Completing the transaction

Hostile transactions

What are the special considerations for unsolicited transactions for public companies?

Managers in Colombian listed companies do not hold the right to block a takeover transaction, and as a general rule do not play any active role in a given transaction; instead the choice to sell share relies mostly in the shareholders’ decision. Therefore, hostile transactions are not generally applicable in Colombia. During a public tender offer proceeding, it is legally possible for other interested parties to compete by submitting a new public tender offer, in which case such a competing public tender offer must comply with the same requirements as to the original public tender offer. Pursuant to Decree 2555 of 2010, the following are the requirements that should be met by a competing public tender offer:

  • the offeror of a competing public tender offer cannot be the same beneficiary as the one of the original public tender offer;
  • the first advertisement of the competing public tender offer should be published at least two days before the expiration date of the acceptance period of the original public tender offer;
  • the competing public tender offer cannot be for a lesser amount or lesser price than the original public tender offer;
  • the competing public tender offer must be better than the original public tender offer. It is understood as a better offer if the price is at least 5 per cent higher or if the amount of stock to be acquired is at least 5 per cent higher or, if the price or the amount of stock is equal to that in the original public tender offer, if the minimum number of shares to be accepted to trigger the public tender offer is less than the minimum amount in the original public tender offer;
  • if the original public tender offer contemplates consideration in securities, then the competing public tender offer may offer cash and securities; likewise, if the original public tender offer contemplates consideration in cash, then the competing public tender offer can only offer consideration in cash;
  • if the original public tender offer contemplates upfront payment, then the competitor has to offer the same form of payment; on the other hand, if the original public tender offer contemplates payment in instalments, then the competing public tender offer has to present the payment under the same terms or better;
  • once the first advertisement of the competing offer is published, any acceptance already made to the original public tender offer will be automatically made to the competing offer; and
  • in any case, the interested party may at any time improve the conditions of the original public tender offer, following the same procedure for competing offers.
Break-up fees - frustration of additional bidders

Which types of break-up and reverse break-up fees are allowed? What are the limitations on a public company’s ability to protect deals from third-party bidders?

In general, break-up fees would not be permitted in Colombia, if the agreement or provision obstructs the right of the shareholders to accept competing public tender offers by third parties. Nevertheless, the Superintendence of Finance, when consulted on the matter, has not been slow to accept break-up fees when the shareholders are allowed to sell, and end up selling their shares, to a competing bidder.

Government influence

Other than through relevant competition regulations, or in specific industries in which business combinations or acquisitions are regulated, may government agencies influence or restrict the completion of such transactions, including for reasons of national security?

In general, governmental agencies cannot intervene in, influence or restrict the completion of a business combination.

The Superintendence of Companies or the Superintendence of Finance, as applicable, may restrict a merger or a spin-off whenever the applicable procedures are not abided by, and creditors or minority shareholders’ rights are affected.

Under securities regulations, the Superintendence of Finance may influence or restrict the completion of a business combination whenever market transparency may be affected. Furthermore, the Superintendence of Finance may block mergers among financial institutions if such a transaction affects the public interest or the financial system’s stability. Additionally, pursuant the bankruptcy statute, the Superintendence of Companies shall approve certain transactions that may involve business combinations.

Foreign investment regulations may be applicable in very specific scenarios, taking into account that that in Colombia, foreign investment is allowed in all sectors of the economy with the exception of the following: (i) activities related to national security; (ii) processing and disposal of toxic, hazardous or radioactive waste not originated in the country; (iii) private security and surveillance (which in some specific cases such as private security companies can only be provided by legal entities whose equity holders are Colombian individuals, and in others such as valuables transportation foreign individuals or companies can also be equity holders); and (iv) legal entities operating open television services (for which foreign investment cannot exceed 40 per cent of the company’s capital stock).

In the event a business combination violates such prohibition, the transaction could be considered null and void. Additionally, in certain telecommunication markets, in which the use of the electromagnetic spectrum is licensed by the state, combination may require divestment of licences if, by virtue of the transaction, the thresholds of the maximum licensed spectrum are exceeded.

Conditional offers

What conditions to a tender offer, exchange offer, mergers, plans or schemes of arrangements or other form of business combination are allowed? In a cash transaction, may the financing be conditional? Can the commencement of a tender offer or exchange offer for a public company be subject to conditions?

Public tender offers shall be addressed to all the shareholders of the same class of shares of the target company in equal conditions. The only condition for the acceptance of a public tender offer that can be imposed is that the acceptance is made for ‘all or none of the shares’, in which case the acceptance of the public tender offer is made only if all of the shares from the offeree are acquired by the offeror.

Acquisitions through a public tender offer may be paid in cash, in foreign currency (subject to Colombian foreign exchange regulations) or with securities.

In cash acquisitions, the availability of financing would not be allowed as a condition to a cash offer. Furthermore, before presenting the public tender offer, the interested party shall grant collateral, as additional security for performing its obligations under the public tender offer. If the consideration is in cash, then the collateral may be a cash deposit in a Colombian or a foreign bank, a standby letter of credit, a performance or blanket bond issued by an insurance company, treasury bonds issued or guaranteed by the Republic of Colombia or the assignment of rights in a collective investment fund. The beneficiary of the collateral shall be the stock exchange.

Pursuant to Decree 2555 of 2010, when the consideration for the acquisition (through a public tender offer) consists of securities, they must be free of any liens or limitations of ownership and must be pledged as collateral for satisfaction of the payment. Further, in these cases in which the payment of the acquisition is to be made with securities, at least 30 per cent of the shares to be acquired through the public tender offer must be offered to be paid in cash.


If a buyer needs to obtain financing for a transaction involving a public company, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist in the buyer’s financing?

Financing, whenever applicable to these types of transactions, is in most cases a contractual matter. Hence, financing is not generally dealt within the transaction documents as such. As a general rule, financing comes from third parties such as banks and would, most of the time, come down to the negotiation and execution of a credit agreement. When a credit agreement is executed by the purchaser of shares, the purchaser may agree to pledge the shares.

The financing of the acquisition of shares of Colombian companies may be made either by foreign financial institutions or by Colombian financial institutions pursuant to Colombian foreign exchange regulations. If the financing is made by a Colombian financial institution for the acquisition of shares of the same financial institution or of a third financial institution, it can only be made provided that the shares are offered in an initial public offer or in a privatisation process and that the financing is made over other securities that hold a value of at least 125 per cent of the financed amount.

Taking into account that financing is generally regulated by contract, the obligations that may be agreed by the seller to assist the purchaser’s financing must also be included as contractual matters. As a general practice, parties agree that the seller must collaborate with the purchaser to obtain the financing by supplying the information of the target company or of the assets that may be required by the financial entity.

Finally, Law 1676 of 2013 sets forth a legal framework for movable guarantees, which provide higher access to financing and may be used for financing business combinations. This law and its regulation creates a simple and non-expensive registry for movable securities; provide publicity that makes a security effective against third parties; allows for securities to be granted under different priorities and to different creditors; and, to establish a direct payment to the secured creditor or a simplified enforcement proceeding of the movable security by a notary public, a chamber of commerce or a judicial instance.

Minority squeeze-out

May minority stockholders of a public company be squeezed out? If so, what steps must be taken and what is the time frame for the process?

A majority shareholder is obliged to offer the shares of the minority shareholders when the majority shareholder holds more than 90 per cent of the shares of the listed company or when delisting the company.

Also, when delisting the company and some of the shareholders voted against delisting or did not attend the shareholders’ meeting in which the delisting was approved, they may solicit a mandatory public tender offer addressed to them, which must be carried within three months of the shareholder meeting. In order for a delisting to become effective, this mandatory public tender offer must be completed.

Waiting or notification periods

Other than as set forth in the competition laws, what are the relevant waiting or notification periods for completing business combinations or acquisitions involving public companies?

In public tender offers a minimum period of 10 business days and a maximum of 30 business days should be granted to stockholders for the acceptance of the public tender offer.