ECUADOR Law and Practice Contributed by: María Celeste Alvarado, Jorge Sicouret Zea, Ángel Gaibor and Octavio Rosselli, Coronel & Pérez
5.2 Market Practice on Timing Market practice on timing of disclosure usually follows legal requirements in connection therewith. 5.3 Scope of Due Diligence The scope of due diligence in a negotiated business combination usually includes corporate, labour, finan - cial and tax matters, litigation, material contracts, organisational documents, operating licences and governmental permits and property. 5.4 Standstills or Exclusivity Standstill agreements limiting the ability of the bidder to dispose of the shares of the target company are not usually demanded for non-listed companies and would not be applicable when the target company is listed. Exclusivity agreements, on the other hand, are quite common and are usually demanded by the potential acquirer prior to the issuance of its binding offer. 5.5 Definitive Agreements If a tender offer is required, the terms and conditions will be contained in the tender offer itself without the need for a separate agreement. If a tender offer is not required, it is common practice to document the terms and conditions of the acquisition in written agreements. 6. Structuring 6.1 Length of Process for Acquisition/Sale If the transaction refers to non-listed companies and the thresholds referred to in 2.4 Antitrust Regula- tions are not met, the process could last three to four months. If the transaction is subject to review or approval by the Superintendence of Economic Com - petition, such review or approval could take between five and nine additional months and the subsequent tender offer process around 30 business days. 6.2 Mandatory Offer Threshold The mandatory offer thresholds for listed companies are indicated in 4.2 Material Shareholding Disclosure Threshold . If the bidder intends to acquire 35% or more of the outstanding shares, the tender offer must be made for at least 50% thereof. If the bidder intends
to acquire 51% or more of the outstanding shares, the tender offer must be made for 100% thereof. 6.3 Consideration When a tender offer is required, the consideration must be in cash. If a tender offer is not required, the parties can agree on a consideration other than cash, but cash is typically used as consideration as well. If there is a value gap to be addressed, the parties usually revert to earn-out agreements, escrow agree - ments or similar arrangements. 6.4 Common Conditions for a Takeover Offer If the target company is listed, the parties can agree on conditions precedent to filing the tender offer, pro - vided such conditions do not contravene the Anti - trust Law. The most common condition is to obtain the required governmental approvals, but business concerns can be addressed as well. Once the ten - der offer filing is approved by the Superintendence of Companies, Securities and Insurance, it becomes irrevocable. 6.5 Minimum Acceptance Conditions The minimum acceptance condition is set forth in the tender offer. If the bidder intends to acquire 35% or more of the outstanding shares, the tender offer must be made for at least 50% thereof, but if the tendered shares represent less than 35% of the outstanding shares the tender offer will be deemed terminated. Similarly, if the bidder intends to acquire 51% or more of the outstanding shares, the tender offer must be made for 100% thereof, but if the total proportion of tendered shares is below 51% the tender offer shall be deemed terminated. Control is achieved by own - ing 50% plus one share. However, certain corporate decisions may require a qualified majority, or even unanimity. 6.6 Requirement to Obtain Financing If a tender offer is required, the transaction cannot be conditioned upon the bidder obtaining financing. Furthermore, the bidder must provide an acceptable security, such as a standby letter of credit or a first demand guarantee for 100% of its offer. The bid - der must disclose any potential indebtedness to be incurred by it, or by the target company, to finance the acquisition, but obtaining the financing cannot be a
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