CHILE Law and Practice Contributed by: Cristián Eyzaguirre Fontaine, Daniela Del Solar Nielsen and Gonzalo Eyzaguirre Alvarado, Eyzaguirre & Cía
9.3 Common Defensive Measures Hostile transactions and the defensive tactics aimed at blocking them are usually seen in more developed capital markets such as the United States of America, as is the case with ‘poison pill’ and ‘shark repellent’ strategies or plans. However, such tactics, such as ‘poison puts’, defensive lawsuits, defensive mergers or acqui - sitions, ‘golden parachutes’ and the like, are not common in Chile, and certain tactics may not be valid under Chilean law. However, parties interested in discouraging an acquisition can implement one or more of these measures used in other jurisdictions, especially when the target company is privately held. These measures are always subject to a case-by-case assessment of their legal feasibility. 9.4 Directors’ Duties Under Chilean law, directors have a series of duties to the company and its shareholders, such as duties of loyalty, care, impartiality, oversight, confidentiality and good faith. Directors elected by any group or class of shareholders have the same fiduciary duties that other directors have to the corporation and the other shareholders and cannot under any circumstances disregard their duties to the corporation or to the other shareholders that did not elect them based upon the fact that they are acting in the interests of the electing shareholders. These legal duties cannot be contracted away. 9.5 Directors’ Ability to “Just Say No” Directors cannot simply refuse and take action that prevents a business combination without observing their fiduciary duties. Under Chilean law, directors must act in the best interests of the company and all its shareholders. Therefore, if they choose to oppose a merger or acquisition, such a decision must be based on a reasonable
cases have increasingly ended in judicial or arbi - tration proceedings and fines imposed by the Financial Market Commission( Comisión para el Mercado Financiero , CMF).
9. Defensive Measures 9.1 Hostile Tender Offers
Hostile tender offers in Chile are not prohibited under the Securities Market Act and can be launched by a bidder without the endorsement of the target company’s board of directors or its controller; regardless of whether a single share - holder or a group of shareholders who, acting in concert, exercise such control. The characterisation of a tender offer as ‘hostile’ is not determined by its legality but rather by the absence of coordination with the company’s controlling shareholder, who is typically the nat - ural counterpart in friendly transactions. These types of offers are usually addressed directly to the shareholders and are more common when the offer does not seek to acquire control of the target company. In any case, hostile takeovers are not common, as most M&A activity in Chile tends to be pre - ceded by some level of agreement or coordi - nation with the controlling shareholder (if one exists). Where no controlling shareholder is pre - sent, the board of directors’ position can carry particular weight, especially in companies with widely dispersed ownership. 9.2 Directors’ Use of Defensive Measures Directors in Chile may not use defensive meas - ures to protect the company from a hostile take - over if their fiduciary duties to the company and its shareholders are breached.
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