ECUADOR Law and Practice Contributed by: María Celeste Alvarado, Jorge Sicouret Zea, Ángel Gaibor and Octavio Rosselli, Coronel & Pérez
6.4 Common Conditions for a Takeover Offer If the target company is listed, the parties can agree on conditions precedent to filing the ten - der offer, provided such conditions do not con - travene the Anti-Trust Law. The most common condition is to obtain the required governmen - tal approvals, but business concerns can be addressed as well. Once the tender offer filing is approved by the Superintendence of Com - panies, Securities and Insurance, it becomes irrevocable. 6.5 Minimum Acceptance Conditions The minimum acceptance condition is set forth in the tender offer. If the bidder intends to acquire 35% or more of the outstanding shares, the ten - der offer must be made for at least 50% thereof, but if the tendered shares represent less than 35% of the outstanding shares, the tender offer will be deemed terminated. Similarly, if the bid - der intends to acquire 51% or more of the out - standing shares, the tender offer must be made for 100% thereof, but if the total proportion of tendered shares is below 51%, the tender offer shall be deemed terminated. Control is achieved by owning 50% + 1 share. However, certain cor - porate decisions may require a qualified major - ity, or even unanimity. 6.6 Requirement to Obtain Financing If a tender offer is required, the transaction can - not be conditioned upon the bidder obtaining financing. Furthermore, the bidder must provide an acceptable security, such as a standby letter of credit or a first demand guarantee for 100% of its offer. The bidder must disclose any poten - tial indebtedness to be incurred by it, or by the target company, to finance the acquisition, but obtaining the financing cannot be a condition of the bidder’s obligations under the tender offer. If a tender offer is not necessary, a business
combination can be conditional on the bidder obtaining financing. 6.7 Types of Deal Security Measures If a tender offer is required, no security measures tending to impede, obstruct or encumber the right of the shareholders of the target company to accept competing offers can be included. If there are competing or concurrent offers, the bidder has the right to amend its initial tender offer so that it exceeds the terms and conditions of any subsequent offer. When a tender offer is not required, the bidder usually seeks match rights and non-solicitation provisions. Even though they are permitted, break-up fees are not commonly requested. 6.8 Additional Governance Rights The bidder can enter into shareholders’ agree - ments and/or negotiate the right to designate more members of the board of directors, veto rights or special majorities for certain decisions. Under Ecuadorean law, as long as the rights of the minority shareholders are not breached, shareholders can implement corporate govern - ance arrangements to the satisfaction of the bidder. 6.9 Voting by Proxy Shareholders can vote by proxy provided that the authorised person is not a member of the management of the company or its controlling departments, nor one of the external auditors. 6.10 Squeeze-Out Mechanisms Ecuadorean law does not contemplate a squeeze-out mechanism as such. Under cer - tain circumstances, the shareholder is entitled to withdraw but cannot be forced to sell its shares only because it did not accept the tender offer.
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