EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera, Daniel Leiva and Raquel Santos, Torres Legal
• non-solicitation provisions – the target may agree not to solicit other offers or engage in discussions with potential bidders, helping to protect the initial offer; and • exclusivity agreements – the target company can enter into agreements that grant exclusivity to the bidder for a specified period, preventing the target from negotiating with other parties during that time. These measures aim to protect the interests of the bidder and facilitate the completion of the transac- tion, while also balancing the interests of the target company’s shareholders. 6.11 Additional Governance Rights In El Salvador, if a bidder cannot obtain 100% owner- ship of a target company following a takeover offer, they can still secure certain governance rights, includ- ing board representation and shareholder agreements, to establish voting rights in decision-making process- es and other governance matters. Minority protection rights are not especially relevant under Salvadoran legislation but are nonetheless recognised. These governance rights enable the bidder to have a degree of control and influence over the target com- In El Salvador, it is advisable to obtain irrevocable commitments from the principal shareholders of the target company to tender their shares or support the transaction. This can provide greater assurance to the bidder regarding the likelihood of a successful offer. These commitments typically outline that the principal shareholders will tender their shares or vote in favour of the transaction. However, they often include provi- sions allowing the shareholder to withdraw their com- mitment if a superior offer is made. This “out” clause provides flexibility for the shareholders such that they pany, even without full ownership. 6.12 Irrevocable Commitments
not typically approve the offer price itself but ensures that the terms are fair and compliant with legal require- ments. The regulator or stock exchange may set a timeline for the tender offer, which outlines how long the offer will remain open. If a competing offer is announced, it can affect the timeline of the original tender offer. The initial bidder may have to respond by extending their offer or revising the terms to remain competitive. These processes are designed to protect sharehold- ers and ensure transparency in the acquisition. Another factor to consider is whether the transaction significantly impacts the market conditions; a review by the Superintendency of Competition ( Superintend- encia de Competencia ) may be necessary to prevent monopolistic practices. 6.14 Timing of the Takeover Offer A takeover offer or tender offer cannot be completed in El Salvador before the expiry of the offer period due to the lack of regulatory or antitrust approvals. The extension terms typically depend on the agreement between the parties and may require a notification to shareholders. Therefore, the parties involved some- times seek approval, or a form of reference approval, before making the transaction. 7. Overview of Regulatory Requirements 7.1 Regulations Applicable to a Technology Company The regulatory landscape in El Salvador depends on the specific technology sector one wants to enter. For instance, there is a new legal framework applicable to all entities operating in the digital assets market, regardless of whether the intention is to be a digital asset provider, issuer or certifier. Additionally, Bitcoin has its own distinct regulations. First and foremost, a formal commercial entity must be established in El Salvador. This typically involves setting up a company that complies with all legal and tax requirements. Subsequently, the specific regula- tions governing the target industry must be navigated,
can act in their best financial interests. 6.13 Securities Regulator’s or Stock Exchange Process
In El Salvador, the offer generally needs to be approved by the SSF before launching; this is to ensure compli- ance with securities regulations. The regulator does
111 CHAMBERS.COM
Powered by FlippingBook