Documentation

Preliminary agreements

What preliminary agreements are commonly drafted?

As in many other jurisdictions, non-disclosure agreements (NDA), letters of intent (LOI) and memoranda of understanding (MOU) are common at the beginning of an M&A transaction. Shareholders may establish mechanisms in their bylaws or via an agreement duly approved by an assembly meeting (eg, NDA, LOI and MOU), including an exclusivity clause, to protect deals from third parties, provided that these provisions are in accordance with the rule of law. These types of agreement are typically executed between the parties, setting out the general terms and conditions under which their negotiations and an eventual transaction will be undertaken, including a timeframe and milestones before closing.

Principal documentation

What documents are required?

The documents required will depend on the type of corporate structures involved in the M&A transaction. In general, they will include:

  • the M&A agreement;
  • assembly meetings authorising the M&A agreement;
  • minutes of the assembly meetings authorising the M&A agreement;
  • the bylaws of the companies involved;
  • the resulting bylaws according to the M&A agreement;
  • the mercantile registry of the companies involved;
  • identification (ID) of the shareholders of the companies involved;
  • the tax ID certificates of the companies involved;
  • certificate of tax compliance from the Dominican Tax Authority;
  • audited financial statements;
  • real estate property certificates;
  • trade name and trademark certificates;
  • non-litigation certificates; and
  • the required operation licences or permits (depending on the scope of the activities of the acquired or target company).

Additional documents may be required for M&A transactions involving regulated companies.

Which side normally prepares the first drafts?

The buyer normally prepares the first drafts.

What are the substantive clauses that comprise an acquisition agreement?

A typical acquisition agreement involves a set of provisions on:

  • the object of the purchase;
  • price;
  • form of payment;
  • the cause of the purchase;
  • assets;
  • justification of the seller’s ownership rights;
  • authorisation to sell;
  • delivery;
  • new ownership rights;
  • the seller’s obligations;
  • closing and precedent conditions;
  • escrow or secure deposit for pending contingencies (eg, labour and tax)
  • warranties;
  • the seller’s waivers;
  • termination;
  • non-compliance due to force majeure;
  • confidentiality and non–competition;
  • taxes;
  • divisibility;
  • amendments;
  • the quality of the subscribers;
  • heirs and assignees;
  • applicable law;
  • jurisdiction (arbitration);
  • domicile; and
  • attachments.

What provisions are made for deal protection?

Deal protection is ensured through the provisions on:

  • the cause of the purchase;
  • closing and precedent conditions;
  • warranties;
  • termination;
  • confidentiality and non-competition;
  • amendments; and
  • jurisdiction (arbitration).

Closing documentation

What documents are normally executed at signing and closing?

The documents that are normally executed at signing and closing are:

  • the transaction agreement;
  • a closing checklist;
  • attachments or exhibits;
  • asset transfer authorisations;
  • escrow agreements;
  • consents and authorisations;
  • waivers; and
  • any other additional documents depending on the scope of the operation and sector requirements.

Are there formalities for the execution of documents by foreign companies?

No. Foreign and local investors are accorded equal treatment under Article 221 of the Constitution. However, foreign companies must be registered at the mercantile registry and the Dominican Tax Authority, depending on the nature of the agreement for execution purposes. In addition, official foreign documents must be certified and translated into Spanish.

Are digital signatures binding and enforceable?

E-commerce law establishes equal value on electronic documents and hard copies. Judiciary precedents also establish equal value, provided that the electronic data is reliable and auditable. Companies must register their digital signatures at the mercantile registry office before signing the agreement in order for it to be considered electronically agreed and therefore binding and enforceable.

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