximum period of three months from the date they are notified of their assignment, provided that the report of supplementary financial auditor(s) is sufficiently reasoned. The financial auditors’ reports must also be deposited in both the Disappearing Company and Benefitting Company’s files at CR and thus, they should be publicly accessible.

The main duty of directors in a business combination is to review and discuss the reports prepared by the financial auditors of both the Disappearing Company and Benefitting Company and by the supplementary financial auditor(s) appointed by the judge overseeing CR in order to prepare their own report on the merger process (in the light of above reports) and submit that latter report to the EGM that will be held to resolve on the merger in each of the Disappearing Company and Benefitting Company.

Prior to the 2019 amendments of LLC, the chairman of the board of directors had the power to appoint an advisory committee composed of either directors; managers appointed from outside the board; or members of the board of directors and managers. The members of this committee are assigned to study the issues referred to them by the chairman of the board; however, their opinion does not bind the chairman or the board.

After the 2019 amendments to LLC, the above authority was cancelled. However, the board of directors may still establish special or ad hoc committees if this is allowed under the terms of the company’s articles of association.

This is not applicable in Lebanon.

As stated hereinabove, the board of directors’ report on the merger is based on the unified reports submitted by the financial auditors of both the Disappearing Company and Benefitting Company. These reports provide guidance to directors on matters such as valuation, regulatory compliance, negotiation strategies and overall deal structuring to ensure that directors issue a well-informed report to shareholders that align with the best interests of both the companies and their stakeholders.

This is not applicable in Lebanon.

Hostile tender offers are not regulated under Lebanese laws. In practice, they are not common in the current business landscape.

Defensive measures are not regulated under Lebanese laws. In general, it is worth mentioning that EGM is the sole body in both the Disappearing Company and Benefitting Company that is allowed by law to resolve on the merger and demerger of companies and to block/reject/refuse any offer to acquire the company. Directors must implement the decisions taken by EGM, otherwise they may be revoked ad nutum.

This is not applicable in Lebanon.

This is not applicable in Lebanon with respect to defensive measures

.

Directors do not have the ability to “just say no”. Directors have the obligation to implement the resolutions taken by the assembly of shareholders. 

Litigation is not common in connection with M&A deals in Lebanon. Due to the relatively limited occurrence of M&A within the Lebanese business landscape, coupled with the prevalence of small to medium-sized enterprises and family-owned businesses, litigation in M&A transactions is very rare.

Moreover, there was not much room for activation of the provisions regulating mergers in Lebanon, especially in light of the financial crisis that Lebanon is witnessing since October 2019, and the intermittent strikes called for by public servants, added to the ramifications of the COVID-19 pandemic. Parties are instead prioritising negotiation and alternative dispute resolution methods to resolve conflicts or disagreements that may arise during M&A processes. Generally, arbitration has become increasingly common in Lebanon as a preferred method for resolving disputes outside of conventional court proceedings.

This is not applicable.

This is not applicable.

Shareholder activism is not explicitly regulated under the LCC.

This is not applicable.

This is not applicable.