One of the major features of the Monaco economy is that it is government-driven. The main actors are well-structured family businesses in the construction and property sectors, and subsidiaries and branch offices of a large international group of companies, mainly in the banking and finance, shipping, hospitality and luxury sectors, as well as the state-owned Société des Bains de Mer, which controls the casinos and most of the luxury hotels in Monaco.

Generally, these businesses have stable and sometimes important cash reserves and benefits, due to good financing from the banking sector, which enables them to prosper without the need for significant third-party investments.

There was some M&A activity of importance in Monaco in 2023 but the overall volume of trade remains similar to 2022, after a significant increase in 2022. The impact of the COVID-19 pandemic is not significant anymore.

After the economic difficulties due to COVID-19, the majority of sectors of activity are experiencing strong growth, although lower than that of 2022, which was remarkable.

The most productive sector in Monaco last year was wholesale trade, which represents 26% of the Monegasque revenue. Scientific and technical activities and administrative and support services is the second most remunerative sector: it represents 22% of the Monegasque revenue. Financial activities, an important sector in the Principality, grew by 88% compared to 2022.

Last year, there was mostly activity within the media, yachting, construction, automotive and property management sectors.

Accommodation and food service activities were the most affected by the health crisis but have now started to grow again (+16%).

Apart from wholesale trade, which is the most remunerative sector but which fell by 10.6%, only the real estate (-5.6%) and transportation (-1.5%) sectors were down on the previous year.

Banks experienced a significant rise in their assets under management in 2023 (+11.8%). Deposits remained stable (+1%), but the amount of credits granted in the Principality decreased from the previous year (-5.5%).

It should be noted that all companies are private in Monaco, as there is no stock market in the Principality (see 4.6 Transparency for the only exceptions, which are the bank CFM Indosuez Wealth and the state-owned Société des Bains de Mer). Businesses of a certain size and turnover are usually acquired through a private share purchase agreement or through a capital increase.

Small businesses tend to be acquired through an asset deal. This consists of the purchase of a company’s main assets by a company incorporated by investors in Monaco for that particular purpose. Mergers and contributions of assets are less frequent but may also be used.

The primary regulators for M&A activity in Monaco are – as explained in 2.3 Restrictions on Foreign Investments – the Monaco government, which exercises a control over deals involving foreign acquirers through the Minister of State (equivalent to a Prime Minister) and the Business Development Agency (Direction du Développement Economique).

Other key regulators supervise M&A activity in specific sectors, eg, the Commission for the Control of Financial Activities (CCAF) for any deal relating to the financial sector (financial activities run by the banks and asset management companies), the Prudential Supervisory Authority (ACPR, the French authority supervising banking activities, including Monaco by application of Franco-Monegasque treaties) and the CCIN (the Independent Authority of Monaco Data Protection).

Pursuant to Law No 1,144 of 26 July 1991 and the Ordinance of 5 March 1895, foreign investors that wish to undertake a business activity in Monaco must request prior authorisation to perform such activity in Monaco, be it as shareholders or as directors of a Monaco-based company, as sole traders, or as foreign companies opening a branch in Monaco.

The application must be filed with the Minister of State, through the Business Development Agency, the authority responsible for delivering the above-mentioned authorisation within a three-month period.

This authorisation is personal and cannot be transferred or sold to a third party. It expressly defines and limits the business activity that has been authorised, which implies that no change to the activity or its headquarters can take place without a new application to the Business Development Agency.

The general prior authorisation regime, although not common, enables the Monaco government to play a key role in the economy. The regime has proven its efficacy and works well within the economy of a small state such as Monaco. Although the system could appear to make the incorporation process in Monaco tedious and longer, this is not the case, as access to the state administration is generally smooth and fast (the Minister of State generally takes six weeks to deliver an authorisation to conduct a business). However, if certain activities are considered to be sufficiently represented in the Principality, this may lead the Monaco government to reject a request for authorisation.

There are no Monegasque antitrust regulations that apply to business combinations relating to activities in Monaco. The absence of regulations is mainly due to the relatively small size of the Monaco market (note that Monaco is the second smallest country in the world after the Vatican). The impact of such regulations would be very low or non-existent.

However, an acquisition or a merger carried out in Monaco can be subject to the economic concentration rules provided for by European Union member states (for instance, the French legislation if, in the context of a concentration, the transferred or merged Monegasque companies undertake significant activity in France).

Amendment No 12 of 28 July 1970 to the National Collective Bargaining Agreement of 5 November 1945 provides that if a collective dismissal is contemplated within a maximum period of six months following a merger, a takeover deal or an acquisition, then the management of the target company must communicate in writing to staff representatives before the deal occurs (within one to three months after the target company’s decision to merge, to be taken over or to sell its assets) the relevant information concerning the extent of the dismissals contemplated and the professional categories concerned, as well as the economic and technical reasons for the proposed collective dismissal and the measures planned to limit the number of dismissals.

If no such collective dismissal (ie, at least two dismissals) is contemplated, there is no obligation to inform the target company’s employees about the contemplated deal as long as it does not result in a reorganisation, except where a collective bargaining agreement between the target company and unions provides for such an obligation prior to the merger/acquisition being effective.

Apart from the above, acquirers should be informed that neither a change to the ownership structure of a company, be it through a takeover or a merger, nor a transfer of its assets to another company, can justify in itself the termination of an employment contract. If a company merges or transfers all or part of its assets, all employment contracts within the target entity must be transferred to the acquirer/newly registered company, it being specified that any employee whose employment contract has been transferred retains all the rights they had acquired under the employment relationship until the date of the transaction taking effect.

See 2.3 Restrictions on Foreign Investments.

There is no substantial M&A-related case law in Monaco.

There have been no significant changes to takeover law since 2017, and the body of rules that may be relevant to takeover transactions is not under review.

It is also worth noting that Bill 1,053 approving the Protocol amending the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data and Bill 1,054 on the protection of personal data were both presented in Parliament on 20 December 2021, deposited in public session and referred to the Commission. These aim at modernising the Monegasque legislation on personal data and bringing it in line with European standards. Although they do not directly concern takeover law, once adopted this reform will certainly sharpen the focus on compliance with personal data regulations during the due diligence prior to takeover. To date they have not been adopted.

It is also worth noting that Monaco adopted several anti-money laundering (AML) and Countering the Financing of Terrorism laws lastly in 2023 and 2024 which amended in depth the original Law no 1,362 of 3 August 2009 on the fight against money laundering, terrorist financing and corruption and its related Sovereign Order no 2,318 of 3 August 2009, in order to bring Monaco regulations in compliance with international standards. When working on M&A transactions, internal AML checks and AML due diligence on the target company become increasingly important.

Stakebuilding in the target prior to launching an offer is not common, given the relatively small size of companies in Monaco and the usually small number of shareholders.

There are no material shareholding disclosure thresholds or filing obligations in Monaco takeover law. The only legal obligations that exist relate to money laundering and oblige each Monaco-based company to disclose information about each natural person who ultimately holds or controls directly or indirectly at least 25% of its capital or voting rights (a beneficial owner) at the Monaco Companies Register (Répertoire du Commerce et de l’Industrie).

The reporting threshold and filing obligation imposed on all Monaco-based companies regarding their beneficial owners is mandatory. There are no provisions under Monaco law allowing companies to increase or decrease the reporting threshold relating to beneficial owners.

There are no provisions in Monaco law that forbid dealings in derivatives. However, as there is no stock market in Monaco, there are generally no dealings in derivatives.

See 4.2 Material Shareholding Disclosure Threshold.

As there is no stock market in Monaco, all companies are private and there is no requirement to make known the purpose of an acquisition. It is worth noting that the Société des Bains de Mer, which is controlled by the state and runs the Monaco casinos and major hotels, is one of the two Monaco-based companies that have their shares admitted to trading on a regulated market (Euronext Paris). The other Monegasque company whose shares are listed on the Euronext market is the bank CFM Indosuez Wealth.

Under Monaco law, there is no obligation for a target company to disclose a deal.

Under certain circumstances, a disclosure is organised in order to file for a public authorisation before completing the sale (LLC companies, regulated activities, a lease with the State Property Authority, etc).

This is not applicable to Monaco (see 5.1 Requirement to Disclose a Deal).

Due diligence is usually conducted as a two-phase process in Monaco deals. First, the target company makes general information on the company available to potential buyers (annual accounts, audit reports, real estate, intellectual property, personal data, analysis of compliance of the company’s activity with the regulatory requirements applying to it, review of commercial and employment contracts, etc).

Following this phase, a selected number of potential buyers are given access to a second phase, during which special requirements may be negotiated to enable the conclusion of the deal.

Potential buyers have tended to request more information about projected performance from the seller since the pandemic and in particular an interim accounting situation of the target company at the due diligence stage.

Standstills are not in great demand in the Monaco M&A market. Exclusivity is more usual, as Monaco companies are most commonly controlled by a small number of shareholders, often within the same family, with whom the finally selected bidder usually negotiates a limited exclusivity period for the last steps of the deal. Confidentiality clauses remain the most usual ones due to the very small size of the Principality and its limited number of residents.

It is permissible for tender offer terms and conditions to be documented in a definitive agreement. Indeed, most Monaco companies are owned by a very limited number of shareholders holding the majority of the shares, so potential buyers wishing to gain control over a target entity generally contact the majority shareholders and agree the terms of a share purchase agreement.

As in nearby jurisdictions, the duration of the process in Monaco depends on various factors such as the knowledge of the target company’s business by a potential acquirer, the scope of the due diligences required, or the need to obtain financing. It is also subject to the duration of the government approval process, in the event of a transaction involving foreign investors. Based on the above, the process for acquiring/selling a business in Monaco generally takes two months minimum.

In 2023, there was no applicable legislation framing the suspension of time limits.

There is no mandatory offer threshold under Monaco law.

Cash is more commonly used as consideration than shares in Monaco since most sellers do not have a strategic goal when selling and rather wish to retrieve some liquidity.

In deal environments with high valuation uncertainty, the parties have resorted to earn-out or price supplement where usually only a fixed price was offered.

Such additional price is usually stipulated when the initial price is low, or when the buyer wishes to ensure the seller’s support or if the seller wishes to supplement his or her income (eg, for his or her retirement).

These clauses are difficult to draft, and their scope of application is not easy to determine.

There are no restrictions imposed by regulators regarding the use of offer conditions by a bidder. As Monaco companies are all private, such conditions are usually negotiated directly between the bidder and the target company’s shareholders, before being integrated into the share/asset purchase agreement concluded between the parties.

The most common conditions relate to:

• the approval of the takeover by the government (where the bidder is a foreign company or a natural person);
• the approval of other regulators such as the ACPR and the CCAF for M&A deals involving a bank and/or an asset management company (or other government bodies in case the target is regulated), or from the French Competition Authority should the merger/acquisition consist of a “concentration” with worldwide turnover and turnover generated in France exceeding the thresholds provided for by French law;
• the obtaining of financing, should the merger/acquisition be financed by a banking loan.

Conditions also apply to the approval of the operation by the shareholders’ assembly as well as the board of directors, where applicable.

Any person or entity wishing to take control of a Monaco private company must own more than 50% of the voting rights, it being specified that this threshold only provides the majority during the shareholders’ ordinary general assembly, ie, over the matters relating mainly to the approval of the annual accounts as well as the appointment/replacement of members of the board of directors.

A wider control, including the power of decision-making over key issues – eg, approving an M&A deal or the sale of assets, increasing the share capital, amending the by-laws or transferring the company’s headquarters – usually requires the acquirer to take over at least 75% of the voting rights (depending on the provisions of the by-laws of the target). This enables the acquirer to take decisions pertaining to the shareholders’ extraordinary general assembly.

A share/asset purchase agreement in Monaco may be conditional upon obtaining financing, according to the agreements between the parties.

The most commonly used deal security measures in Monaco are non-solicitation, non-compete and confidentiality clauses.

A bidder that does not seek 100% ownership of a target entity may seek representation in the board or the management of the target company.

Shareholders can vote by proxy in Monaco in accordance with the stipulations of the company by-laws.

Squeeze-out mechanisms and short-form mergers, etc, do not exist under Monaco law.

Irrevocable commitments do not apply in Monaco.

Monaco-based companies are all private, so bids generally remain confidential unless voluntarily disclosed to the press or to a third party for specific purposes usually detailed in the confidentiality agreement/clause.

The requirement of disclosure in relation to the issuance of shares in a business combination does not apply in Monaco.

Although there is no obligation for bidders to produce a document for making a bid public, it is worth noting that the financial statements exchanged between parties to a transaction as part of the prior negotiation process need to be prepared in accordance with the International Financial Reporting Standards (IFRS).

These financial statements are either prepared or supervised by a Monaco chartered accountant.

Full disclosure of transaction documents does not apply in Monaco.

Directors of a target company have a permanent duty to act in accordance with the corporate interests of the company, which implies that they must ensure that the interests of the company are being protected as part of the contemplated deal, along with those of the shareholders and all other stakeholders (mainly employees and creditors). Consequently, directors are supposed to keep in mind that the price offered by the bidder is not the only criterion to take into account when analysing the content of a bid; the bidder’s long-term strategic intentions towards the target company and its stakeholders are also a key element.

There is no obligation under Monaco law to establish special or ad hoc committees to analyse business combinations. It is also not common for boards of directors to establish such committees in practice, in the event of a conflict of interest. This kind of issue is addressed by mandatory law provisions submitting, as the case may be, the completion of a deal such as a merger or a buyout to the prior approval of the shareholders, should one of the directors have direct or indirect interests in the bidding company.

Although neither Monaco statute law nor case law expressly provide for a rule like the business judgement rule, Monaco courts are not likely to intervene in the board of directors’ judgement, as long as it is characterised that, as part of a deal, the directors acted reasonably and with a standard of conduct consistent with ensuring the pursuit of the corporate interest.

Companies’ directors involved in a business combination usually receive outside advice from lawyers and financial/strategic advisers, as well as certified accountants, which is particularly necessary in Monaco to help directors go through the government authorisation process when performing a deal involving foreign investors and/or directors.

There are no legal provisions in Monaco expressly tackling the issue of conflicts of interest of shareholders or advisers, unless they are considered as de facto directors (dirigeants de fait). In practice, however, it is highly recommended for shareholders and advisers to disclose a conflict of interest related to a contemplated deal, if only to maintain a degree of trust between the parties.

Conversely, Monaco law contains provisions whereby when a director has a conflict due to a direct or indirect interest in another company, he or she should disclose it to the shareholders prior to the conclusion of the deal and obtain the prior approval of the shareholders’ general assembly. Any deal concluded without complying with this procedure is null and void.

Monaco law does not distinguish between a hostile and a friendly takeover. In any event, hostile offers are uncommon, since all companies are private, mostly small or medium-sized, and managed by their majority shareholders.

Even though Monaco law does not expressly define defensive measures, in practice, when facing a hostile bid, the management or the board of directors of the target entity acts to attempt to protect its position in the company by implementing certain measures likely to impede the hostile bidder in taking control.

These measures generally require the prior approval of the shareholders and may consist of an increase of share capital, the purchase of the target company’s shareholders’ own shares or seeking an alternative bidder.

See 9.2 Directors’ Use of Defensive Measures.

If directors obtain the prior approval of the majority of shareholders to implement defensive measures when facing a hostile private bid, they have a permanent duty to act consistently with the corporate interest of the company, understood under Monaco law as the interest of the legal entity, pursuing its objectives in the common interest of stakeholders and with a view to ensuring the prosperity and continuity of the business.

Even where they are also majority shareholders, directors cannot “just say no”, as they are bound by a general duty to act in the best interest of the company by considering all factors that may be impacted by the offer. For example, an unjustified refusal of a deal offer where the target company is in dire straits and is likely to benefit from a takeover offer could later make the directors liable towards the target entity’s creditors for its later insolvency.

Since there is no stock exchange in Monaco, all M&A transactions are private and do not usually go to litigation in the event of a dispute. Disputes are generally settled amicably and mainly relate to guarantees granted by the parties.

If it does occur, litigation is most commonly brought in the post-closing phase of a deal.

To the best of the authors’ knowledge, the overall trend did not change in 2023. Broken-deal issues do not usually go to litigation and are usually settled amicably.

Shareholder activism is not an important issue in Monaco, where most companies are small or medium-sized companies and are generally controlled by a few people and/or family-owned, with minority shareholders being for the most part passive.

Exceptionally, minority shareholders that have the power to block certain important decisions, eg, a merger/takeover/sale of their company’s assets, may use that power to obtain better financial conditions in the prospective transaction or a higher dividend before they leave the company.

There is no significant example of activists seeking to encourage companies to enter into M&A transactions, spin-offs or major divestitures in Monaco.

See 11.1 Shareholder Activism.