EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera, Daniel Leiva and Raquel Santos, Torres Legal
limitations that may be applicable. For exam- ple, regulations for banks and pension funds are designed to ensure transparency and market stability. 6.3 Transaction Structures Due to the nature of transactions involving a public entity and a private partner, various struc- tures must be considered. As mentioned before, El Salvador does not have public companies that are in listed in the market; however, it does have public-private partnerships, such as joint ven- tures between the state and private entities, as well as concessions, particularly when public services or the exploitation of state resources are involved. 6.4 Consideration and Minimum Price In El Salvador, public company acquisitions in the technology industry can be structured as cash transactions or stock-for-stock transac- tions; however, they are mostly cash transac- tions. The only regulation regarding the specific minimum price is that it is not possible to sell all shares at the nominal price. 6.5 Common Conditions for a Takeover Offer/Tender Offer There is no regulation for takeover offers in El Salvador, since they mostly occur in the private sector – ie, between private parties. 6.6 Deal Documentation It is customary to enter into transaction agree- ments in El Salvador in connection with a takeo- ver offer or business combination, not only for public companies but also between companies in the private sector. Both public and private companies typically provide representations 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 acceptance 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 transparent acquisition pro- cess. 6.8 Squeeze-Out Mechanisms In El Salvador, squeeze-out mechanisms allow a majority shareholder to buy out minority share- holders 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; • 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 independent valuations or agreed-upon meth-
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