EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera, Daniel Leiva and Raquel Santos, Torres Legal
6.5 Common Conditions for a Takeover Offer/ Tender Offer There is no regulation for takeover offers in El Salva- dor, since they mostly occur in the private sector – ie, between private parties. 6.6 Deal Documentation It is customary to enter into transaction agreements in El Salvador in connection with a takeover offer or busi- ness combination, not only for public companies but also between companies in the private sector. Both public and private companies typically provide repre- sentations and warranties regarding their operations, assets and financial condition. This practice helps reassure the buyer that they are acquiring a company that meets the expected standards and reduces the overall risk associated with the transaction. 6.7 Minimum Acceptance Conditions Concerning the minimum acceptance conditions for tender offers in El Salvador, the following should be considered: • minimum acceptance threshold – this ensures that the bidder achieves a meaningful level of control over the target company; • regulatory considerations – the bidder must disclose their intentions regarding control of the company and the potential impacts of the offer on shareholders; and • strategic reasons – setting a minimum accept- ance threshold helps the bidder assess the viability of the offer and ensures that they have sufficient shares to effectively influence corporate decisions. These conditions are designed to protect the interests of both bidders and shareholders, ensuring a fair and In El Salvador, squeeze-out mechanisms allow a majority shareholder to buy out minority shareholders who have not tendered their shares after a successful tender offer in accordance with the following: • ownership threshold – a threshold of at least 90% ownership is typically required to initiate a squeeze-out; transparent acquisition process. 6.8 Squeeze-Out Mechanisms
• legal mechanism – once the 90% threshold is met, the bidder can begin a formal process to buy the remaining shares at fair market value; • fair value determination – the price offered must reflect fair value, determined through independ- ent valuations or agreed-upon methods, ensuring minority shareholders receive adequate compensa- tion; and • regulatory oversight – the Superintendence of the Financial System ( Superintendencia del Sistema Financiero SSF) oversees the process to ensure compliance with legal standards and to protect all shareholder rights. 6.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer In El Salvador, “certain funds” (ie, financing docu- ments with bank certification) are not always required to launch an offer. However, it is advisable – and commonly requested – to have secured financing to ensure the viability of the offer. The offer can be made either by the buyer or by the financing banks, depending on the structure of the transaction. If certain funds are not required, a takeo- ver offer or business combination can be conditional on the bidder obtaining financing. This must be clearly stated in the offer documentation and communicated to shareholders. 6.10 Types of Deal Protection Measures A target company can grant several types of deal pro- tection measures, which may include: • break-up fees – the target company may agree to pay a fee to the bidder if the deal is terminated under specific conditions, discouraging competing offers; • matching rights – the target can grant the initial bidder the right to match any superior proposal from another party, allowing them to retain the opportunity to complete the transaction; • force-the-vote provisions – in a merger scenario, the target company can include provisions that require shareholders to vote on the merger agree- ment, ensuring that the transaction is put to a vote even if there are competing offers;
110 CHAMBERS.COM
Powered by FlippingBook