PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
Paraguayan regulators typically allow reasonable flexibility in applying conditions, and usually approve transactions if the origin of funds complies with all relevant mutual legal assistance (MLA) regulations and the conditions do not violate antitrust regulations. All bonds or securities in the market must be can- celled before the company can withdraw from public offering. 6.6 Deal Documentation In Paraguay, it is customary for parties to enter into a transaction agreement regarding a tender offer. The target company’s board is usually not involved, and negotiations take place at the shareholder level. Additionally, sellers and the company typically provide detailed representations and warranties, especially when the acquisition involves all shares. The specific details of these representations are usually negotiated on a case-by-case basis. 6.7 Minimum Acceptance Conditions A typical minimum acceptance condition for tender offers in Paraguay is 51%, reflecting the majority control threshold. However, higher thresholds may be negotiated in some cases, especially when con- trol over strategic decisions is crucial to the acquirer. 6.8 Squeeze-Out Mechanisms Paraguayan law does not provide specific squeeze- out mechanisms, which are legal procedures that allow majority shareholders to force minority share- holders to sell their shares, following a successful tender offer. However, in the following situations, shareholders can exercise their right to leave the company through with- drawal ( derecho de receso ). To exercise this right, the shareholder must notify the company within a spe- cific period, generally through written communication, requesting reimbursement of the value of their shares. The company must buy back the shares at fair value, usually determined by the last balance sheet, ensuring a fair and just process for the shareholder.
The triggering situations to exercise such a right are: • substantial changes to the corporate object or pur- pose – if the company changes its main business activity, a shareholder may opt to leave; • transformation or merger of the company – share- holders can leave if they disagree with the com- pany’s transformation or merger; and • violation of their rights or interests – where a share- holder’s rights are unfairly affected. Furthermore, it is important to note that corporate by-laws or shareholder agreements can include rules regarding squeeze-out mechanisms. This underlines the importance of being informed and prepared as a shareholder. 6.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer In Paraguay, it is not mandatory by law to have spe- cific funds, such as fully executed financing docu- ments, to initiate a takeover offer. Nevertheless, it is standard procedure for the acquiring party to have financing arranged, and the offer may be contingent upon securing the necessary financing. 6.10 Types of Deal Protection Measures Deal protection measures like break-up fees, match- ing rights and non-solicitation provisions are permit- ted in Paraguay, although they are not as prevalent as in other jurisdictions. These provisions are typically open to negotiation between the parties since there is no specific regulation governing them. Therefore, the parties have the freedom to negotiate and establish these measures as they see fit. 6.11 Additional Governance Rights If a bidder cannot acquire 100% ownership of a target, they may negotiate governance rights such as board representation, veto rights on strategic decisions and profit-sharing agreements to protect their interests. Given the lack of regulation for these covenants, the parties have complete freedom for negotiation. 6.12 Irrevocable Commitments In Paraguay, it is common practice to secure irrevo- cable commitments from significant shareholders to tender their shares. These commitments, which usu-
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