GUATEMALA Law and Practice Contributed by: Ignacio Andrade Aycinena, Alejandro Solares Solares, Claudia Pontaza Rubio and Lester Meda Ruano, Lex Atlas
7. Disclosure 7.1 Making a Bid Public
shareholders based on shareholding. Anti-dilution provisions usually take the form of payment of shares with a premium. If acquisitions concern minority holdings or step-ups, Guatemalan law requires that boards of directors be elected by cumulative voting. Minority rights can be included in the articles of incorporation. This allows for the possibility of super-majorities in board and shareholders’ meetings when certain decisions are made as part of the articles of incorporation during an acquisition process. Classes of shares can also be established. 6.9 Voting by Proxy Shareholders voting by proxy is permissible under Article 1687 of Guatemala’s Civil Code. The commer - cial code allowed at-distance participation in meet - ings. 6.10 Squeeze-Out Mechanisms The law does not provide for squeeze-out mecha - nisms, short-form mergers or other mechanisms to buy out shareholders who have not tendered. Exten - sive litigation has applied when attempts to force squeeze-out mechanisms have been possible under foreign legislation during mergers with foreign entities. Share capital reductions are possible, albeit rare, with several open rules for selecting the sharehold - ers subject to reduction. Modifications to include a specific group of shareholders as capital-reduction targets would require the approval of said sharehold - ers. Amortisable shares through capital reduction are allowable under Guatemalan corporate law. 6.11 Irrevocable Commitments It is not common to obtain irrevocable commitments. Voting trusts are not generally used for such pur - poses. They are allowed under Guatemalan law, with a maximum duration of ten years, but are not com - monly used due to the shareholding structure of the majority of target companies. Put obligations can be negotiated, and there is no legal provision prohibiting these. If shares are involved, put agreements must be registered in the share registry.
Considering that, in Guatemala, most target compa - nies are private, a bid is usually made public to the rest of the shareholders after the sellers and the buy- ers have agreed on the terms and conditions of the transaction to exercise their right of first refusal and then to the public after the deal has closed. 7.2 Type of Disclosure Required There are no specific disclosure requirements for non- public issuers of securities for the issuance of shares in a business combination other than information on the effective payment of the shares to be issued and the subsequent notice to the Mercantile Registry indi - cating the number of shares paid and issued and their nominative value. Controlling entities must disclose the following infor - mation if the target has registered securities in the Securities Registry. When control is acquired, informa - tion regarding the controlling entity must be recorded as part of the public offering registration stating the following information: • composition of its board management’s power of attorney holders if resources from the issuance are to be used solely by the issuer or employed to finance the controlling entity; • if the controlled entity is the issuer, if the control - ling entity is or is not to be liable to respond with respect to the obligations of the controlled entity, and if there is a warranty, the terms of such war - ranty; and • if any other controlled entity is to respond with respect to its obligations. 7.3 Producing Financial Statements There is no legal requirement for bidders to produce financial statements in their disclosure documents. Most of Guatemala’s medium-to-large companies now prepare their financial statements in accordance with IFRS. The tax authorities increasingly use IFRS for tax auditing purposes, although tax rules change and conversion to a tax rules form is also required.
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