EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera, Daniel Leiva and Raquel Santos, Torres Legal
11.3 Board’s Role The board is expected to be actively involved in negotiations and can defend the company’s interests during a business combination. It is relatively uncommon for an M&A transaction to end in litigation; however, this can happen. The buyer should consider how involved the board of directors was in the transaction. This ensures that everyone is informed and in agreement at the time of executing the agreement, minimising the possibility of any opposition. This approach helps avoid any judicial proceedings, which would only delay the process. 11.4 Independent Outside Advice Directors commonly seek independent outside advice in connection with a takeover or business combination. This typically includes legal advice and financial advice, with financial advisers often providing fairness opinions to assess whether the terms of the transaction are fair from a finan- cial perspective. This practice helps protect the directors by demonstrating that they acted with due diligence in fulfilling their fiduciary duties.
Mandatory Notification Certain types of M&A may require mandatory notification to the Superintendence, particularly if they meet specified thresholds. This allows the authority to assess potential anti-competitive effects. Exemptions Some transactions might be exempt from review, depending on their size, nature or specific regu- lations. In El Salvador, directors have a fiduciary duty to act in the best interests of the company and its shareholders during a business combination. This includes exercising care, loyalty and good faith. While directors primarily owe their duties to shareholders, they must also consider the inter- ests of – and their legal obligations to – others such as employees and creditors, especially in the context of long-term sustainability and cor- porate governance. 11.2 Special or Ad Hoc Committees 11. Duties of Directors 11.1 Principal Directors’ Duties Whether special or ad hoc committees are estab- lished in business combinations depends on the type, scope and size of transaction. Neverthe- less, there is usually significant involvement from the owners, who are typically part of the board of directors. Committees are typically tasked with overseeing the transaction, ensuring that the interests of all shareholders are represented and that the process is fair and transparent in a more informal process.
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