LEGAL ALERT ON KAZAKHSTAN BANKS M&A
Under Kazakhstan law, generally, both resident and non-resident legal entities may own shares in a Kazakhstan bank.
National Bank Pre-Transaction Consent. Generally, there are two thresholds entailing the necessity to obtain the National Bank of Kazakhstan (the ‘NBK’) (financial regulator) pre-transaction consent: (i) “large participant”, whereby an entity controls ≥10% of voting shares; and (ii) “bank holding”, whereby an entity controls ≥25% of voting shares of a bank.
The applicable triggering thresholds are both quantitative and substantive, e.g. NBK consent is required if the acquiring entity either owns said percentage of shares in a Kazakhstan bank or it has the right to control the bank via other means, including, but not limited to, by virtue of an agreement or otherwise.
Please note that in order to receive large participant status (applies to non-resident entities), the participant must have a minimum rating – the acquirer’s long-term rating in foreign currency must not be lower than the Kazakhstan sovereign rating – from a qualified rating agency approved by the NBK. A single rating by an approved agency should be sufficient.
Antimonopoly Pre-Transaction Approval Acquisition of >25% of voting shares in a company may be deemed an “economic concentration”. Pre-transaction antimonopoly approval for economic concentration is required, inter alia, where the combined balance sheet value of the target and the acquirer exceeds certain threshold. The threshold is also both quantitative and substantive. The Competition Law is drafted very broadly giving the Antimonopoly Agency wide discretion to interpret the law.
The Antimonopoly Agency approval process is quite bureaucratic, non-transparent, document-intensive and time-consuming (in practice the overall process may take more than 3 months). The Antimonopoly Agency approval is not always limited to traditional market consolidation concerns and is sometimes used by the government to reject transactions on other grounds.
Failure to obtain Antimonopoly Agency approval may result in, inter alia, the invalidation of the transaction and administrative fine.
List of Offshore/Black-Listed Jurisdictions The Kazakhstan law imposes restrictions in relation to offshore/black-listed countries. Legal entities incorporated in certain offshore/black-listed countries cannot own (directly or indirectly) shares in a Kazakhstan bank. Further, a Kazakh bank’s shareholder is required to submit a written affirmation of its compliance with the offshore/black-listed countries restriction. Failure to comply with above statutory restriction may result in not taking into account during the shareholders meeting the votes of the particular shareholder or even invalidation of the Kazakh bank’s resolution of the shareholders meeting. The offshore/black-listed countries restriction does not apply to offshore subsidiary banks of non-resident banks of the Republic of Kazakhstan that have a minimum credit rating as provided by Kazakh law.
KASE notification In case the Kazakh’s bank shares are listed on the Kazakhstan Stock Exchange (the ‘KASE”), such Kazakh bank may be required to notify the KASE on the proposed M&A transaction as material information that can affect share price of the bank and that affects interests of the investors.
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