ECUADOR Law and Practice Contributed by: María Celeste Alvarado, Jorge Sicouret Zea, Ángel Gaibor and Octavio Rosselli, Coronel & Pérez
in-depth analysis, such as those pertaining to business combinations, but nothing prevents the board of directors from delegating to the ad- hoc committee making decisions on the ordinary course of business or in matters in which a direc - tor has a conflict of interest. 8.3 Business Judgement Rule In suits alleging a board of director’s violation of their duty of care, the court will uphold the board’s decisions provided that they have been made with sufficient, objective and reasonable information, and following an adequate proce - dure, unless there is hard evidence to the con - trary. 8.4 Independent Outside Advice In a business combination, independent outside legal, accounting, tax, asset valuation, environ - mental and expert appraisal services are com - monly required by the board of directors. 8.5 Conflicts of Interest In the Ecuadorean private sector, there have been very few cases where directors have been subject to judicial scrutiny. The fact that most large companies are family-owned contributes to the lack of judicial scrutiny regarding conflicts of interest.
moment at which the governing bodies are aware of a potential tender offer until the results thereof are published, directors must refrain from executing, or agreeing to execute, any act that is not in the ordinary course of business and that would in any way affect the tender offer process or favour one bidder over the other, such as issu - ing stocks or securities and entering into option or transfer agreements over assets. 9.3 Common Defensive Measures Defensive measures subsequent to the govern - ing bodies becoming aware of a potential tender offer are not allowed. 9.4 Directors’ Duties Defensive measures subsequent to the govern - ing bodies becoming aware of a potential tender offer are not allowed. 9.5 Directors’ Ability to “Just Say No” Directors cannot take any action that prevents the tender offer from being fulfilled and/or a busi - ness combination from being implemented; they must act with absolute neutrality for the benefit of the company only.
10. Litigation 10.1 Frequency of Litigation
9. Defensive Measures 9.1 Hostile Tender Offers
Most M&A transactions have arbitration clauses that typically specify that the arbitration proce - dure shall be confidential. Thus, it is not pos - sible to determine how common litigation is in connection with disputes amongst the parties. However, there have been lawsuits against the Superintendence of Economic Competition in connection with its denial of M&A transactions based upon competition concerns.
Hostile tender offers are permitted in Ecuador, but due to the market size, they are not com - mon. 9.2 Directors’ Use of Defensive Measures Directors of listed companies are not allowed to implement defensive measures. From the
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