GUATEMALA Law and Practice Contributed by: Ignacio Andrade Aycinena, Alejandro Solares Solares, Claudia Pontaza Rubio and Lester Meda Ruano, Lex Atlas
7.4 Transaction Documents Under Guatemala’s applicable rules and regulations, there is no obligation to disclose any of the transaction documents in full for private or public transactions, unless the transaction involves modifications to the articles of incorporation. Extraordinary shareholders’ meetings must be recorded in the property registry.
8.4 Independent Outside Advice Accounting, tax, legal and any other advice required and that might affect the combination can be given. However, acting upon advice does not waive board liability. 8.5 Conflicts of Interest A board member must abstain from participating in any manner, including being in the room in which the matter is subject to approval and in participating in discussions and decisions, when and if the decision carries a conflict of interest for them. The acting direc - tor is subject to liability and damages, but the opera - tion is not voided unless directly acting on behalf of two contracting parties. The situation contravenes the provisions of Article 1694 of the Civil Code, which establishes that a single agent cannot grant contracts representing at the same time the rights or interests of the two contracting parties. These types of conflicts are usually solved through ADR procedures due to the arbitral and confidential - ity clauses included in the transactional documents; hence, many of the conflicts are privately resolved between the parties. Contracts have been voided by conflict-of-interest rules, but damages litigation has been rare in courts in Guatemala for this type of cause. Hostile tender offers are permitted but not that com - mon in this jurisdiction; they occur concerning big targets, under Decree 34-96 of the Congress of the Republic, Law of Stock Market and Merchandise. 9.2 Directors’ Use of Defensive Measures Boards in Guatemala do not hold the power to use defensive measures against acquisitions in general. Board compensation is approved by shareholders, and decisions regarding issuance and pricing of shares are generally left to the shareholders’ meet - ing. The board of directors may carry out capital calls within the authorised level of capital of the company. A shareholder has, in a manner that boards do not have at their disposal, measures that allow them to adopt disruptive or defensive measures. Again, tenders are 9. Defensive Measures 9.1 Hostile Tender Offers
8. Duties of Directors 8.1 Principal Directors’ Duties
Under Articles 171 and 172 of Guatemala’s Code of Commerce, the administrator will be held liable before the company, the shareholders and creditors of the company for any damage caused by them either wil - fully or by negligence. If there were many administra - tors, they will all be held jointly liable, except when said administrators have expressly voted against the decision relating to the damage or upon approval of management’s report by the shareholders if the deci - sion was reported to shareholders. Approval of man - agement reports by the shareholders equates to the release of all matters expressly reported in the man - agement report in question. 8.2 Special or Ad Hoc Committees It is common for the board of directors to establish special committees in business combinations, and these committees are used to internally facilitate the transition from the acquiree to the acquirer regardless of whether some of the directors might have a conflict of interest. Under the Code of Commerce of Guatemala, the administration of a company cannot be delegated; therefore, decisions of the committee must be rati - fied and adopted as decisions of the board in order to become mandatory. 8.3 Business Judgement Rule In Guatemala, courts do not apply the business judge - ment rule. In criminal proceedings, courts have applied the standard that boards have a duty of due diligence, which is opposite to the business judgement rule.
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