COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Andres Crump and Natalia Ponce de León, Baker McKenzie
sonal gains or those of any appointing share - holders. Lastly, diligence equates to the foresight and caution of an experienced professional, ensuring informed and thorough decision-making. 8.2 Special or Ad Hoc Committees It is common for companies (private and listed) to establish special or ad hoc committees when evaluating an acquisition, a merger or the sale of shares in another company. Note that directors of the targets do not neces - sarily play a role in an acquisition, as the deci - sion to sell the shares of a company lies solely with the shareholders, and not with the board of directors or any other body of the target. While the ad hoc committees can serve as an initial screening mechanism to identify poten - tial conflicts of interest, the regulatory process is that, in the event of a conflict of interest, the director has the alternative to either refrain from engaging in the conflicting activity or seek prior approval from the shareholders. Consequently, special committees are not entitled to definitively resolve conflicts of interest. 8.3 Business Judgement Rule The business judgment rule, recently formalised in corporate regulations, serves as a benchmark for judges when assessing directors’ decisions. It allows directors the freedom to make business decisions without fear of being held accountable by judicial authorities due to negative outcomes in the business. However, this freedom is cur - tailed during takeover attempts by the passivity rule, which bars directors and management from deploying defensive tactics once a hostile tender offer is initiated.
In the case of public offers, the target company’s management does not participate; the deci - sion to sell shares in publicly listed companies rests solely with the shareholders. As a result, in Colombia, there is an absence of legal precedent regarding the assessment of directors’ behav - iour in these scenarios, as they do not partici -
pate in the decision-making process. 8.4 Independent Outside Advice Private Companies
A common and beneficial practice for directors is to draw on the expertise of external advis - ers who can provide an independent perspec - tive on a business. These advisers may offer a wide range of services including, for instance, financial, tax, legal, regulatory and marketing consultancy. Listed Companies In a typical sale process, the target’s board of directors does not play any role, and therefore it is uncommon for the board of director to seek independent outside advice. In business com - binations, by way of acquisition, merger, or oth - erwise, the board of directors is typically more involved, and therefore it is quite common for the board to seek guidance from external advisers. 8.5 Conflicts of Interest The Superintendence of Companies has previ - ously examined situations involving conflicts of interest. It has specifically evaluated whether certain actions or agreements represent a con - flict of interest, with a particular focus on related- party agreements. Additionally, applicable regulation explicitly states that a conflict of interest exists when directors have an indirect or direct interest that could compromise their judgement or independ - ence in the decision-making targeted towards
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