COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Andres Crump and Natalia Ponce de León, Baker McKenzie
lenging paradox. They are subject to a strict liability regime, which, coupled with the prohi - bition on acting before a public tender offer is made, presents a dilemma. Directors navigate between adhering to their fiduciary duties and complying with securities regulations. This situ - ation underscores the complexity of corporate governance, where regulatory constraints can sometimes conflict with the responsibilities entrusted to company directors. 9.5 Directors’ Ability to “Just Say No” Except for certain business combinations such as mergers, directors of a target do not play a role in rejecting or accepting public tender offers, nor in negotiating a transfer of shares. It is the shareholders who possess the exclusive right to determine whether to sell their shares. In Colombia there have been fewer instances of litigation associated with M&A deals compared to the United States and other common law jurisdictions. However, claims related to breach of representa - tions and warranties and purchase price adjust - ments are not unheard of. 10.2 Stage of Deal Most frequently, M&A disputes arise after the closing of the transactions. Broken-deal dis - putes triggered by a failure to close a transac - tion (due to the occurrence of a material adverse 10. Litigation 10.1 Frequency of Litigation
principles arose in Colombia resulting from the COVID-19 pandemic. However, there are valuable lessons to be learned in the M&A landscape following the COVID-19 pandemic. Deal makers are now placing greater importance on certain aspects, such as: • ensuring that exit or walk away rights are properly drafted and negotiated, specifi - cally including provisions related to material adverse effects caused by pandemics and other disruptive events; • carefully negotiating interim covenants between the signing and closing of a deal, particularly in uncertain times; this includes provisions related to operating the business in the ordinary course, in accordance with past practices or in a prudent and reasonable way; • rethinking the extensions to drop-dead dates; and • purchase price and related adjustments, including completion accounts and locked- box mechanisms. In Colombia, corporate culture has traditionally involved closed-capital companies with a limited number of shareholders, contrasting with com - mon law jurisdictions. This environment has his - torically limited shareholder activism. One of the mechanisms available for activists is the shareholders’ corporate action known as “acción social de responsabilidad” , which is employed against directors who fail to act in the best interest of the company. To date, the use of this action has been limited, because in practice it was restricted to the controlling shareholder. 11. Activism 11.1 Shareholder Activism
change, or otherwise) are rare. 10.3 “Broken-Deal” Disputes
To our knowledge, no broken-deal disputes that established relevant precedent and legal
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