ANDORRA Law and Practice Contributed by: Marc Ambrós and David Cuesta, Cases & Lacambra
Andorran law does not expressly define a list of defensive measures in the event of a hostile ten- der offer, as these are not expressly regulated. However, in practice, the management or the board of directors of the target entity would have to respond in an attempt to protect their position in the company by implementing certain meas - ures likely to prevent the hostile bidder from tak - ing control of the company. Such measures would usually require the prior approval of the shareholders’ general meeting and might entail an increase in share capital, the purchase of the target company’s own shares, or the search for an alternative bidder. 9.3 Common Defensive Measures See 9.2 Directors’ Use of Defensive Measures . 9.4 Directors’ Duties If the management or the board of directors obtain the prior approval of the shareholders’ general meeting to implement defensive meas - ures against a hostile tender offer, they have a permanent duty to act in a coherent manner with the social interest of the company, understood in Andorran law to be the interest of the legal entity, pursuing its purposes in the common interest of the stakeholders and with the aim of ensuring the prosperity and continuity of the company. 9.5 Directors’ Ability to “Just Say No” Even when they are also majority shareholders, directors cannot “just say no” , as they are bound to act in the best interests of the company by considering all factors that may be affected by the offer. For example, the unjustified refusal of a tender offer when the target company is in dire straits and is liable to benefit from such offer could
make the directors liable for the target compa - ny’s insolvency.
10. Litigation 10.1 Frequency of Litigation
M&A transactions in Andorra do not usually lead to lawsuits in the event of disputes between the parties. Such disputes are usually settled out of court in an informal and amicable manner and mainly concern the warranties granted by the parties. 10.2 Stage of Deal In the event of a dispute between the parties, it is most likely to occur in the post-closing phase of the transaction. 10.3 “Broken-Deal” Disputes As already noted, deal-breaking problems do not usually go to court and are settled amicably in Andorra. Shareholder activism is not a relevant force in Andorra, as most companies are small or medium-sized and they are generally controlled by only a few shareholders and/or are family- owned, with minority shareholders being mostly passive. Exceptionally, minority shareholders who have the power to block certain important decisions (eg, a merger/spin-off of the company) can use it to obtain better financial terms in the planned transaction or a higher dividend before leaving the company. 11. Activism 11.1 Shareholder Activism
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