EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera, Daniel Leiva and Raquel Santos, Torres Legal
ods, ensuring minority shareholders receive adequate compensation; and • regulatory oversight – the Superintendence of the Financial System (SSF) oversees the pro- cess to ensure compliance with legal stand- ards and to protect all shareholder rights. 6.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer In El Salvador, “certain funds” (ie, financing doc- uments with bank certification) are not always required to launch an offer. However, it is advisa- ble – and commonly requested – to have secured financing to ensure the viability of the offer. The offer can be made either by the buyer or by the financing banks, depending on the struc- ture of the transaction. If certain funds are not required, a takeover offer or business combina- tion can be conditional on the bidder obtaining financing. This must be clearly stated in the offer documentation and communicated to share- holders. 6.10 Types of Deal Protection Measures A target company can grant several types of deal protection measures, which may include: • break-up fees – the target company may agree to pay a fee to the bidder if the deal is terminated under specific conditions, discour- aging competing offers; • matching rights – the target can grant the initial bidder the right to match any superior proposal from another party, allowing them to retain the opportunity to complete the trans- action; • force-the-vote provisions – in a merger sce- nario, the target company can include provi- sions that require shareholders to vote on the merger agreement, ensuring that the transac-
tion is put to a vote even if there are compet- ing offers; • 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 exclusiv- ity to the bidder for a specified period, pre- venting 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 transaction, 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% ownership of a target company following a takeover offer, they can still secure certain gov- ernance rights, including board representation and shareholder agreements, to establish voting rights in decision-making processes and other governance matters. Minority protection rights are not especially relevant under Salvadoran leg- islation but are nonetheless recognised. These governance rights enable the bidder to have a degree of control and influence over the target company, even without full ownership. 6.12 Irrevocable Commitments In El Salvador, it is advisable to obtain irrevoca- ble commitments from the principal sharehold- ers 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
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