COSTA RICA Law and Practice Contributed by: Claudio Donato and Carolina Retana Herrera, Zurcher, Odio & Raven
10. Litigation 10.1 Frequency of Litigation
9.2 Directors’ Use of Defensive Measures
Although hostile bids and takeovers are rare in Costa Rica, and the legal framework does not provide the extensive Delaware-style takeover defences, companies may adopt various gov - ernance and contractual tools to deter or prevent unsolicited offers. These measures are typically implemented through shareholders’ agreements and corporate governance mechanisms. 9.3 Common Defensive Measures There have been no hostile takeovers in Costa Rica to date. However, companies may use con - tractual provisions such as pre-emptive rights, tag-along rights and drag-along rights within shareholders’ agreements as preventative strat - egies. In addition, if the transaction is subject to merger control, the board of directors may appear before the competition authority to raise concerns regarding potential anti-competitive effects as a form of defence. 9.4 Directors’ Duties Directors are personally accountable to share - holders for their decisions and must act in the best interests of both the shareholders and the company. If they take defensive measures that shareholders perceive as detrimental, or if they have acted despite a conflict of interest, they may face legal action. 9.5 Directors’ Ability to “Just Say No” Directors are not allowed to just reject a business combination such as a merger. When receiving an offer, this should be notified to the compa - ny’s shareholders, which ultimately would be the ones approving the merger through a sharehold - ers’ meeting.
Judicial litigation is not common in connection with M&A deals in Costa Rica, and there is no public knowledge of recent cases. However, most deals include dispute resolution clauses through which the parties undertake to resolve any dispute through arbitration; there - fore, arbitration disputes that are not public can - not be ruled out. 10.2 Stage of Deal The few precedents that do exist typically involve breaches of representations and warranties, or undisclosed latent defects that were not properly disclosed during the transaction process. 10.3 “Broken-Deal” Disputes There have not been any significant recent judi - cial precedents in the M&A field in Costa Rica. Shareholder activism is not customary in Cos - ta Rica and has not played a significant role in shaping corporate or transactional outcomes. 11.2 Aims of Activists Activist shareholders do not typically seek to influence companies to pursue M&A transac - tions, spin-offs or major divestitures. 11.3 Interference With Completion Given the absence of shareholder activism, there have been no cases of interference with the completion of announced transactions. 11. Activism 11.1 Shareholder Activism
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