COLOMBIA Law and Practice Contributed by: Gabriela Mancero, Daniel Peña, Maria Fernanda González and Andrea Sánchez Gallardo, Peña Mancero Abogados
11. Duties of Directors 11.1 Principal Directors’ Duties
11.3 Board’s Role Usually, the board is not directly involved in negotiations as they are limited to approving the transaction based on the information and recommendation provided by the management of the company. Additionally, Article 6.15.2.1.19 of Decree 2555 of 2010, which regulates the financial, insurance and securities market sectors, incorporates the passivity rule for takeover bids. This rule restricts directors’ scope of action when a takeover offer is launched, prohibiting them from actions that would be permitted in the absence of such a bid such as issuing shares or convertible securities, performing operations on securities affected by the offer if it could disrupt it, disposing of any asset or group of assets representing 5% or more of the total assets or performing any act that is outside the company’s ordinary course of business or that could disrupt the offer. 11.4 Independent Outside Advice The board typically mandates obtaining legal and financial advice from an independent con- tractor. It is not customary for a financial advi- sor to provide a fairness opinion, as their advice primarily consists of valuing the shares and/or the company.
Directors, as administrators, must act in good faith, with the loyalty and diligence of a prudent businessperson. Their actions must serve the company’s interests, taking into account the interests of its shareholders. Directors’ primary duties include making informed and careful deci- sions, ensuring equal treatment of all sharehold- ers, avoiding conflicts of interest, maintaining confidentiality and ensuring regulatory compli- ance. 11.2 Special or Ad Hoc Committees Although Colombian law does not require the formation of a special committee for a takeover offer or business combination, some companies establish support committees for the board of directors. These committees may be tasked with analysing and recommending either the approval or disapproval of an M&A transaction to the board. If a director has a conflict of interest, regulations stipulate that they must abstain from participat- ing in the decision unless authorised to do so by the board of shareholders.
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