The International Comparative Legal Guide To

Mergers & Acquisitions 2011

A practical cross-border insight into mergers & acquisitions
Published by Global Legal Group with contributions from: Albuquerque & Associados Arzinger Ashurst LLP Bech-Bruun Boss & Young, Attorneys at Law Brando Teixeira Sociedade de Advogados Cardenas & Cardenas Abogados Cravath, Swaine & Moore LLP Debarliev, Dameski & Kelesoska Attorneys at Law Dittmar & Indrenius Elvinger, Hoss & Prussen Eubelius Fenech Farrugia Fiott Legal Garrigues Georgiades & Pelides LLC Gide Loyrette Nouel Goltsblat BLP Guyer & Regules Herbert Smith LLP Kalo & Associates Koep & Partners Lenz & Staehelin Mannheimer Swartling Advokatbyr AB Meitar Liquornik Geva & Leshem Brandwein Nishimura & Asahi Pachiu & Associates PRA Law Offices Schoenherr Selvam LLC Skadden, Arps, Slate, Meagher & Flom LLP Slaughter and May Steenstrup Stordrange DA Stikeman Elliott LLP SZA Schilling, Zutt & Anschutz Udo Udoma & Belo-Osagie uri i Partneri law firm

Chapter 13

Colombia
Cardenas & Cardenas Abogados
Bernardo P. Cardenas

1 Relevant Authorities and Legislation

1.1 What regulates M&A?

2.2

What advisers do the parties need?

The parties usually need legal, accounting and environmental advisers. If the company is a publically listed company then they will need stock brokers if the deal has to be transacted through the stock exchange.
2.3 How long does it take?

The Commercial Code, the Civil Code and the Tax Code.
1.2 Are there different rules for different types of public company?

No there are not.

1.3 Are there special rules for foreign buyers?

It all depends on the time needed by the parties to reach an agreement. However, if prior approval is needed from the Finance Superintendency this can result in an additional 3 to 4 months while the authorisation is obtained. If prior approval is needed from the antitrust authority this can take from 3 to 4 months if the percentage of the market of the relevant product or service to be acquired is not significant. If the purchase generates controlling 60% or 70% of the relevant market of the product or service then the antitrust approval may take up to a year if it is necessary to negotiate with the authority the conditions of the sale i.e. if any trademarks or assets need to be sold to third parties to preserve competition, etc. If the purchase involves 25% or more of a listed company this will have to be made by means of a public acquisition offer (OPA) for a listed company, there are certain publications and terms which need to be taken into account and which can extend the transaction for a period of up to 2 to 3 months.
2.4 What are the main hurdles?

No there are not, except for foreign exchange regulations covering the remittance of foreign investment when purchasing shares or quotas from local shareholders or assets from local companies. National defence, toxic waste management and television broadcast have certain limitations as to the percentage of ownership by foreign investors.
1.4 Are there any special sector-related rules?

Yes, buyers of more than 10% shareholding in entities in the financial sector need prior approval from the Finance Superintendency. Buyers of mining titles need prior approval from the mining authority. Buyers of companies in the oil sector also need prior approval from the National Hydrocarbons Agency.
1.5 What are the principal sources of liability?

The main hurdles would include acquiring an important stake in the market of a product or a service, in which it is necessary to involve the antitrust authority.
2.5 How much flexibility is there over deal terms and price?

The principal sources are environmental, employment and tax liability.

2 Mechanics of Acquisition
2.1 What alternative means of acquisition are there?

This is completely flexible. However, for tax purposes it is presumed that the asset has been sold for at least 75% of its commercial value.
2.6 What differences are there between offering cash and other consideration?

The alternative means of acquisition are purchase of controlling stakes in companies or purchase of assets. Purchase of commercial establishments (ongoing business concerns) is also a means of acquisition of a business.

There are none.

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2.7

Do the same terms have to be offered to all shareholders?

4 Information
4.1 What information is available to a buyer?

2.8

Are there any limits on agreeing terms with employees?

No limits inasmuch as all social security requirements are respected.

2.9 What documentation is needed?

4.2

Is negotiation confidential and is access restricted?

Written agreements including the terms of the transactions are needed. If the transaction involves the transfer of immoveables this will have to be done by means of a public deed.
2.10 Are there any special disclosure requirements?

Unless it is a publically traded company, information is confidential. If it is a publically traded company then a negotiation would be considered relevant information which would need to be disclosed.
4.3 What will become public?

If it is a publically listed company, the information provided by the company will become public. If authorisation is required from the antitrust authority, the parties can request that the information provided for the authorisation remain confidential.
4.4 What if the information is wrong or changes?

None, unless an antitrust approval is required in which case the relevant market needs to be explained as well as how the acquisition will affect such market. If it is the acquisition of a publically listed company then the ultimate real beneficiary of the transaction needs to be disclosed.
2.11 What are the key costs?

The parties that submit wrong information may be subject to penalties from the relevant authorities.

The key costs are advisors. If it is an offer for shares of a publically listed company then a bond has to be posted.
2.12 What consents are needed?

5 Stakebuilding
5.1 Can shares be bought outside the offer process?

Please see above.

2.13 What levels of approval or acceptance are needed?

If the purchase involves a publically listed company, then the acquirer can only acquire up to 25% of the shares of the company outside the offer process.
5.2 What are the disclosure triggers?

Please see above.

2.14 When does cash consideration need to be available?

In relation to a publically listed company the purchase of 5% or more of the shares involves informing the relevant authority.
5.3 What are the limitations and implications?

As agreed by the parties.

3 Friendly or Hostile
3.1 Is there a choice?

Acquirors cannot purchase more than 25% of a listed company in the open market.

6 Deal Protection
There is a choice but hostile takeovers are almost unknown in Colombia.
3.2 How relevant is the target board? 6.1 Are break fees available?

Yes, if agreed by the parties.

6.2 Can the target agree not to shop the company or its assets?

The target board is irrelevant.

3.3 Does the choice affect process?

Yes, this can be agreed. Hostile takeovers have not occurred in Colombia.

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If it is a publically listed company, the same terms have to be offered to all shareholders. If is not a publically listed company, then the terms can be different for each shareholder.

If it is a publically listed company it will have access to its corporate information and financials. If it is not a publically listed company but is supervised by either the Superintendency of Companies or the Finance Superintendency then it will have access to the corporate information and financials of the target company.

Cardenas & Cardenas Abogados

6.3 Can the target agree to issue shares or sell assets? 8.2

Colombia
What can the target do to resist change of control?

Yes, this can be agreed.

6.4 What commitments are available to tie up a deal?

This depends on the type of company, but in closed companies the controlling shareholders may simply resist or decline an offer.
8.3 Is it a fair fight?

Colombia

The commitments available are penalty clauses and exclusivity. Yes it is.

7 Bidder Protection 9 Other Useful Facts

7.1 What deal conditions are permitted? 9.1 What are the major influences on the success of an acquisition?

Those that the parties agree.

7.2 What control does the bidder have over the target during the process?

The major influence is timing, including a due diligence. Timely presentation of any authorisations to authorities who need to approve the transaction, is needed.
9.2 What happens if it fails?

Whatever the parties agree.

7.3 When does control pass to the bidder?

There may be liability if issues were undisclosed by sellers. The control passes to the bidder upon the delivery of the shares and the registration in the shareholders registry or upon the culmination of the public acquisition offer if it is a listed company.
7.4 How can the bidder get 100% control?

10

Updates

10.1 Please provide, in no more than 300 words, a summary of any relevant new law or practices in M&A in Colombia.

The bidder can get 100% control by purchasing all of the shares of the company or all of the assets of the company.

All new cases and major developments have already been addressed in the previous sections.

8 Target Defences
8.1 Does the board of the target have to tell its shareholders if it gets an offer?

No, it does not have to tell the shareholders. In Colombia, the offers are addressed mainly to the shareholders and not to the Board.

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Cardenas & Cardenas Abogados

Colombia

Bernardo P. Cardenas
Cardenas & Cardenas Abogados Cra. 7 No. 71 52 Torre B, Piso 9 / Bogot D.C. Colombia

Tel: Fax: Email: URL:

+57 1 3137 800 +57 1 3122 410 bcardenas@cardenasycardenas.com www.cardenasycardenas.com

Education: New York University. Master of Comparative Jurisprudence. New York, USA. 1990. Universidad del Rosario. Lawyer. Bogot, Colombia. 1988. Admitted to practice: Colombia, 1988. Languages: Spanish and English.

Cardenas & Cardenas Abogados is primarily recognised for its commitment to understanding the needs of its customers by accompanying them as professional counselors in different areas of law. Since 1913 Crdenas & Crdenas Abogados has worked with domestic and international customers, under standards of high ethical commitment, seriousness and professionalism. Today the firm has a prominent group of lawyers that respond effectively to the demands of its customers. The constant contact with major local and international companies has enabled the Firm the experience in being able of providing outstanding legal professional services. The firm has a large number of international companies doing business in Colombia as its clients and has successfully participated in several national and international transactions representing Colombian clients. Its structure allows it a broad international support through correspondent firms in over one hundred and fifty cities in the world. Effective September 1, 2010, Crdenas & Crdenas Abogados entered into an alliance with Fernandez de Soto & Asociados, with the purpose of strengthening the following key practice areas of the Firm: Litigation and Arbitration; Antitrust and Consumer Protection; Administrative Law and Infrastructure. This alliance presents a true synergy for the clients and members of the Firm, resulting in a better range of services supported by high standards of quality.

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The International Comparative Legal Guide to:

Mergers & Acquisitions 2011

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