Legal Practice Areas in Chile

Mergers & Acquisitions is a critical area of legal practice in Chile that has significantly developed over the last two decades while becoming increasingly more complex due to full incorporation of standards of international transactions (such as due diligence requirements, pre-closing covenants, closing conditions, representations and warranties, caps and limits on seller’s liabilities, price adjustments, non-compete and exclusivity provisions, choice of law, and international arbitration). The influence in this respect of international law firms (most of them based in U.S. and U.K.) that has provided legal assistance to foreign investors in Chile has been visible.

A variety of legal alternatives are available for carrying out a merger and acquisition of a Chilean company, mainly: (i) a direct merger whereby two or more companies decides to merge into one of them or into a newly created one; (ii) an indirect merger as a result of the acquisition of 100 percent of the interest or shares in a company; (iii) the acquisition of a given percentage of interest of shares that provides the acquirer the controlling power over the company; and (iv) the acquisition of the assets of a company (including or not liabilities, operations, etc.) as an ongoing concern. Of course, all of these alternatives may consider multiple variations on the structure finally implemented, from mergers and acquisitions made not at the target level but in an upper level, through previous reorganizations aimed to “clean” the target, as well as negotiation of partners or shareholders agreements to strengthen or to share the acquired control, etc.
Mergers and acquisitions regulations in Chile fundamentally concern corporations (sociedades anónimas), although a variety of companies also may be merged and acquired under well-recognized principles of freedom in Chilean laws. Needless to say, regulations are far stricter where an open corporation or a company operating in a regulated industry is involved. In this line, for instance, applicable regulations do not allow the direct acquisition of the control of an open corporation - with certain exceptions - but impose on the interested party the obligation to conduct a public tender offer.

Notwithstanding that mergers and acquisitions requires an experienced corporate counsel to head the process, it should be noted that a potential acquirer is forced to receive advice from a legal team which includes tax, regulatory, and antitrust specialists, among others, not only by reason of standard due diligence of the target company, but also because the definition of the legal structure to be followed for the acquisition may critically depend on tax, regulatory, and antitrust considerations. Furthermore, and under recent major amendments of the Competition Act to come into force by June 2017, both a mandatory pre-merger notification system and new substantive standards for evaluating mergers have been introduced, which will have to be taken into account in order to ensure a successful acquisition.