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Content last updated: 24-04-2020

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  • Merger Control Regime
  • Merger Screening

2. Nature of merger control regime

2.1 Mandatory or voluntary

2.1.1 Is filing mandatory or voluntary?

Filing is mandatory if the thresholds described in Section 2.3.1 under the Merger Screening Schedule are exceeded.

2.2 Suspensory effect

2.2.1 Must completion of the transaction await clearance by the relevant authorities?

Completion of notifiable transactions must await clearance by the Faroese Competition Authority unless a prior exemption has been granted. The Competition Authority may impose conditions and remedies when exemptions are granted.

1. What type of transactions are caught by the merger control regime?

1.1 Concentrations

1.1.1 Type of transactions that are caught by the merger control rules?

A transaction is caught by the merger control rules if it brings a change of control on a lasting basis resulting from:

  • the merger of two or more independent enterprises or parts of these enterprises;
  • acquisition of direct or indirect control, or influence on the dominating position of one or more enterprises or parts of enterprises, as follows:
    • taking over the majority of shares or of a part of them;
    • taking over majority voting rights;
    • in another way in the sense of provisions of laws in force and other regulations.

The following transactions are exempt from notification:

  • financial undertakings or insurance undertakings whose ordinary business includes transactions and trade in securities on their own or others’ account and who temporarily possess shares which they have acquired for the purpose of resale in so far as they do not exercise the voting rights attached to the shares, and divestment of the shares happen within 12 months of the acquisition;
    • by request, the Competition Authority may extend the period for another 12 months if the acquirer proves that divestment was not possible within the specified period;
  • Acquisition of shares or parts of shares as a result of internal restructuration and related to joint control, mergers and transfer of property;
  • when control is acquired by a person who, according to the law on bankruptcy etc. may dispose of the business.

1.2 Joint ventures

1.2.1 What types of joint ventures are caught by the merger control rules?

The creation of joint ventures performing on a lasting basis all the functions of an autonomous economic entity resulting in permanent structural market change, i.e. a so-called "full-function" joint venture.

1.3 Definition of "control"

1.3.1 How are the concepts of "control" and "change of control" defined?

Control is defined as the ability to exercise decisive influence on an undertaking by rights, contracts or any other means, either separately or in combination, having regard to the considerations of fact or law involved.

It has to be decided on the facts in each case, whether there is the capability of exercising decisive influence over an undertaking. Decisive influence can be de jure in the form of acquisition of the majority of the voting rights or through special rights; or de facto based on a historic pattern of attendance at annual general meetings.  

2. Establishing jurisdiction for notification of mergers

2.1 Merging parties/undertakings concerned

2.1.1 Which undertakings are considered parties to the merger ("undertakings concerned") in the various types of transactions identified under Section 1.1.1 and 1.2.1.

This is not specified in the Competition Act. However, see Section 3.3.2 below.

2.3 General thresholds

2.3.1 Threshold(s) for when a concentration must be notified under the general merger control regime?

Merger filing is needed if:

  • the combined global turnover of the undertakings concerned exceeded EUR 20,000,000 in the last financial year, and the combined turnover of at least two of the undertakings concerned exceeded EUR 3,000,000 in Kosovo in the last financial year.
At least one of the undertakings concerned must be located in Kosovo (local nexus).

2.5 Foreign-to-foreign mergers

2.5.1 Do any exemptions, special thresholds etc. apply to foreign-to-foreign mergers, i.e. where none of the undertakings concerned is domiciled in the jurisdiction?

Yes, if the thresholds are met and the transaction has an effect on competition within Kosovo.

3. Calculation and allocation of turnover, asset value, transaction value etc.

3.1 Relevant turnover

3.1.1 How is turnover defined (e.g. is income from other sources than "ordinary activities to be included, and how are rebates, taxes, internal turnover etc. treated)?

The Competition Act does not clearly specify the methodology for calculating the turnover of the participating undertakings for the purpose of the jurisdictional threshold. It only provides that income from the sale of goods or services made between undertakings which are part of a group are not taken into consideration in the calculation of the total annual turnover.

The Competition Act provides that its implementation be in conformity with European Union “Directives” on competition.

Thus, it may be expected that the Competition Authority will apply the definition of turnover under the EU Merger Regulation. That is, the relevant turnover to be taken into account is the net turnover related to the sale of goods and/or services in the ordinary course of business exclusive of (i) rebates; (ii) value added tax and other taxes directly related to the turnover; and (iii) group internal sales.

3.2 Relevant period for calculation of turnover

3.2.1 Which financial year(s) is relevant for the calculation of turnover?

The turnover should be based on the latest financial year for which audited annual accounts exist.

If, until the submission of notification for concentration, participants have not managed to close annual financial reports, the last year for which concentration participants have closed annual financial reports shall be considered as a meritorious year in the procedure for assessment of the concentration.

3.3 Relevant undertakings for the calculation of turnover

3.3.2 The undertakings whose turnover is taken into account?

The Competition Act does not clearly specify the methodology for calculating the turnover of the participating undertakings for the purpose of the jurisdictional threshold. It only provides that income from the sale of goods or services made between undertakings which are part of a group are not taken into consideration in the calculation of the total annual turnover.

The Competition Act provides that its implementation be in conformity with European Union “Directives” on competition.

Thus, it may be expected that the Competition Authority will apply the rules on calculating turnover under the EU Merger Regulation. That is, turnover is calculated on a group basis for the undertakings concerned.

In a merger, the "undertakings concerned" are each of the merging entities.

In an acquisition of control, the undertakings concerned may vary depending on the characteristics of the transaction.

- In case of acquisition of sole control, the undertakings concerned are the acquiring undertaking consisting of all entities belonging to the same group (i.e. parent, subsidiaries, sister companies etc.) and the target undertaking (i.e. not including the seller).

- In case of acquisition of joint control of a newly created joint venture, the undertakings concerned are each of the undertakings jointly acquiring control. The same applies where one undertaking contributes a pre-existing subsidiary or a business (over which it exercises sole control) to a newly created joint venture.

- In case of acquisition of joint control over a pre-existing undertaking or business, the undertakings concerned are each of the undertakings acquiring joint control, and the pre-existing acquired undertaking.

- In case of entry of a new shareholder in a pre-existing joint venture, which leads to a change in the quality of control for the remaining controlling shareholders, the undertakings concerned are the newly entering controlling shareholder alongside with the remaining controlling shareholders.

- In case where a pre-existing, full-function joint venture acquires control over another undertaking, the undertakings concerned are the joint venture (i.e. not including the parent companies) and the target undertaking. Where a joint venture is mere acquisition vehicle, the undertakings concerned are in such situation the parent companies to the joint venture and the target undertaking.

- In case of change from joint control to sole control, the undertakings concerned are the undertaking acquiring the sole control and the joint venture. The other "existing" shareholder (i.e. the seller) is not considered an undertaking concerned.

3.3.3 Shall the turnover of the existing seller be included in the target's group turnover?

See Section 3.3.2 above.

3.7 Special rules

3.7.1 Do any special rules or principles apply to the calculation, allocation etc. of turnover, assets etc. for specific undertakings (e.g. State-owned undertakings, investment funds, credit and financial institutions, insurance companies, financial holding companies, others)?

Specific rules apply to the calculation of turnover for credit – and other financial institutions and insurance undertakings, which can be found in the Competition Act:

https://ak.rks-gov.net/assets/cms/uploads/files/Law%20No%2003%20L-220%20on%20protectiong%20of%20competition%20-%20Eng.pdf

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and last updated on 24-04-2020 by

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