PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
5.3 Spin-Off Followed by a Business Combination
On a regular basis – ie, every quarter – the company is mandated to file and publicly disclose its financial statements, including all holders with more than 10% of the shares or the votes. This regularity, a testa- ment to the transparency of the Paraguayan market, ensures stakeholders are consistently informed. The acquirer is not required to disclose its intentions regarding the company, and importantly, there is no “put up or shut up” rule, providing a level of flexibility in the Paraguayan market. 6.2 Mandatory Offer Paraguay does not have a mandatory offer thresh- old for acquiring a public company. The process for acquiring control is typically governed by the com- pany’s by-laws and shareholder agreements, if any. 6.3 Transaction Structures Public company acquisitions in Paraguay are typically structured as tender offers, and mergers are less com- monly used for public companies due to the corpo- rate process of local merger regulations. Tender offers allow for a cleaner and faster acquisition process and are often preferred. 6.4 Consideration and Minimum Price Acquisitions of public companies in the technology industry typically involve cash transactions, although stock-for-stock deals may happen when a foreign buyer is involved. There is no minimum price requirement for a takeover offer, but contingent value rights and other mecha- nisms are used to address valuation uncertainties. 6.5 Common Conditions for a Takeover Offer/ Tender Offer Typical conditions for a takeover offer include the fol- lowing: • regulatory approval, if applicable; • a minimum control stake threshold, usually 51% or more; and • no material adverse changes in the target’s finan- cial position.
Spin-offs followed immediately by a business combi- nation are possible in Paraguay. The key requirements include ensuring compliance with tax regulations (keeping the assets at book value) and corporate law, as well as obtaining shareholder and board approv- als. This is the most common way in which spin-offs are utilised. 5.4 Timing and Tax Authority Ruling The typical timeline for a spin-off in Paraguay depends on the transaction’s complexity, the shareholders’ agreement, the kind of assets involved and regulatory approval (for some industries), but it generally takes four to six months. A tax ruling from the Paraguayan tax authority is not required, but some opt for it. In such a case, obtaining it can take three to six months. 6. Acquisitions of Public (Exchange- Listed) Technology Companies 6.1 Stakebuilding It is not customary in Paraguay to acquire a stake in a public company before making an offer. The reporting threshold for acquiring an interest in a public company is 10%. Regarding the disclosure, unless it could be consid- ered a “material event”, the company has three busi- ness days to inform the relevant authorities, namely, the Securities Superintendency ( Superintendencia de Valores SIV), equivalent to the American SEC, and the Asunción stock exchange ( Bolsa de Valores de Asunción BVA). Generally, the acquisition of shares by a third party should not be considered a material event. A merger, on the other hand, is considered a material event. Further, the company must update its ultimate benefi- cial owner (UBO) and legal entities records. The UBO record contains information about the individuals who ultimately own or control the company, while the legal entities record includes details about the company’s structure and ownership.
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