PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
ties, especially when the acquisition involves all shares. The specific details of these representa- tions 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 control 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 pro- cedures that allow majority shareholders to force minority shareholders to sell their shares, follow - ing a successful tender offer. However, in the following situations, sharehold- ers can exercise their right to leave the com- pany through withdrawal ( derecho de receso ). To exercise this right, the shareholder must notify the company within a specific period, gener- ally 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 share- holder. The triggering situations to exercise such a right are: • substantial changes to the corporate object or purpose – if the company changes its main business activity, a shareholder may opt to leave; • transformation or merger of the company – shareholders can leave if they disagree with the company’s transformation or merger; and
• violation of their rights or interests – where a shareholder’s rights are unfairly affected. Furthermore, it is important to note that cor- porate by-laws or shareholder agreements can include rules regarding squeeze-out mecha- nisms. 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 specific funds, such as fully executed financing documents, 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, matching rights and non-solicitation provisions are permitted in Paraguay, although they are not as prevalent as in other jurisdictions. These pro- visions 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 meas- ures 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 agree- ments to protect their interests. Given the lack of regulation for these covenants, the parties have complete freedom for negotia- tion.
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