CHILE Law and Practice Contributed by: Cristián Eyzaguirre Fontaine, Daniela Del Solar Nielsen and Gonzalo Eyzaguirre Alvarado, Eyzaguirre & Cía
shareholders’ interests, all as previously noted in section 7.2 Type of Disclosure Required . Their role is primarily advisory rather than decisional, as the shareholders ultimately approve or reject any business combination. Moreover, directors elected by any group or class of shareholders, whether controlling or minority, owe the same duties to the company and all its shareholders. They may not prioritise the interests of the shareholders who elected them to the detriment of the corporation or other shareholders. 8.2 Special or Ad Hoc Committees It is not common in Chile for boards of directors to establish special or ad hoc committees spe - cifically for business combinations. Unlike in oth - er jurisdictions, where independent committees play a significant role in evaluating and negotiat - ing transactions, Chilean corporate governance practices generally do not use such structures, although they are allowed for this purpose. When some directors have a conflict of interest, they must disclose it to the board and abstain from voting on the matter. While Chilean law does not mandate the forma - tion of special or ad hoc committees regarding business combinations, some publicly traded corporations meeting certain thresholds must establish an independent directors’ commit - tee ( Comité de Directores ), which, among other matters, must review all transactions where any related party to the company or any board mem - ber is involved. Such transactions would include business combinations. 8.3 Business Judgement Rule In Chile, courts do not apply an explicit equiv - alent to the business judgment rule as devel -
oped in the jurisprudence of the United States of America. However, Chilean courts generally defer to the board of directors’ decisions in com - mercial and strategic matters unless there is evi - dence of fraud, gross negligence, bad faith, or a violation of legal or fiduciary duties. 8.4 Independent Outside Advice Directors in Chile involved in a business com - bination typically receive independent outside advice from various professional advisors to ensure they fulfil their fiduciary duties and com - ply with legal requirements. The most common forms of independent advice include: • financial advisors who may be engaged to provide valuation reports, market analysis, negotiation support and strategy, deal struc - turing, and tax optimisation; and • legal counsel from external firms that may be engaged to lead legal due diligence process - es, provide negotiation support and strategy, ensure compliance with regulatory frame - works, and optimise tax structures. 8.5 Conflicts of Interest Conflicts of interest involving directors, manag - ers, shareholders, and advisers have been the subject of judicial and regulatory scrutiny in Chile. With respect to directors and managers, conflicts of interest most commonly arise in the context of related-party transactions. While Chilean law requires directors to act in the best interests of the company as a whole, cases have emerged in which controlling shareholders engaged in tunnelling practices, diverting cor - porate resources to related entities, or structur - ing mergers in a manner that disproportionately diluted minority shareholder participation. These
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