COSTA RICA Law and Practice Contributed by: Claudio Donato and Carolina Retana Herrera, Zurcher, Odio & Raven
• other relevant details concerning the offeror. In some cases, the effectiveness of the offer may be conditioned on acquiring a minimum number of securities. For acquisitions involving private companies, the parties are generally free to agree on a non- exhaustive list of conditions. However, some ancillary restrictions – such as non-compete or exclusivity provisions – may be subject to scru - tiny by the competition authorities, which may reject certain terms or condition the approval of the transaction on their limitation. It is com - mon practice to include non-compete clauses for specific durations, provided they meet legal and regulatory requirements. 6.5 Minimum Acceptance Conditions In a Public Purchase Offering of Securities, when the offeror intends to reach a participation equal to or higher than 25% but lower than or equal to 50%, the offer must be made on a number of securities representing at least 10% of the capital of the offeree company. When the offeror intends to reach a participation higher than 50%, the offer must be made on a number of securities that allows the acquirer to reach at least 75% of the capital of the offeree company. 6.6 Requirement to Obtain Financing In transactions involving private companies, it is possible to enter into agreements that include suspensive clauses that make the completion of the transaction conditional upon the buyer obtaining financing. However, this is restricted in public company acquisitions subject to a Public Purchase Offer -
ing of Securities, as a performance bond must be provided in order to place an offer. 6.7 Types of Deal Security Measures In Costa Rica, deal security measures sought by bidders of private companies generally align with international standards and have not suf- fered changes in the regulatory environment. However, this should comply with local corpo - rate, contract and competition law. Common deal protection mechanisms include: • break-up fees not exceeding a quarter of the principal obligation under the transaction; • initial bidder match rights; and • non-solicitation and non-competes, provided these comply with local competition law. 6.8 Additional Governance Rights In private company partial acquisitions, bid - ders often enter into shareholder agreements to secure the right to appoint certain board mem - bers and management positions. Another strate - gy is to remove cumulative voting from the com - pany’s by-laws. This system, established by the Commercial Code, allows shareholders to allo - cate their votes – calculated by multiplying their shares by the number of board seats – among candidates as they choose, enhancing minority shareholder representation. The Code also gen - erally prohibits partial or staggered board renew - als if they would obstruct cumulative voting. 6.9 Voting by Proxy Shareholders may grant a proxy letter or a power of attorney to a third party for the authorised person to represent them in shareholders’ meet - ings. 6.10 Squeeze-Out Mechanisms Some squeeze-out mechanisms are mergers, as a common approach is to merge the target com -
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