COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Andres Crump and Natalia Ponce de León, Baker McKenzie
the company’s best interest. This regulation lists cases of potential conflicts of interests by way of example, including when the counterparties to agreements entered by the company are: • companies legally represented by the same individual; • individuals or companies that exercise indi - rect or direct control over the company; or • family members of the director or the direc - tor’s partners (up to second degree of con - sanguinity or civil relationship and second degree of affinity). To our knowledge, there are no known cases where the Superintendence of Companies has determined that a conflict of interest duly approved by the company’s highest governing body was ultimately harmful to the company. 9. Defensive Measures 9.1 Hostile Tender Offers Hostile tender offers are allowed in Colombia but are rare. 9.2 Directors’ Use of Defensive Measures Public market regulations limit the availability of defensive measures pursuant to the passivity rule. According to this rule, from the moment share negotiation is suspended – which coincides with the filing of the public tender offer authorisation before the SFC – until the offer’s outcome is pub - lished, the company and its directors are pro - hibited from carrying out the following actions (unless they were approved prior to the filing of the public tender offer authorisation):
• issuing shares or convertible securities; • conducting direct or indirect operations on the shares; • disposing of, encumbering, or performing any act that could result in the definitive sale of, assets representing 5% or more of the total assets, as well as leasing assets that could impede the normal progress of the offer; • executing transactions that could significantly alter the price of the target shares or securi - ties; or, • engaging in any act outside the company’s ordinary course of business; these restric - tions extend to subsidiaries and affiliates if the target is part of a business group or under control. Nevertheless, regulations do allow for the pos - sibility of a third party presenting a competing tender offer. Therefore, seeking “white knight” ie, an entity completely independent of the compa - ny’s directors – may be permissible, as it would not involve any of the previously mentioned prohibited actions. This process can provide a strategic alternative for companies facing hostile takeover attempts, ensuring that all actions are within legal boundaries and corporate govern - ance standards. 9.3 Common Defensive Measures Given the scarcity of hostile takeovers in Colom - bia, there have not been any instances where defensive strategies have been employed. This absence of visible scenarios involving such measures could suggest a business environment that is either less aggressive or more regulated in ways that deter hostile attempts to gain control of companies. 9.4 Directors’ Duties While defensive measures are limited under Colombian regulations, directors face a chal -
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