Acquisition of a company in which a sanctioned entity holds a minority stake

Hypothetical:  

A US based company seeks to acquire the shares of a UK company in which a minority shareholder’s assets are frozen under applicable EU and UK sanctions.

Key Considerations:

  • The shares of that company are frozen and therefore no change in the nature or location of those assets can take place without a licence from the relevant national sanctions authorities in the EU. Depending on the regime, those authorities may also need to confer with the United Nations. This would apply even where the shares are to be converted into cash and paid into a frozen bank account within the EU.
  • Consideration will need to be given as to what, if any, applicable licensing grounds may allow for the transfer to take place, and it is possible that such authorization may not be forthcoming, which would mean the shares could not be transferred or converted and the minority stake could not be purchased as part of the acquisition.
  • Consideration should be given as to how to deal with the minority shareholding in any pre-acquisition due diligence and contractual documentation and this issue should be addressed early-on in any transaction. Depending on the location of the frozen shares, and the identity and/or location of the custodian of those shares, a licence may be required from more than one national authority in the EU.
  • US sanctions should also be considered to determine (i) if the shareholder is subject to an asset freeze under US legislation and (ii) if any form of authorization from or notification to the Office of Foreign Assets Control (“OFAC”) is required.


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