COSTA RICA Law and Practice Contributed by: Claudio Donato and Carolina Retana Herrera, Zurcher, Odio & Raven
as real estate and vehicles, and a review of property titles, leases, mortgages and other security interests; • regulatory and administrative matters – an examination of business licences, operational permits, sector-specific authorisations and compliance with applicable regulations, and an assessment of risks related to government investigations, administrative proceedings and obligations under IP, data protection and consumer protection laws; • outstanding and potential litigation and con - tingencies – a review of ongoing or threat - ened legal disputes, arbitration or administra - tive claims, and an analysis of the likelihood of adverse outcomes, estimated financial exposure and potential reputational impact; and • accounting and tax – a review of financial statements, tax returns and accounting prac - tices, and an assessment of compliance with applicable tax laws and identification of con - tingent liabilities, pending audits or disputes with tax authorities. The scope of due diligence on a transaction var - ies considerably depending on the type of trans - action, the markets in which the parties operate and the purpose of the transaction. There are certain sectors that will involve more highly spe - cialised due diligence. 5.4 Standstills or Exclusivity During the negotiation phase, it is very common for the parties to agree on exclusivity, so that the sellers do not negotiate with third parties that may affect the ongoing negotiation. This is often agreed upon in the initial letter of intent. Standstill clauses are common in international or multi-jurisdictional hostile takeovers, but it is uncommon to see hostile takeovers in Costa
Rica, so these clauses are not customary nor usually demanded. 5.5 Definitive Agreements It is permissible for tender offer terms and con - ditions to be documented in a definitive agree - ment, although this is not common since tender offers are not customary in Costa Rica. The exe - cution of agreements during negotiation phases, including the definitive terms and conditions, is uncommon in transactions involving private companies. Typically, a non-binding letter of intent is signed first, followed by a due diligence process. After - ward, the parties enter a negotiation phase, dur - ing which the final key terms of the sale and pur - chase agreement are defined and agreed upon. In some cases, when the parties aim to close swiftly, a hold-separate agreement is agreed upon after finalising due diligence, where pro - visional terms and conditions are agreed upon, including suspensive clauses stipulating that the contract will be executed immediately upon the fulfilment of certain conditions. In cases that require the approval of the competition authori - ties, one of the suspensive conditions is such clearance, but in these cases, such terms and conditions may be subject to variations when required by the competition authority, which may be incorporated more quickly by means of addendums. Contrary to the above, when the acquisition of listed companies is sought in certain circum - stances, the buyer must issue a Public Purchase Offering of Securities in which the terms and conditions must be stipulated (see 5.1 Require- ment to Disclose a Deal ).
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