CHILE Law and Practice Contributed by: Cristián Eyzaguirre Fontaine, Daniela Del Solar Nielsen and Gonzalo Eyzaguirre Alvarado, Eyzaguirre & Cía
6.8 Additional Governance Rights Under Chilean law, a bidder seeking to acquire less than 100% ownership of a target company may, through amendments to the bylaws of the company agreed upon in a duly convened share - holders meeting and/or a shareholders agree - ment, obtain various governance rights to exert influence over key corporate decisions. These rights are typically structured through mecha - nisms such as board representation, veto rights and special voting rights, enabling the bidder to maintain significant control over the company’s strategic direction despite not holding a 100% ownership stake. These arrangements’ regulato - ry implications and flexibility may vary depend - ing on whether the target company is publicly traded or privately held. Governance rights in publicly traded companies are subject to stricter regulatory oversight under Chilean securities laws. Disclosure obligations, minority shareholder protections, and corporate governance rules may limit the extent to which a bidder can negotiate governance or control rights. Any material agreements affecting cor - porate governance may require disclosure to the Financial Market Commission ( Comisión para el Mercado Financiero, CMF ) and the market. In contrast, privately held companies offer great - er flexibility for bidders to negotiate governance rights through the target company’s bylaws amendments or shareholder agreements with - out extensive regulatory constraints. In such cases, parties have broader discretion to estab - lish governance structures, decision-making processes, and protective mechanisms tailored to their interests. 6.9 Voting by Proxy Chilean law allows shareholders to vote by proxy at shareholders’ meetings, even if the
proxy holder is not a shareholder, provided that the proxy is granted in writing, covers all of the shares held by the shareholder entitled to partici - pate at the meeting, and includes certain men - tions required by law. This rule applies to both privately held and publicly traded corporations. 6.10 Squeeze-Out Mechanisms In Chile, implementing squeeze-out mechanisms like short-form mergers and other methods to acquire minority shareholders’ shares after a successful tender offer is complicated by the legal framework that protects shareholder rights. Under Chilean law, each shareholder is entitled to one vote per share of common stock, which typically prevents majority shareholders from unilaterally diminishing the voting power of oth - ers. However, one means of circumventing such restrictions is the issuance of preferred shares, which may carry limited or no voting rights. These shares may also be endowed with special privileges, such as preferential liquidation rights, though such rights must be expressly set out in the company’s bylaws. While the issuance of preferred stock may limit voting rights in specific instances, this mecha - nism is only effective under certain conditions and is typically more applicable to private com - panies. Furthermore, it is important to note that shareholders retain pre-emptive rights, which allow them to maintain their proportional own - ership in the event of new share issuances, thus complicating the process of effecting a squeeze- out of minority shareholders. It is also important to emphasise that directors are not permitted to circumvent these sharehold - er protections. In accordance with their fiduciary duties, directors must act in the best interests of all shareholders and are therefore prohibited
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