GUATEMALA Law and Practice Contributed by: Ignacio Andrade Aycinena, Alejandro Solares Solares, Claudia Pontaza Rubio and Lester Meda Ruano, Lex Atlas
to the release of all matters expressly reported in such management report. 8.2 Special or Ad Hoc Committees It is common for the board of directors to estab - lish special committees in business combina - tions, and such committees are used to inter - nally facilitate the transition from the acquiree to the acquirer regardless of whether some of the directors might have a conflict of interest. Under the Code of Commerce of Guatemala, the administration of a company cannot be delegat - ed and thus decisions of the Committee must be ratified and adopted as decisions of the board to become mandatory. 8.3 Business Judgement Rule In Guatemala, courts do not apply the business judgement rule. In criminal proceedings, courts have applied the standard that boards have a duty of due diligence, which is opposite to the business judgement rule. 8.4 Independent Outside Advice Accounting, tax, legal and any other advice required and that might affect the combination can be given. However, acting upon advice does not waive board liability. 8.5 Conflicts of Interest A board member has to abstain from participat - ing in any manner, including being in the room in which the matter is subject to approval and in participating in discussions and decisions, when and if the decision carries a conflict of interest for him or her. The acting director is subject to liability and damages, but the operation is not voided unless directly acting on behalf of two contracting parties. The situation contravenes the provisions of Article 1694 of the Civil Code, which establishes that a single agent cannot
grant contracts representing at the same time the rights or interests of the two contracting par - ties. These types of conflicts are usually solved through ADR procedures due to the arbitral and confidentiality clauses included in the transac - tional documents; hence, many of the conflicts are privately resolved between the parties. Con - tracts have been voided by conflict-of-interest rules, but damages litigation has been rare in courts in Guatemala for this type of cause. Hostile tender offers are permitted but not that common in this jurisdiction, they occur concern - ing big targets, under Decree 34-96 of the Con - gress of the Republic, Law of Stock Market and Merchandise. 9.2 Directors’ Use of Defensive Measures Boards in Guatemala do not hold the power to use defensive measures against acquisitions in general. Board compensation is not within the powers of the board, but a shareholder has, in a manner that boards do not have at their dis- posal, measures that allow them to adopt dis - ruptive or defensive measures. Again, tenders are not usual in Guatemala. If defensive meas - ures exist under the articles of incorporation or in the entity’s Corporate Governance Manuals the board may use them if allowed. 9.3 Common Defensive Measures There is no specific subject regulation. There are only general considerations on good faith in business. 9. Defensive Measures 9.1 Hostile Tender Offers
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