ANDORRA Law and Practice Contributed by: Marc Ambrós and David Cuesta, Cases & Lacambra
9. Defensive Measures 9.1 Hostile Tender Offers
Additionally, the director is required to be adequately informed about the company’s performance, to par - ticipate actively in its management, and to investigate any irregularities in the management of the company. Duty of Loyalty According to the Companies Act, the duty of loyal - ty forces a director to act with the honesty that can be expected of a representative who manages the resources of others and, in particular, to refrain from competing with the company, from taking advantage of the company’s business opportunities and from using the company’s assets for private purposes. 8.2 Special or Ad Hoc Committees Under Andorran legislation it is not compulsory, or common, to establish special or ad hoc committees in business combinations. However, in complex trans - actions it is common to establish joint committees between representatives of the acquiring company and the target company to supervise the fulfilment of the steps and conditions established for the interim Although Andorran law or case law does not expressly provide for a rule such as the business judgement rule, under Andorran legislation, the directors are required to act in accordance with their duty of diligence and loyalty. 8.4 Independent Outside Advice The independent outside advice that it is commonly given to directors in a business combination in Andor - ra is legal, tax, financial and strategic advice. 8.5 Conflicts of Interest Conflicts of interest of directors are not expressly reg - ulated under Andorran legislation. However, conflicts of interest can be considered a breach of the duty of loyalty and, therefore, an action influenced by a con - flict of interest could be considered a breach of the duty of loyalty and may be subject to judicial scrutiny. period between signing and closing. 8.3 Business Judgement Rule
Andorran law does not distinguish between hostile and friendly takeovers, so they are not regulated. In any case, hostile tender offers are unusual in Andor - ra, as most companies are privately owned, mostly small or medium-sized, and managed by their majority shareholders. 9.2 Directors’ Use of Defensive Measures See 9.1 Hostile Tender Offers . Andorran law does not expressly define a list of defen - sive measures in the event of a hostile tender offer, as these are not expressly regulated. However, in prac - tice, the management or the board of directors of the target entity would have to respond in an attempt to protect their position in the company by implementing certain measures likely to prevent the hostile bidder from taking control of the company. Such measures would usually require the prior approval of the share - holders’ general meeting and might entail an increase in share capital, the purchase of the target company’s own shares, or the search for an alternative bidder. 9.3 Common Defensive Measures See 9.2 Directors’ Use of Defensive Measures . 9.4 Directors’ Duties If the management or the board of directors obtain the prior approval of the shareholders’ general meeting to implement defensive measures against a hostile tender offer, they have a permanent duty to act in a coherent manner with the social interest of the com - pany, understood in Andorran law to be the interest of the legal entity, pursuing its purposes in the com - mon interest of the stakeholders and with the aim of ensuring the prosperity and continuity of the company. 9.5 Directors’ Ability to “Just Say No” Even when they are also majority shareholders, direc - tors cannot “just say no”, as they are bound to act in the best interests of the company by considering all factors that may be affected by the offer. For exam - ple, the unjustified refusal of a tender offer when the target company is in dire straits and is liable to benefit
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