COLOMBIA Law and Practice Contributed by: Jaime Trujillo and Natalia Ponce de León, Baker McKenzie
tors is typically more involved, and therefore it is quite common for the board to seek guidance from external advisers. 8.5 Conflicts of Interest The Superintendence of Companies has previously examined situations involving conflicts of interest. It has specifically evaluated whether certain actions or agreements represent a conflict of interest, with a par - ticular focus on related-party agreements. Additionally, applicable regulation explicitly states that a conflict of interest exists when directors have an indirect or direct interest that could compromise their judgement or independence in the decision-making targeted towards the company’s best interest. This regulation lists cases of potential conflicts of interests by way of example, including when the counterparties to agreements entered by the company are: • companies legally represented by the same indi - vidual; • individuals or companies that exercise indirect or direct control over the company; or • family members of the director or the director’s partners (up to second degree of consanguinity or civil relationship and second degree of affinity). To our knowledge, there are no known cases where the Superintendence of Companies has determined that a conflict of interest duly approved by the com - pany’s highest governing body was ultimately harmful to the company. 9. Defensive Measures 9.1 Hostile Tender Offers Hostile tender offers are allowed in Colombia but are rare. 9.2 Directors’ Use of Defensive Measures Public market regulations limit the availability of defen - sive measures pursuant to the passivity rule. According to this rule, from the moment share nego - tiation is suspended – which coincides with the filing of the public tender offer authorisation before the SFC
– until the offer’s outcome is published, the company and its directors are prohibited from carrying out the following actions (unless they were approved prior to the filing of the public tender offer authorisation): • issuing shares or convertible securities; • conducting direct or indirect operations on the shares; • disposing of, encumbering, or performing any act that could result in the definitive sale of, assets representing 5% or more of the total assets, as well as leasing assets that could impede the normal progress of the offer; • executing transactions that could significantly alter the price of the target shares or securities; or, • engaging in any act outside the company’s ordi - nary course of business; these restrictions extend to subsidiaries and affiliates if the target is part of a business group or under control. Nevertheless, regulations do allow for the possibility of a third party presenting a competing tender offer. Therefore, seeking a “white knight” – ie, an entity com - pletely independent of the company’s directors – may be permissible, as it would not involve any of the pre - viously mentioned prohibited actions. This process can provide a strategic alternative for companies fac - ing hostile takeover attempts, ensuring that all actions are within legal boundaries and corporate governance standards. 9.3 Common Defensive Measures Given the scarcity of hostile takeovers in Colombia, there have not been any instances where defensive strategies have been employed. This absence of vis - ible scenarios involving such measures could suggest a business environment that is either less aggressive or more regulated in ways that deter hostile attempts to gain control of companies. 9.4 Directors’ Duties While defensive measures are limited under Colom - bian regulations, directors face a challenging para - dox. They are subject to a strict liability regime, which, coupled with the prohibition on acting before a public tender offer is made, presents a dilemma. Directors navigate between adhering to their fiduciary duties and complying with securities regulations. This situ -
336 CHAMBERS.COM
Powered by FlippingBook